Will Penn Entertainment’s deal with ESPN come back to bite them?
We have all heard by now that Dave Portnoy is back as the primary owner of Barstool Sports. It marked the end of an ugly divorce with Penn in which neither side truly got what they want.
In fact, it was so bad for Penn, they were willing to give Dave Portnoy Barstool back for a whopping $1. No, I didn’t mistype that, it cost Dave Portnoy one dollar to buy back a $500 million company.
But now, Penn is once again trying to tip its toe into the world of sports betting, this time partnering with ESPN in hopes of finding success. The deal is said to be a 10-year deal worth roughly $1.5 billion in total, but full details of the contract have yet to be released.
But if that number is true. Penn will have spent over $2 billion dollars between Barstool and ESPN. Certainly, quite a lot of money to just be shelling out on investments you hope work out.
Online betting is taking over America with more and more states legalizing it as years go on, leaving a ton of potential new customers ripe for the taking whenever online sports betting does become legal. But as of right now, DraftKings and FanDuel make up over 70 percent of the online sports betting market.
That doesn’t leave a whole lot of room for a new competitor to come in and make serious money. Penn CEO Jay Snowden acknowledged this and stated that Penn/ESPN was hoping to grab at least a 20 percent of the market share, as they currently just sit at 4-5 percent with little hope of that number going up. But now that hope is a possibility as ESPN is certainly known by enough people to make a drastic impact.
But people simply knowing about the company won’t be enough. Barstool is one of the more well-known sports media sites, but even they weren’t close to delivering the numbers Penn was looking for.
It’s one thing to be known by a lot of people, but it’s a whole other thing to convince them to leave a site/app they have used for years and use yours instead. Just because you are well-known, doesn’t mean your sportsbook will immediately be popular.
One thing that’s for certain is that I like this move by ESPN. They frankly weren’t in a good place and were practically begging companies to give them money. They had to go through yet another mass firing and things just overall weren’t looking good.
But now ESPN will get the influx of cash it needs while also having the potential to create the next great gambling site. I’m sure ESPN is going to shove this down our throats and completely rebrand in favor of this betting app, and I can’t really say I blame them.
It’s certainly a risky endeavor for Penn though, they again have now shelled out over $2 billion and likely can’t afford another failure.
Fox already tried the sports book/betting route and was forced to close it down. This signaled to everyone else that having a functioning sports book isn’t as easy as just having a big following. DraftKings and FanDuel control too much of the market right now and I don’t see that changing anytime soon.
Sure maybe Penn-ESPN can come in and take 20 percent, but how sustainable will that be? Also, will they even be able to get that 20 percent? Unless the sight is much better than that of FanDuel I don’t see why anyone would switch.
Overall I again think this is very risky for Penn to be doing. I mean you just got out of bed with Dave Portnoy and seemingly want to jump right back in with someone else. It’s not the greatest look and even screams a little desperation on their part.
But Penn seems 100 percent set on doing this and putting all their eggs in one baske, and when has ESPN ever let anybody down before? I don’t see how anything could go wrong…
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