Analysis: Penn National Sounds Out On NY Sports Betting

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NY sports betting

Penn National CEO Jay Snowden took the unconventional approach of telling investors no one will make money from NY sports betting.

That is a bit of an unusual approach for a public company that bid for entry, especially one whose investors already showed disappointment over missed earnings per share forecasts. Penn’s stock was down nearly 10% around 10:30 am Eastern.

The New York Post reported earlier this week that Penn National’s bid with Fanatics and Kambi will not make the cut. Snowden’s assessment of the online NY sports betting market during Penn’s third-quarter conference call Thursday sure sounds like that is the case as well.

Snowden’s full comment on NY sports betting

Here is Snowden’s full statement about New York:

“So New York’s an interesting one. I have discussed New York with my team ad nauseam and I feel the same way today that I felt day one, which is I feel really mixed about New York because of the way the gaming law is structured and the fact that the tax rate is being self-imposed with a minimum of 50%.

“When you keep in mind that the 50% tax is in addition to a really high license fee as well as that 50% tax is on gross, pre-promo spend, not net, I don’t think anybody’s going to make money operator-wise. The state’s going to make money. I don’t think a single operator will make money in New York.

“So I’ve always struggled with the “Would you rather be in or not?” I think, objectively speaking, you’d probably rather be in than not be in, but it’s one of those states where if you’re not in you’re not crushed by that either. Maybe from a TAM perspective and a revenue perspective but I think it’s just going to be a margin killer. I think it’s going to be an EBITDA detractor.

“And New Jersey, we’re live in and a lot of New York residents live in North Jersey and Manhattan, which is easy to get over. And I think competitively New Jersey is just going to be able to do things and offer things that New York can’t. I’m not seeing anything – New York has their own prerogative in terms of how they want to structure the law and they’re pursuing that.”

And if Penn is selected?

“If we’re in then we’ll play by the rules,” Snowden continued. “I think that if we end up as one of the operators in New York that, you know, if nobody can make money we’ll lose the least because we can rely on the Barstool audience organically, and turn that on and activate it in ways that we’ve done in other states without having to get into the paid media shotgun approach.

“I don’t know who’s going to be able to afford doing really any of that given the tax rate would be the highest in the country, or at least tied with New Hampshire. And we know DraftKings has been clear, it’s very difficult to make money in New Hampshire.”

That does not sound like a man trying to inspire confidence in a winning NY sportsbook bid.

Bally’s CEO much more positive on NY

To contrast Snowden’s tone, here is Bally’s CEO Lee Fenton‘s statement on New York from the company’s third-quarter conference call today:

“We’re comfortable with our position and with the group that we’ve been working with to ensure that we have access. No one’s happy with a 51% tax rate, I think that will be true for all the partners that we’ve been working with as well. But it’s a huge state and therefore the scale of it means you can have opportunities.

“We also have some opportunities with some of the Sinclair programming that we can leverage in the outskirts of the state as well. Obviously, I think it will change the cost dynamic for all operators that enter that market in terms of how they might address and attack that market but, clearly, New York is not a market that you want to miss out on.”

Who’s getting a NY sports betting license?

The Post reports the two so-called super bids will be the only winners:

That would tax sports betting revenue at 51%, per the final tax rates released by the New York State Gaming Commission.