Penn Entertainment is ready for a wildly competitive promotional environment this football season.
It will be the first full season NFL or college football for most prediction market operators, a dynamic expected to drive up customer acquisition costs. Combined with already-intense competition in some markets and FanDuel’s plan to invest heavily in customer acquisition and retention, the fourth quarter is shaping up to be especially challenging from a marketing standpoint.
“… [Flutter’s comments] hasn’t changed in terms of our approach because we anticipated football season being quite the arms race this year,” CEO Jay Snowden said on Thursday‘s earnings call. “You’re going to have prediction markets that are targeting customers for the first football season ever, given the timeline of when they actually went live, was close to Super Bowl last year.
“We already assumed it was going to be a very aggressive, irrational, marketing spend advertising and new customer acquisition approach this football season. I think this just speaks to it being aggressive, not only from a prediction market standpoint, but maybe some of the incumbent OSB digital-only players as well. It doesn’t change the way we’re thinking about it.”
Penn confident in its strategy
Despite the increased competition, Penn said it remains committed to growing its interactive business, which encompasses online casino and sports betting.
“We’re going to continue to focus on growing casino,” Chief Technology Officer Aaron LaBerge said when asked about acquiring casino players either through direct promotion or cross-selling sports betting. “Clearly, standalone is on a hot growth path. We’re going to lean into that. Casino, in general, has very attractive CACs, customer acquisition costs, so we’re exploiting that currently.
“On the sportsbook side, we are planning to grow through the end of the year. If you remember, we rebranded from ESPN Bet to theScore Bet in December. As sort of that audience normalizes, what we’ve realized is theScore brand, while still small and growing in the U.S., is very loyal, and so we’re taking care of those users.
“We saw a lot of engagement and reactivation through the World Cup. We’re keeping those people engaged through football, so we feel good there. Cross-sells should continue as the sportsbook business grows as well.
World Cup trends ‘encouraging’
Snowden highlighted several positives from the World Cup.
Penn’s shift away from low- and no-value players resulted in a flat hold rate but a stronger net win rate from online sports betting. About 70% of its sports betting customers wagered on the tournament, with 45% placing a soccer bet for the first time.
“This event served as a meaningful engagement and reactivation opportunity for us heading into the NFL season,” Snowden said..
Interactive guidance trimmed
Penn cut its interactive revenue guidance by $30 million. It now expects $1.57 billion “to reflect recent and current operating trends,” CFO Felicia Hendrix said.
Interactive adjusted EBITDA guidance remains at a loss of $20 million, all of which is attributed to the Alberta launch. That launch will likely lead to the third quarter having the biggest loss of the year, with the first nine months expected to be offset by positive fourth quarter adjusted EBITDA, she added.
Penn pleased with Alberta so far
Snowden called Penn’s launch in Alberta encouraging despite early days, both from a user and handle per capita basis.
The company launched three brands, theScore Bet, theScore Casino and Hollywood Casino. The launch is complimented by its partnership with the Toronto Blue Jays, he added.
“Early results from a handle perspective, even though it’s a slow sports calendar, are very encouraging,” Snowden said. “We anticipate to be very aggressive, and we hope to have the same and similar market shares to what we enjoy in Ontario. That’s the focus, and it’s looking good so far.”
Despite not increasing its investment from the initial $20 million, LaBerge said the company has been aggressive.
“We figure with it being a more competitive sort of starting gate in Alberta, that we needed to be a little bit more aggressive in our spend per capita, and we’re feeling good about that decision so far,” he said.
