The massive 10-year, $2 billion deal that ESPN BET signed with Penn Entertainment in 2022 hasn't yielded the results anyone expected, leaving many to wonder what is next for the underperforming sportsbook.
During a conference call on Thursday with investors, it was revealed that Penn's interactive division posted an EBITDA (earnings before interest, taxes, depreciation and amortization) loss of $109.8 million in the fourth quarter of 2024. On top of that, market shares of Penn have plummeted to just 2.35%, well below the projected 20% by 2027.
Thus, it begs the question, will Penn opt out of its agreement in 2026?
Sports betting is booming. It is now legal in 38 states and Washington, D.C., with Missouri set to become the 39th state this fall. Six other states - Connecticut, Delaware, Michigan, Pennsylvania, Rhode Island, and West Virginia - also offer legalized iGaming. Revenue from legal U.S. sports betting hit a record $13.7 billion last year, and there are no signs of it slowing down.
At the time of its agreement, Penn carried licenses to operate online sportsbooks in 16 states.
While expectations were high for ESPN BET, its performance pales in comparison to more renowned sportsbooks like DraftKings, FanDuel, BetMGM and Caesars. ESPN BET produced an underwhelming handle share of 3% in its active states during the NFL season, ranking sixth among operators who reported results.
Snowden still has big plans, including more integration across ESPN's channels - the company's main app had more than 23 million unique monthly users as of May 2024 - and better advertising. By the end of 2025, Penn estimates that ESPN BET will increase its market share to 4.7% in its 20 live markets, excluding New York, and 3.5% for online casino operators. However, with growing customer declines, the sportsbook clearly faces a tall road.
Among the sportsbook's issues is its inability to increase its parlay handle. Such bets make up just 30% of the wagers placed on ESPN BET, compared to at least 50% for DraftKings and FanDuel.
"We have more work to do to unlock the full potential and value of our partnership with ESPN," Snowden said.
That includes capitalizing on one of the busiest times on the calendar for sports bettors, with March Madness giving way to the NBA and NHL playoffs. Last year, an estimated $2.72 billion was bet on the NCAA men's and women's basketball tournaments, according to the American Gaming Association, far exceeding Super Bowl LVIII.
Hoping to generate more betting traffic, there are plans to integrate ESPN BET with its popular Men's NCAA Tournament Challenge.
Doug is a seasoned sports writer/editor with bylines for the New York Times, Associated Press and CBS Sports. He also has extensive experience in the betting industry, including work for Point Spreads. Prior to that, he covered UConn women's basketball and football for Hearst Connecticut Media.
