ESPN Bet will hope that a back-to-basics approach to bookmaking will produce the sports betting market share it is aiming for – and give it the time it needs to hit its target.
Having launched to great fanfare just under a year ago, ESPN Bet has not made as much progress as it clearly believed or hoped it would when it comes to its online sports betting market share and revenue targets.
At the time that the sportsbook’s parent company Penn Entertainment announced the ESPN Bet project, chief executive Jay Snowden famously said he did not see the point in investing $1.5bn and undertaking such a project if it wasn’t to aim for at least 20% share of market.
As the months go by, and after an initial flurry post its mid-November 2023 launch, ESPN Bet has 5% market share in Q3 2024, which is an improvement on the 2% it recorded in Q2 this year, but still far off the numbers it was hoping for.
Recent news also emerged that its betting app would miss the start of the NFL season in New York, having already missed the start of college football at the end of August, and that its licensing hearing with the New York State Gaming Commission was scheduled for… Monday this week.
It has now been given the OK by the state regulator to launch and will do so in the next “several days”, but it means it has missed a month’s worth of the most crucial time of the year when it comes to customer activation and acquisition.
On the download
When it comes to app downloads, data from Sensor Tower published in partnership with JMP revealed that during week three of the NFL season ESPN Bet’s 50,000 downloads gave it a 6% share of downloads, which represented a 75% year-on-year rise.
This was a drop from the 69,000 downloads ESPN Bet achieved during week one, but a direct comparison also shows that FanDuel recorded 426,000 downloads and DraftKings 324,000 in that first week.
Jordan Bender, managing director at JMP, says it is “too early to make a call” on ESPN Bet at this point of the season. He adds that the delayed New York launch is unhelpful but since the Empire State has been live for several years, he also says that it is worth questioning “the quality of the player not already betting on an app, and how costly it will be to acquire and retain bettors away from the proven books”.
Market share will increase for ESPN Bet when New York revenue starts to be captured, but pointing to week three download metrics, Bender agrees that they are “uninspiring for a company pitching massive market share gains,” although he makes the point that “these are businesses that take years to fully build”.
Penn lays off its head of sportsbook
Ahead of its Q2 earnings announcement Penn made a wave of redundancies, these were said to come as part of its integration project with ESPN parent company Disney. However, a second wave of dismissals also came to light last week and CDC Gaming understands that Patrick Jay, ESPN Bet’s senior vice president and head of sportsbook, was one of the executives to have been axed as part of this second round of job cuts. We contacted Penn to confirm the news but had not received a reply at the time of writing.
Getting rid of such a senior sports betting executive suggests Penn is prepared to take drastic action to attempt to remedy the situation but is also a clear sign of the failure of its sportsbook strategy. From marketing and promotions to trading and risk management, the move suggests Penn has decided to bite the bullet rather than wait and hope for the best.
Mind the product gap
By some margin, the product gap is the hardest to close and it is where things can get tricky for challenger brands like ESPN Bet, despite all the ambitious talk of integration and driving traffic from ESPN’s home or fantasy betting pages.
For DraftKings and FanDuel, parlays, same game parlays in particular, act as a virtuous circle, generating hold levels and revenues that are reinvested into developing these key products that deliver profits and market share for the two market leaders. And as they do this and their competitors fail to close the gap, both companies continue to pull away and have more space in which to experiment or focus on live betting, as DraftKings is doing.
Listening to a panel on what British executives call bet builders during this week’s SBC Summit in Lisbon, Portugal, it was striking to hear speakers describe the difficulties encountered when suppliers or operators implement in-play bet builders.
From the generous odds offered pre-match and the big margins operators can envisage, “these don’t always translate into in-play and it’s about preparing operators” to adapt to these scenarios, said Marc Thomas, chief executive of Algosport.
Hard graft
When it comes to offering live bet builders or parlays, Eoin Ryan, director of sportsbook at BV-Group, said building a reliable “live bet builder is hard” and while the data will improve, “operators have the opportunity to engage customers for 90 minutes. If you don’t provide that information and entertainment proposition, they will go elsewhere to get it”. He adds: “It’s about retention and engagement and operators have to service all parts of the offer.”
Thomas remarked that bet builders, or same game parlays in North America, “are about providing a comprehensive offer” and in the U.S., “the top two brands have their SGPs down pat, while Europe is not quite there yet”. One can say that the comment about European operators applies equally to the chasing U.S. brands.
JMP’s Bender says: “Product can take years to build given the need for talent and data to build out models that price bets. It sounds simple in concept, but it takes a lot of time and money”.
Can price make a difference?
As revealed by Truist Securities and the analytics firm HoldCrunch, Penn is competing on price. It had the lowest prices in the first week of the new NFL season and told Truist it will eschew costly promotions and rely on ESPN’s brand name to attract customers.
This budget-conscious approach makes sense as the group has spent millions on sponsorships, media partnerships and other odds boost promotions that have had limited impacts. Tom Johnson, chief executive and founder of HoldCrunch, says Penn is seemingly returning to foundational cornerstones of bookmaking by offering “customers competitive prices while at the same time returning high margins, and that low-price high-margin combination is crucial for success alongside product”.
Cracking the betting-media conundrum
For all the eyeballs ESPN reaches, Penn is not the first gambling company to attempt to combine sports betting with media reach. But the UK brand Sky Bet arguably is the only one to have succeeded in this regard, although it also benefited from a key product (Super Six) and mobile becoming ubiquitous at the time.
“Cross-selling from a media source is only valuable if the company has superior technology to retain players. Failure to retain players off the costly ESPN agreement will lead to elevated losses given the fixed cost structure of the business,” notes Bender. And while DraftKings invested “significant capital on marketing, promotions and technology until the product was ready (…), this process took several years”.
In addition, Penn has only been on its internal tech stack for just over a year and “the cross-sell channels through ESPN are only good if Penn can retain those players, which is the key to the whole operation at this point”.
What happens if ESPN Bet is barely into double-digit market share by the end of the season is, one imagines, an option the Penn higher ups dare not envisage. As the group enters a crucial NFL season, Jordan Bender concludes: “Our sense is the market is looking for gaming share to be mid-single-digits once it launches in New York. Anything short of this would most likely lead to a reassessment of the business model and increased scrutiny around the strategy.”
