Last month, the sports wagering field was momentarily stirred when Penn Entertainment announced it would spend $1.5 billion over the course of a decade to license the ESPN Bet brand. At the same time, the entertainment company decided to part ways with Barstool Sports, with the termination costing a remarkably low rate of $1.
While the agreement is seen as a potential landmark occasion for both Penn and ESPN, there are skeptics who question the budding sportsbook brand’s capacity to pose a valid threat to the colossal market shares belonging to Flutter Entertainment’s FanDuel and DraftKings.
For approximately five and a half years, sports betting has enjoyed legality in the U.S and it took even less time for FanDuel and DraftKings to establish their current duopoly, jointly accounting for an impressive 75% of the market.
Andrew Kim, an analyst from ARK Investment Management, remarked that FanDuel and DraftKings together clinched almost two-thirds of the domestic online sports wagering market as of June, compared to Penn’s Barstool Sports, which only managed to secure a meagre 4% share.
Kim expressed doubts over Penn’s future market performance with ESPN, saying, “Given PENN’s failure to win market share with Barstool, how will it fare with ESPN – a legacy media property battling a multi-year decline in market share?”
Insights suggest that ESPN Bet’s future is potentially both promising and challenging. On the upside, the ESPN brand carries weight among sports enthusiasts, in addition to the considerable resources held by both the network and Walt Disney, its parent company.
However, how these advantages convert into attracting sports wagering clients is uncertain. Consistent with a survey conducted by investment bank Jefferies, a significant portion of sports bettors are likely to stick to multiple betting accounts, but are also inclined to remain loyal to familiar platforms – a scenario beneficial for FanDuel and DraftKings and potentially disadvantageous for smaller competitors.
Kim also suggested that Penn could exploit the ESPN affiliation to its advantage, as ESPN Bet, under Penn’s operation, stands to gain from exclusive ESPN promotions.
Penn’s partnership with ESPN comes at a time when the latter is struggling with a lapse in subscriptions due to the rise of individuals turning away from traditional television – a phenomenon known as cord-cutting. Despite this setback, the network may have the potential to counter these decreases and stimulate growth through its streaming service, ESPN+.
However, Disney’s recent announcement of price hikes across all its streaming services, including ESPN+, raises questions about the move’s efficacy amidst increasingly budget-conscious consumers.
In Kim’s words, “As ESPN transitions to streaming, how will it safeguard its content library and sports franchise against big tech companies?” Further, how will ESPN deploy its distribution and scale to market ESPN Bet and compete against other sportsbook operators?
Despite the relentless dominance of the DraftKings-FanDuel duopoly thus far, it remains to be seen if ESPN Bet can be the breakthrough contender. As Kim concludes, “We would be surprised.”
