Can Penn/ESPN Pairing Make a Dent in Sports Betting World?

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ESPN brand new sports book, ESPN Bet, debuted this week in 17 states. 

I wrote about the deal that ESPN and Penn Gaming agreed upon back in August, ending Penn's relationship with Barstool Sports, and paying ESPN $1.5 billion over 10 years to rebrand to ESPN Bet. 

Penn makes a deal with the hopes that EPSN could lower its customer acquisition cost, but the big question we are about to find out is, can ESPN make a difference?

In a crowded space, ESPN Bet is way behind the game regarding sports betting. 

Two industry giants, FanDuel and DraftKings, with around a decade of presence, have undoubtedly earned the confidence of bettors through their widely-used sportsbook apps.

So where will ESPN Bet fit in?

While Penn and Barstool got off to a great start, it wasn't sustained In a space that is very expensive to acquire customers, Penn eventually gained full control and sold Barstool back to Dave Portney for $1.

So why was Penn so willing to get out of their deal?

Penn pulled out from the deal in part because they felt Barstool was too edgy, which in turn made it tough for them to gain enough traction in more states.  While it was in 17 states, it wasn't gaining any traction in the states it was in, behind leaders DraftKings, FanDuel, BetMgm, and others. 

Enter ESPN.

ESPN finally became open to the idea that they would enter the sports betting space, while Penn Gaming convinced its partners that it was time to break away from its stalling partnership with Barstool and join forces with the World Wide Leader.

While the two deals are very similar, their reach is not. 

ESPN just reaches significantly more people and has a much better overall distribution than Barstool can ever dream of. 

For example, forget the cable distribution, ESPN+, and website traffic, and let's simply look at ESPN's social media platforms. ESPN has over 150 million social media followers combined subscribers, this doesn't even take into account its other platforms of shows, like Sportscenter, or its radio shows, NBA or NFL-specific shows. It is also the most followed brand on TikTok, where younger people consume plenty of their time.  

Put it all together and it's something Barstool Sports could not match, making this move make sense on the surface. For ESPN, they get thrust into 17 states right off the bat, due to Penn Gaming's pre-existing relationships with those states. 

So will this work? 

Penn didn't have much of a choice, a few years into their partnership with Barstool, they saw the writing on the wall, they had hit their apex, and were not going to surpass the industry leaders DraftKings and FanDuel, who own almost 75% of the sports gaming market share as per agamble.com.  So this essentially was the only option they had to try and at least compete with them. 

So while it didn't work out with the Barstool brand, what is ESPN looking to gain from this partnership?

While ESPN is still a cash cow, the cable bundle is crumbling before their eyes and ESPN+ hasn't caught on as much as they had hoped. ESPN has been in search of a partner and buyer of the company, recently releasing their financials to try and lure someone to make a bid to buy them. 

So on the surface, this deal makes sense for ESPN, who is looking for new revenue streams.Penn runs the betting side and the ESPN Bet app, ESPN essentially got $2 billion to handle the branding.  

So it all sounds like a smart deal for both sides.  Penn gets a bigger brand to help promote its gaming app, and ESPN gets a bundle of cash for essentially doing nothing but allowing Penn to use their name. 

But in the grand scheme of things, it all might be too late. 

FanDuel, DraftKings and others have built brands that the betting market trusts and feels comfortable with, while ESPN stood on the sideline and watched them grow into what they once were - industry leaders. 

Yes, ESPN is still the industry standard on the cable side, but that's like saying you have the most profitable newspaper. Now in the betting pond, ESPN has to come to terms with its lack of vision five years ago that is costing them today, and it's taking Penn with them. 

Penn made a deal with Barstool to try and move up the sports betting ladder, but left to move up another rung. However, this deal seems like it was done a bit too late for either side to prosper to their fullest potential.

Penn has said they would like to own about 20% of the sports betting market in the US by 2027.  Can adding ESPN's branding help them make that big of a jump? Doubtful. 

Think of it like this, even if ESPN Bet has the best product, which at this point, I'm not sure is the case.  People who used the Barstool app would tell you that it was an interior product to the market leaders. Its like FS1 trying to gain market share on ESPN on the cable side, they haven't really made much of a dent. FS1 may in fact have better shows and better talent, but people are trained to use ESPN for sports, regardless of which product they like better. 

Its a trust factor, and time creates trust. PENN and ESPN sat on the sidelines for too long to generate the trust need to make the dent needed to compete in this space. 

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