ESPN BET Still Has A Long, Long Way To Go

Penn Entertainment's stock is down 90% while FanDuel and DraftKings continue to gain marketshare.

It’s no secret that I’ve been bearish on ESPN BET. Specifically, I have publicly said it was an irresponsible use of shareholder capital to write off an $850 million loss on Barstool Sports (just six months after the acquisition was finalized) only to commit another $2 billion to a similar licensing deal, albeit on a bigger scale, with ESPN.

The early results made me look pretty silly, though. Dozens of readers and industry executives reached out to me, essentially saying that A) ESPN’s audience provided Penn with a unique opportunity to lower customer acquisition costs and B) it was a safer, higher upside bet (no pun intended) than a partnership with Barstool Sports.

The early data seemed to confirm this thesis. ESPN BET set an industry record with 1.1 million downloads in its first week. The ESPN BET app was also the #1 most downloaded app in Apple’s App Store for 100 straight hours, beating FanDuel and DraftKings to account for 70% of all U.S. sportsbook app downloads that week.

We could argue that Penn still shouldn’t have sold Barstool Sports back to Dave Portnoy for $1 without securing a legitimate non-compete. Barstool has since signed an eight-figure marketing deal with DraftKings, and one can assume a portion of Penn’s existing sportsbook users (from Barstool Sportsbook) have followed them there.

But this is only part of the story. Nine months have passed since the deal was initially announced, and the early results indicate an uncertain future for ESPN BET.