An interesting confluence of events may trigger a purchase of Penn Entertainment by Boyd Gaming but Penn’s digital assets could be of interest to FanDuel’s parent company, Flutter Entertainment.
Let’s take a closer look at the details behind the potential purchase and how it might impact top-rated sportsbooks.
Is Penn Digital a Fit for Flutter?
Boyd Gaming agreed to allow FanDuel market access to mobile sports betting in the U.S. in 2018 for a 5% share of the company but Boyd is reportedly seeking more assets in the land-based casino business, which would make Penn an obvious target. However, Penn’s digital assets, like ESPN BET, would likely need to be purchased by a third party and that is where FanDuel’s parent company, Flutter Entertainment, comes in.
But what would Flutter do with the ESPN BET brand? Its subsidiary, FanDuel, is already the industry leader and history suggests that Flutter forsakes its digital acquisitions as it did when it bought the Stars Group, which included the struggling U.S. mobile sports betting brand, FOX Bet. Flutter gave FOX Bet little support and it ultimately terminated the brand last year.
But FOX Bet had less than 1% of the market, yet, giving life to a brand like ESPN BET with approximately 8% of the market and is in direct competition with its golden goose – FanDuel – doesn’t make much sense.
Flutter’s Dilemma
With the acquisition, Flutter would gain access to ESPN BET customers and could assimilate the brand into FanDuel or simply shut it down entirely and eliminate an up-and-coming competitor.
Chris Krafcik, the managing director of sports betting and emerging verticals at gaming consultancy firm Eilers & Krejcik, believes this endeavor is not worth the effort for Flutter.
“That is NOT to say, however, that a Flutter-ESPN Bet combination would make (enough) sense to pursue. Lots of challenges (e.g., potential tech stack switch, hefty marketing spending commitments, ESPN media ecosystem integration) to navigate.
“Our armchair view is that the juice is probably not worth the squeeze—especially given FanDuel’s market-leading positioning in U.S. online gambling.”
Penn’s Complicated Mobile Sports Betting History
Penn Entertainment has made its bones in the land-based casino market while its foray into the world of mobile sports betting has been tumultuous to put it gently. Penn initially purchased the controversial Barstool Sports media brand, which it would use to birth Barstool Sportsbook and use its media platform to pull customers from Barstool’s young demographic. It was a carefully crafted strategy to turn viewers into bettors that was met with only a modicum of success.
However, shortly after spending north of $550 million on buying the Barstool brand and launching Barstool Sportsbook, a bigger opportunity arose that would see Penn seal a 10-year, $1.5 billion deal with ESPN which would serve as the launching pad for ESPN BET.
However, before the agreement could be consummated, ESPN demanded Penn divorce itself of the Barstool brand due to its controversial reputation. This forced Penn to sell their new acquisition back to Barstool’s original owner, Dave Portnoy, for $1 and retain the rights to 50% of the sale should Portnoy ever sell Barstool Sports.
Late to the Game
Naturally, it would have made no sense for Penn to include the sportsbook in the sale to Portnoy as it would then become a direct competitor of ESPN BET, which is why Barstool Sportsbook is no longer. But things haven’t been a whole lot better since the launch in November 2023 of ESPN BET.
Although the ESPN brand is more widely known than Barstool, it came late to the party, and getting early adopters to sign on is a key strategy of any mobile sportsbook trying to compete with the duopoly of FanDuel and DraftKings.
The hundreds of millions of dollars Penn has already spent to gain a foothold in the online sports betting market has seen its stock price drop, which is of grave concern to investors. Recently, a public letter by Will Wyatt, managing partner of the Donerail Group, to Penn’s chairman David Handler, and the board stirred questioning of Penn’s leadership and suggested a sale may be the best course of action for everyone involved.
