Penn Seeking New York Entry for ESPN Bet, Says Analyst
Posted on: December 18, 2023, 04:57h.
Last updated on: December 18, 2023, 05:55h.
Penn Entertainment (NASDAQ: PENN) is actively evaluating avenues to bring its newly launched ESPN Bet mobile sports wagering application to New York.
Following the recent 11th Annual Truist Securities GLLR Summit in Boston, Truist gaming analyst Barry Jonas noted that ESPN Bet remains one of the hottest topics in the industry, adding that Penn is looking for ways to enter New York.
That jibes with comments from Penn CEO Jay Snowden. When the Penn/ESPN partnership was unveiled in August, Snowden noted the operator was considering entering New York’s sports wagering market. That represented a reversal of his prior stance on the state.
So I’ve always struggled with the ‘Would you rather be in or not?’ I think, objectively speaking, you’d probably rather be in than not be in, but it’s one of those states where if you’re not in you’re not crushed by that either,” said Snowden in 2021. “Maybe from a total addressable market perspective and a revenue perspective but I think it’s just going to be a margin killer. I think it’s going to be an earnings before interest, taxes, depreciation, and amortization (EBITDA) detractor.”
By handle and revenue, New York is by far the largest sports wagering jurisdiction in the US, but owing to an onerous 51% tax rate, it’s also tricky for sportsbook operators to turn profits in the fourth-largest state.
How Penn Can Get ESPN Bet Into New York
When New York lawmakers approved online sports betting in 2021, they granted nine licenses to gaming companies, all of which are currently spoken for.
For Penn to get ESPN Bet into the state, policymakers would need to legislate expansion of the above policy. Or Penn could wait for a current operator to depart the state or buy an existing license from one of those companies.
Acquisition could be tricky, though not impossible, but the top five operators by handle and revenue in New York are unlikely sellers. Those are FanDuel, DraftKings, Caesars Sportsbook, BetMGM, and BetRivers. Fanatics is sixth and an unlikely seller as well because it’s new to the state by way of its acquisition of PointsBet US.
That leaves WynnBET, Resorts World Bet, and Bally Bet as potential targets for Penn and ESPN Bet. The curveball is that the parent companies of all three of those operators are vying for downstate casino permits and, if they’re victorious in that quest, they’d be unlikely to relinquish their New York sports betting licenses.
Due to the significant paring of WynnBet operations earlier this year, Wynn Resorts could be a willing seller of its sports wagering access if it isn’t awarded a New York casino license, but that’s just speculation.
Other Penn, ESPN Bet Notes
Truist’s Jonas added that ESPN Bet could initially exceed Penn’s projected losses of $100 million to $150 million, meaning it could be 2025 before the sportsbook turns profitable.
The analyst also noted that the regional casino operator is not yet repurchasing shares under a $750 million buyback plan announced a year ago because it’s directing excess cash to ESPN Bet.
Source: casino.org
