Penn Entertainment CEO Jay Snowden Thursday, fresh from a sports betting launch in North Carolina, touted the company’s partnership with ESPN. He said it will improve when parlay offerings are expanded and enhancements made to its app by the start of football season.
Snowden participated in the J.P. Morgan Gaming, Lodging, Restaurant & Leisure Access Forum that brought together CEOs from the gaming industry. Penn launched ESPN Bet in November in 17 states.
“We’re only scratching the surface of what’s to come,” Snowden said of app improvements and forthcoming promotions with ESPN personalities.
Penn also has 40 assets in 20 states and has broken ground on four projects, two in Aurora and Joliet, Illinois, one in Columbus, Ohio, and the M Resort in Las Vegas where the company is adding about 400 rooms.
Thursday’s focus, however, was on digital.
“We’re only three months in with (ESPN), but the data we have access to is pretty compelling that top-of-funnel demand has been very strong,” Snowden said. “That’s \ drove the promotional expense that hit us in the fourth quarter. We anticipated 300,000 new users in the first seven weeks and it turned out to be more than one million.”
Penn’s ($334 million) adjusted-earnings interactive loss in the fourth quarter, larger than expected, was the result of the two worst weeks of the year for the hold when ESPN Bet launched, Snowden said. That exacerbated the loss.
“If you fast forward to where we are now in the first quarter, we just launched in North Carolina with everyone else. We feel really good about that launch and that it will be a top-tier state for us, based on users we’re seeing so far.”
The results playing out over the last two months in states where ESPN Bet has launched show the company is performing better in places that don’t have a longer history in the sports-betting space, Snowden said. “I would expect North Carolina to look like the newer states, because that’s the trend we’ve been seeing.”
Since December, ESPN Bet has been “remarkably consistent” in its weekly active users, Snowden said. That number will grow when it launches in New York and as of now is running “mid-to-high-teens user share.
“That’s very encouraging,” Snowden said. “We knew we wouldn’t be competitive at launch on same-game parlays. During football season, that’s a big deal and in the Super Bowl it’s a really big deal. Not surprisingly, we saw our market share on Super Bowl week dip down. We also didn’t market aggressively, because it was our first Super Bowl with 17 states. Right after the Super Bowl, it picked up again from a user-share perspective. Our internal team of engineers and product-development folks, all they’re working on right now are enhancements to our parlay offerings. We know that’s the gap on the product side of things.”
ESPN is also working on integration with their media and fantasy apps.
When the product is close to comparable, given the power of the ESPN brand, that will make a difference, Snowden said. People are in the app, but not spending much time and money in it. “Sixty percent of bets are on parlays and that’s a lot when your product isn’t comparable. As we get our product closer to parity by football season, you’ll continue to see us chip away at that delta between handle share or revenue share.”
J.P. Morgan analyst Joseph Greff said Penn expects 2024 to be an investment year for its interactive segment, but is confident in its liquidity positioning into 2025, where it sees breakeven interactive EBITDA and inflection thereafter.
As for New York, Snowden sees it as breakeven, given its difficulty “in making meaningful money even at scale at the 51% sports betting tax with no deductibility for promos. We felt it was important to be there, because it’s the largest population of any of the legal states today and a database builder for us. Over time, our number-one asset will be our database. It’s growingly rapidly and all the things we can do with it are a conversation for another day. New York could be great, in that an online casino is likely to happen there at some point.”
Snowden said there’s potential momentum for sports betting legalization in Georgia and that Texas is “a matter of when, not if.” Penn is well positioned in Texas with horse tracks it owns in Houston and San Antonio.
ESPN Bet bettors are older and more familiar with the casino side of the business, Snowden said.
“When we get people who come in through the ESPN Bet funnel and visit a property or engage with us on an online casino, the spend goes up exponentially versus betting a $10 or $20 parlay,” Snowden said. “When they visit a casino, that budget can go up to $100 quickly. We like the early signs of omnichannel and cross sales. But it’s very early.”
As for igaming, Greff said management feels they have a competitive product and expects that the launch of its standalone Hollywood Casino app over the next 12 months will be a significant benefit to its customer-acquisition strategy. Users currently have to go through ESPN Bet to play slots and table games.
Penn indicated that they view igaming legislation as a benefit to the overall gaming industry, in which any land-based cannibalization will be more than offset by igaming contributions, Greff said.
The icasino business will have better margins and there’s no better way to drive that than with a robust online-sports-betting database along with a database from casinos, Snowden added. “What we’re missing today in casinos — our product is pretty good — is that we don’t have a standalone icasino app.”
As for online casino legalization, Snowden believes something is likely to happen in the Midwest, whether it’s Indiana, Illinois, or Iowa, and once it does, it will create a domino effect.
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Most of those states do one thing terrible, which is manage their budgets. Like we were pre-COVID, most of these states are back to deficit mode,” Snowden said. “When you’re running a deficit, you have to find new streams of revenue and igaming in states where online sports betting is legal is a no-brainer.”
