As ESPN Bet tests its brand power against more established competition in the US sports betting market, its owner, Penn Entertainment, has announced changes in the leadership of its Interactive division. In addition to ESPN Bet, Penn Interactive is responsible for operating Hollywood Online Casino in the US and theScore Bet in Canada. The Levy family, who founded theScore, took the reins of Penn Interactive when Penn acquired their company in 2021. According to Penn, they will vacate their roles in the coming months due to the company’s large-scale strategic changes.
John Levy, Executive Chairman of theScore, will depart in February. The rest of the family, including Benjie Levy, Head of Penn Interactive and President & COO of theScore, will leave their roles in April 2024. Penn says it’s in the final stages of its search for a new head of the Interactive division.
Penn paid $2 billion for Score Media and Gaming Inc. Penn also took ownership of theScore’s in-house-developed platform as part of that deal. It used that technology to launch Barstool Sportsbook, which has since undergone a makeover to become ESPN Bet.
Unfortunately, theScore itself failed to make much impact on the US sports betting market. In the summer of 2022, Penn withdrew theScore from the US, electing to focus on the Barstool brand there while continuing to push theScore Bet in Canada. Barstool was not doing much better, however. About a year later, in Aug. 2023, Penn cut ties with Barstool Sports and its founder, Dave Portnoy. Penn then signed a 10-year, $2 billion deal with ESPN to apply its brand and marketing power to Penn’s sportsbook product.
Little now remains of the sportsbook strategy the Levys were tasked with overseeing. The change in leadership suggests that Penn is seeking to wipe the slate as clean as possible for its Interactive division. Penn is aiming high with ESPN Bet, so fresh leadership ideas could help it find its new direction.
CEO Jay Snowden said as much in a press release announcing the change:
This transition plan comes at a natural inflection point, with the migration to our proprietary technology platform complete, theScore’s media and betting business delivering record results, and ESPN BET off to a strong start.
Barstool Was A Losing Bet
In 2020, Penn paid $165 million for a 35% stake in Barstool Sports. Then, in 2022, it followed up on its option to purchase the remaining 65% for $387 million. Although this financial outlay wasn’t as high as for the Score acquisition or ESPN deal, there was no return on it for Penn. Ultimately, it returned the company to Portnoy—essentially for free—just to walk away from the relationship.
While it owned the brand, Penn let Barstool’s controversial founder, Dave Portnoy, promote it. The company was counting on Portnoy’s popularity with young men who form the core sports betting audience. However, his political views, combined with accusations of misogyny and sexual misconduct, brought scrutiny and negative attention to the brand.
The Barstool brand’s social media popularity with college undergraduates also proved to be a mixed blessing. Many in that demographic are under the legal gambling age, making it tricky to target messaging responsibly. Further complicating the issue was the blurring of the line between the Barstool Sports media product and Barstool Sportsbook. In one instance, Penn received a $250,000 fine in Ohio because Barstool had been promoting gambling products at a University of Toledo pre-game show with many underage students in attendance.
Portnoy’s misconduct allegations put Barstool in hot water with regulators in some states, including Massachusetts. During Barstool’s application process, the Massachusetts Gaming Commission expressed concerns about Portnoy and his depiction in a New York Times article that Portnoy has characterized as a “hit piece.”
Ultimately, the commission did grant Barstool a license, but with conditions attached. These included its cooperation with a regulatory investigation of Barstool. Meanwhile, New York, the largest state in terms of sports betting handle, denied Barstool’s application. Portnoy later told Variety that Penn had been “denied licenses” because of him, though he did not specify which states.
At the beginning of Penn’s relationship with Barstool, estimates for its potential market share ranged from 15% up to 33%. But despite a promising start, the brand slid to about 3% of the overall US sports betting market share, only grabbing a bigger piece in a few specific states like Michigan.
Is ESPN Bet the Winning Formula?
Having realized the Barstool relationship was failing, Penn moved in a new direction with sports media giant ESPN. The new ESPN Bet app launched on Nov. 14 in 17 states amid a lot of hype and high expectations. Penn says its goal is to achieve a 20% market share by 2027.
The company estimates that the ESPN ecosystem has over 200 million multiplatform monthly users in the US. In addition, Penn’s rewards system, Penn Play, has an estimated 27 million members. By building off Barstool’s existing customer base, Penn has a large target audience that it hopes will fuel the new site.
But having a database of potential users is only half of the equation. ESPN Bet has been spending heavily on promotions, echoing the strategy adopted by its rivals in earlier years. In an earnings call last year, Snowden said the high spending rate will continue through March Madness. Penn CFO Felicia Hendrix added she expects ESPN Bet to be the primary driver of the company’s losses in the foreseeable future.
However, there are some early signs that the cash burn is paying dividends. In December, ESPN Bet climbed into third place in betting handle in several states, including Ohio, Maryland, and Massachusetts. There, it trails only FanDuel and DraftKings while beating the likes of BetMGM.
Penn Also Aims High With iGaming
ESPN Bet is undoubtedly Penn’s focus. However, the Barstool adventure had shifted Penn away from Hollywood, its original online casino brand. It’s now going back to that name, with Hollywood Online Casino now available in Michigan, New Jersey, Pennsylvania, and West Virginia. The company integrated the online casino within the ESPN Bet app to give it more exposure. Integrating with ESPN Bet means that these new Hollywood Casino sites benefit from an upgrade to the Score platform.
Snowden has high hopes for Hollywood Casino. At an earnings call last year, he said the company’s goal is a 16% market share in iGaming. While many would say it is rather ambitious, Penn hasn’t shied away from big plans.
Since Barstool’s shutdown, Hollywood Casino has gone live in Michigan, New Jersey, Pennsylvania, and West Virginia. The casino offers games from studios like IGT, Light&Wonder, Konami, NetEnt, and Aristocrat, including the famous Buffalo slot. It also has a good selection of live dealer games and helpful features like providing game information, RTP, and minimum and maximum wagers. Its game selection remains a little sparse compared to the market leaders however. For instance, its New Jersey site currently features only about 150 slots, while several other operators in that market now have over 1000.