ESPN Bet announced it would launch in New York before the start of the football season and it also revealed that it would not impose a surcharge on winning bets like DraftKings is planning on doing in New York at the beginning of next year.
Just Say No
DraftKings, one of the top-rated sportsbooks in the region, made headlines recently when it announced it was going to impose an approximate 3% surcharge on winning wagers in four states with high tax rates including New York. This has caused many stakeholders in those states to reassess their strategies. Many are taking a wait-and-see approach to find out if DraftKings can gain support from other major players like its archrival FanDuel or if they will go it alone and gamble on their customers’ loyalty to the brand.
ESPN BET will be rolling out in New York on August 24th and also announced it would not be imposing any win taxes in the Empire State. Penn Entertainment, the parent company of ESPN BET, shared the news last week through its CEO, Jay Snowden.
“You should expect us to be observers. A tax surcharge in early 2025 isn’t even on our radar. However, I hesitate to say never,” said Snowden at the company’s second-quarter earnings call last week.
A boost to the bottom line would have been tempting for Penn’s beleaguered online sports betting brand but the juice is apparently not worth the squeeze as ESPN BET is trying to attract customers based on its affiliation with ESPN, the sports media giant.
Cutting Back
ESPN BET has been extremely generous with its sign-up bonuses in other states as evidenced by its giveaway in Ohio when it entered that market last December. A whopping 41% of ESPN BET’s Ohio handle in December 2023 was promotional and the company gave more promos than almost all 19 competitors combined in that month.
“We’re going to continue to take a different approach launching in New York versus what we did when we launched across 17 states in the fourth quarter of last year and really lean a lot more on the product improvements, the integration, and of course the connection that ESPN has with millions and millions of New York-based sports fans,” Snowden said.
Snowden has come under fire for his handling of the company’s digital sports betting strategy. Under Snowden’s watch, the stock plummeted as the company spent over $550 million to acquire Barstool Sports so it could use its media outlet to promote what would become Barstool Sportsbook.
But the ink was barely dry on that contract when Snowden reversed course and doled out $1.5 billion over 10 years to ESPN for the right to use its name and gain access to all its platforms to promote it. However, ESPN’s one not-so-small caveat was that Penn had to divest itself from Barstool Sports, which it promptly did.
Big Bucks, Bigger Risks
However, the $550 million Snowden spent went down the drain as he had to act quickly if he wanted the ESPN deal, which forced him to sell Barstool Sports back to its original owner, Dave Portnoy, for the princely sum of $1. Penn will receive 50% of the proceeds should Portnoy sell Barstool but he has vowed never to do so.
Therefore, this could be a make-or-break opportunity in New York, and with ESPN BET expecting to spend only 2% to 3% on its promotional budget to get the word out, it might not be enough to capture the size of the audience they are seeking. Yet, they remain convinced that New Yorkers aware of the ESPN brand will seek them out and will stay based on the quality of the product.
Todd George, executive vice president of operations at Penn Entertainment, said, “When you think about knowing the fan avidity, personalization, usage preferences of all those people, and then being able to target them, whether it’s introducing them to sports betting or people that are already sports bettors, giving them personalized offers, and then moving them seamlessly between apps with no friction, it is a massive opportunity.”
