Sportsbook Shows Early Success With ESPN’s $2 Billion Deal: Joel Macdonald Weighs In

Sportsbook Shows Early Success With ESPN's $2 Billion Deal: Joel Macdonald Weighs In
© Thomas Serer

Despite the huge outlay, it only managed to capture under five percent of the national sports betting market. Penn Entertainment will now rebrand its sportsbook as ESPN BET through an even costlier ten-figure marketing deal with the world-famous sports programming network and its new namesake.

Thankfully, the colossal new deal has already demonstrated significant early success for Penn Entertainment. The brand-new ESPN BET app attracted a record-breaking 1.1 million downloads in its first week. That meant several days atop the Apple’s App Store’s most-downloaded apps list. It also accounted for over two-thirds of all U.S. sportsbook app downloads during the corresponding week.

Meanwhile, initial forecasts from Bank of America’s equity research department promptly put ESPN BET’s overall market share between nine and ten percent. That immediately saw Penn Entertainment’s latest foray into the betting arena named America’s third-biggest sportsbook behind only DraftKings and FanDuel.

But with $850 million lost after selling Barstool Sports fewer than six months in, and with only a very short-term non-compete agreement in place with the outgoing business’s new owners despite early reports to the contrary, not everything looks entirely rosy.

Many experts, including Joel Macdonald, have remained bearish on the partnership between Penn Entertainment and ESPN. And with good reason, it seems. ESPN BET’s stock is already down ten percent versus its immediate post-deal level. This dip suggests that despite early successes, investors aren’t entirely satisfied.

And while Bank of America’s forecasts promptly placed ESPN BET third among the nation’s top sportsbooks, it still ranks significantly below DraftKings and FanDuel on Google Trends. Elsewhere, impressive initial app download figures for the new collaboration with ESPN were likely driven in no small part by a generous $250 user sign-up bonus.

On the other hand, there’s much to sing about as well. Partnering with ESPN lets Penn Entertainment integrate directly into the Disney-owned sports entertainment behemoth’s broadcasts. That’s a massive and unique advantage over DraftKings, FanDuel, and every other player in the market.

And, yes, the official but still fledgling sportsbook of ESPN might not yet have reached the heady heights of FanDuel’s or DraftKings’ market share. But to even be in the same ballpark after only a few months has to represent a significant early win for the operation and its team.

Be that as it may, none of this excuses Penn Entertainment’s management’s ultimately much less successful or lucrative past deals and decisions, according to Joel Macdonald. Remember, it wasted at least $850 million of shareholder capital hastily purchasing and establishing Barstool Sports.

And without a long-term non-compete agreement with the outgoing business’s new owners, there’s a definite risk that past Barstool Sports users–only tempted away by ESPN BET’s highly enticing $250 sign-up bonus–will return to the familiarity of its predecessor.

That’s doubly true if Barstool Sports’ new owners offer one or more incentives of their own once their non-compete agreement concludes at the end of this year’s football season. The short non-compete agreement between ESPN BET and Barstool Sports could yet prove to be Penn Entertainment’s undoing and worst decision to date. For now, only time will tell.