Penn eyes exit
Penn Entertainment CEO Jay Snowden has tossed a grenade into the future of struggling ESPN Bet by reminding shareholders the brand can opt out of the market.
Snowden told investors Thursday that the Disney-owned, Penn-powered ESPN Bet has failed to meet market expectations over the past 1.5 years.
fourth-quarter EBITDA loss of $109.8m
Penn backed this up with figures revealing it posted a fourth-quarter EBITDA loss of $109.8m from its interactive arm that includes ESPN Bet’s online business.
Snowden then posited the idea that Penn could exercise an ESPN Bet opt-out clause available in 2026. If Penn choose this option, it places the 10-year, $2bn ESPN Bet deal struck between the Pennsylvania-based firm and Disney in August 2023 in limbo.
Ambitions dashed
In 2023, Penn agreed to pay Disney’s ESPN $1.5bn to create ESPN Bet along with $500m in warrants to be paid over the ensuing ten years. In return, Disney granted Penn three years to operate ESPN Bet.
Part of that deal, however, included a clause allowing Disney or Penn to back out after the three years on one condition – if business goals were not met.
Only halfway through the three-year period, with ESPN Bet way behind serious contenders in many key states including New York, Illinois, and New Jersey, Penn is already pointing out the 2026 ESPN exit door to shareholders.
we’re not on pace right now to do that.”
Snowden stated Thursday that: “When we announced our partnership, both sides made it very clear that we expected to compete for a seat at the podium. And we’re not on pace right now to do that.”
The CEO talked up “tremendous plans” for ESPN Bet in 2025 and 2026 before subsequently addressing the elephant in the room.
“If, for whatever reason, we’re not hitting the levels that we need to […] you have a three-year clause in that contract that both sides will have to do what’s in their best interests.”
“So that’s always out there,” Snowden told stakeholders Thursday.
Price of failure
According to industry experts, if ESPN Bet fails, heads are likely to roll at Penn.
ESPN Bet’s much-trumpeted intentions to make an impact in this year’s NFL season has turned to dust. The sportsbook finished sixth in handle behind Fanatics, a performance that doesn’t bode well for ESPN Bet’s future.
Into this mix comes Penn activist investor HG Vora Capital, which is trying to claim three board seats due to dissatisfaction with Penn’s “reckless spending” on the likes of ESPN Bet.