On an idyllic fall evening on Manhattan’s famed South Street Seaport, ESPN Chairman Jimmy Pitaro delivered the introductory comments at last week’s ESPN Edge technology conference.
Pitaro addressed a packed audience Thursday as rays of sunlight bouncing off the East River illuminated the stage of an expansive conference hall. ESPN is at a crossroads of sorts, as Disney explores strategic plans to roll out a standalone streaming platform of the sports network. But any plans for a direct-to-consumer network took a back seat to ESPN’s highly anticipated launch with partner PENN Entertainment of its sports betting brand, a new division that has been in the works for months.
Pitaro was bullish about Tuesday’s launch of ESPN BET, using opening comments to tout the network’s foray into the U.S. sports betting ecosystem. ESPN BET goes live less than a week before the Kansas City Chiefs host the Philadelphia Eagles on ESPN’s Monday Night Football, in a juicy rematch of Super Bowl LVII. The debut formally marks the start of a lucrative 10-year partnership between ESPN and PENN, which is powering the sports betting platform for which the gaming company’s interactive division sets all the odds.
The New York audience also heard from PENN CEO Jay Snowden, who described the partnership as the “opportunity of a century” for his company. From his first meeting with Pitaro, Snowden said it became clear that a comprehensive sports betting brand had become a necessity for the network. By the end of their 90-minute meeting in Bristol, Connecticut, the two had become so aligned on their vision for ESPN BET that they started finishing each other’s sentences, Snowden told the ESPN Edge audience.
Both sides are focused on creating a seamless, frictionless experience for bettors. Despite the fanfare, questions surround whether ESPN BET can emerge as a Top 3 operator over the next three years. Given PENN’s investment — $1.5 billion over the next 10 years for the rights to ESPN’s brand in operating the sportsbook platform — they can aptly be described as billion-dollar questions.
While an opt-out is available after three years, the partnership will be worth closer to $2 billion if the accord lasts for the entirety of the contract. ESPN’s cachet as one of the world’s most recognizable sports brands is a main reason why PENN essentially swapped Barstool Sportsbook for ESPN BET in this summer’s transformative deal.
Integrations, integrations … and integrations
Anyone who has followed the partnership between PENN and ESPN since the August announcement has become accustomed to hearing the word “integration” frequently. While the term is a buzz word used by MBAs, you don’t need a Ph.D. from the Harvard Business School to understand the intent. Think of an integration simply as a way to combine various aspects of a company’s organization to produce greater efficiencies within the business.
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When it comes to implementing ESPN BET into the fabric of ESPN, there will be media integrations, broadcast integrations, app integrations, marketing integrations, fantasy sports integrations, and much, much more. Networks already post in-game odds as an engagement tool for viewers, and the Worldwide Leader in Sports can now promote the odds of ESPN BET.
ESPN BET is coming soon!
Excited to share our new teaser spot with ESPN’s Scott Van Pelt. https://t.co/K038YKAdDF
— PENNEntertainment (@PENNEntertain) November 1, 2023
On Christmas Day, the Denver Nuggets will face the Golden State Warriors in a matchup of the last two NBA champs. Let’s say Steph Curry has four 3-pointers at the end of the third quarter. In between quarters, ESPN has the ability to create an on-screen graphic of Curry’s odds of hitting the over on various props. The graphic might tempt a viewer to bet on whether Curry will hit one more 3-point shot or go on a heater and drain four more.
The cross-pollination efforts to promote ESPN BET may continue as the NBA broadcasts lead into SportsCenter, hosted by betting enthusiast Scott Van Pelt. The longtime anchor is a favorite among gamblers for his “Bad Beats” segment. ESPN BET will be able to lean into his popularity and that of other personalities at ESPN, which garners about 117 million unique visitors a month. That amount outranks Barstool Sports, PENN’s now-abandoned partner, by about 15-fold.
Snowden noted that PENN plans to work with Van Pelt and other ESPN personalities to offer their picks of the day. If former Colts punter Pat McAfee is playing a same-game parlay, ESPN BET can promote McAfee’s “Parlay of the Day.”
From among customers downloading the new app, ESPN BET already plans to invite several winners of a random drawing to Bristol for a VIP tour of the ESPN studios.
Wayne Kimmel, a prominent venture capitalist, predicts that ESPN BET will eventually surge to No. 1 in the market. ESPN, according to Kimmel, is in a unique position where it could offer incentives such as inviting VIP bettors to watch the CFP national title game from the sidelines with McAfee. That would be the type of advantage competitors can’t match, though it remains to be seen whether such offers will exist.
Leveraging fantasy sports
Over the last year, DraftKings and FanDuel have drawn away from the competition among online national sportsbooks.
The Big 4 of FanDuel, DraftKings, BetMGM, and Caesars control about 90% of the nationwide online sports betting (OSB) market, but the two leaders alone maintain a share of approximately 70%, according to industry data. At the end of this year’s first quarter, FanDuel accounted for roughly 46% of the market, with DraftKings next at 25%, according to Macquarie. Since then, DraftKings made gains in iGaming, supplanting FanDuel in combined sports betting and online casino market share in the third quarter.
BetMGM and Caesars continue to trail the leaders with a combined OSB market share around 20-25%. After the historic PASPA decision that opened up state-by-state legalized betting, FanDuel and DraftKings had the luxury to draw upon vast legions of fantasy sports players.
According to data cited by PENN, FanDuel Sportsbook and DraftKings Sportsbook & Casino each had at least 2.9 million unique customers in September, with FanDuel leading the way at 3.3 million. On the fantasy side, DraftKings had 1.6 million unique users, about 660,000 more than FanDuel’s fantasy sports product.
ESPN dwarfs that amount with a fantasy sports database of approximately 12 million users, according to a PENN Entertainment presentation. Over the next year, ESPN BET will use PENN’s customer relationship management technology to create integrations between fantasy sports and online sports betting. Snowden, an ardent Eagles fan, outlined a scenario where a customer with A.J. Brown on his ESPN fantasy team could receive alerts promoting sportsbook props on the receiver.
Don’t expect the offers to be available this week, however. The deeper integrations, Snowden indicated, are more of a 2024 project once ESPN BET gets up and running.
“It’s all about prioritization on the product road map,” Snowden told Sports Handle. “We know that fans love the idea.”
An emphasis on personalization
On a quarterly earnings call last week, Disney CEO Bob Iger reiterated that plans to launch a direct-to-consumer platform for Disney-owned ESPN are inevitable.
Iger envisions a “soft landing,” where ESPN will remain part of a larger bundle but will also be available a la carte for viewers who want it as a standalone streaming service. Iger pointed to ESPN as one of four building blocks of growth for the company, outlining a strategy to transform the network into the “preeminent digital sports platform” on the market.
While retaining a majority stake in ESPN, Disney also has the option of selling equity in the network to a tech giant such as Amazon or even a professional sports league.
If Disney decides to sell a slice of ESPN as part of a long-term partnership, the company might pursue a league route, the New York Times reported, citing two people familiar with ESPN’s plans. Such a partnership with the NBA could provide ESPN with benefits such as in-game soundbites from players as well as broadcast rights to its apps. The NFL, in conjunction with Genius Sports, recently released a new “stream and bet” platform.
“A league partnership that grants Disney and ESPN mobile streaming rights would not only align with current trends among younger viewers and bettors but also position them to capitalize on future technological developments in the sports and betting industries,” said Jeffrey Kamys, chief investment strategist for the Inherent Wealth Fund’s iBET Sports Betting & Gaming ETF.
To further Iger’s aspirations for establishing ESPN as the definitive, multi-platform digital experience, personalization will be key, said Mark L. Walker, who serves as executive vice president of ESPN BET.
The network strives to develop content that reflects fans’ preferences and passions, he noted, and with ESPN BET, the company will attempt to “responsibly and meaningfully” extend those relationships to those who are interested. Walker, a diehard Chelsea supporter, indicated that he has little interest in what happens to Sheffield United unless the Premier League club is facing Chelsea. The same approach can be applied to gambling, where ESPN BET can cater to bettors through personalized offers.
Disney CEO Bob Iger announced Wednesday that ESPN will be available as an a la carte streaming product in 2025, ending years of speculation of when cord-cutters would be able to watch the leading sports network. https://t.co/guxOimlmiG
— The Washington Post (@washingtonpost) November 9, 2023
ESPN BET can also turn to personalization through “ad tech” as a way of optimizing the experience for individual bettors. Across the advertising industry, ad tech is a general term that describes the tools advertisers employ to reach customers.
Despite residing in Kentucky, Chalkline Sports CEO Daniel Kustelski is a fan of the Minnesota Vikings. Ordinarily, a sportsbook operator may have no clue that a Kentucky bettor has a proclivity for betting on the Vikings. But through technologies such as artificial intelligence and machine learning, operators can monitor trends that suggest a bettor has an affinity for wagering on a certain team.
Within those wagers, a Vikings bettor may wager on Justin Jefferson props at an elevated rate. Through ad tech, software is available to offer a bettor a personalized wager on a Jefferson anytime touchdown at 325 when the prop is available elsewhere with a lesser payout.
In the past, prominent media companies such as Fox have acted as “media content providers” when attempting to engage with sports bettors, according to Kustelski. The model differs from one where a major media company attempts to “convert users into sports bettors.” PENN, he suggests, can acquire new customers by leveraging the technology.
“By football season next year, they have every opportunity to be inside ESPN with that critical ad tech to convert players onto the book,” Kustelski told Sports Handle.
As with nearly every major launch, there are more questions than answers at the moment. Asked by Sports Handle if ESPN BET has eclipsed internal targets for app downloads, PENN declined to comment, citing company policy. PENN also declined to elaborate on strategies for promotional intensity, conversion rates from fantasy sports and TikTok, as well as various incentives for loyal customers.
As a public company and per corporate policy, PENN does not share those details beyond quarterly earnings calls, a company spokesman told Sports Handle.
In a presentation at last month’s Global Gaming Expo in Las Vegas, Snowden stated that customer retention would be driven through an integrated product and customer value proposition, and not through aggressive promotional activity, according to Truist Securities analyst Barry Jonas. On a trailing three-month basis, DraftKings and FanDuel maintained a 63% combined promo share in a group of select states (for June 2023 through August), Truist research found. By comparison, PENN ranked fifth with a promo share of only 1%.
There are also questions of whether ESPN BET can convert longtime FanDuel and DraftKings bettors. A survey of about 850 respondents from Betting Hero found that a customer downloads about 3.2 sports betting apps, on average. The bettors surveyed indicated that they actively use fewer than two apps (average of 1.8) at a given time
Joe Stauff, an analyst with Susquehanna Financial Group, has high conviction that ESPN BET and its large top-of-funnel will generate interest, but it needs to “discover” the level of retention first. The retention capabilities, he wrote, will be driven by product quality.
Another analyst, Ryan Sigdahl of Craig-Hallum Capital Group, anticipates strong user acquisition and handle share gains for ESPN BET, but he awaits better clarity around retention and considerations such as product performance, integrations, and competitive dynamics.
Barclays projects OSB market share of approximately 6.1% for ESPN BET in the fourth quarter of 2023, up from about 2.8% in the previous quarter under Barstool. From there, ESPN BET is projected to generate first-quarter market share of 8.5% during its first Super Bowl and March Madness. Barclays then models a slight regression to 7% for the following two quarters.
On a long-term basis, Snowden is hopeful that ESPN BET will hit at least 20% by 2027.
“We’re not doing this deal to be 4 percent or 5 percent market share players,” Snowden said on an August earnings call. “That’s not going to be acceptable for us. It’s not going to be acceptable for ESPN.”
ESPN BET is almost here — get in on the action with our exclusive ESPN BET promo code when ESPN BET launches Nov. 14.
Chris Altruda contributed to this article
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