ESPN Bet has big ambitions, a tough road as it launches in New York

ESPN sees betting as a major growth area as it hedges against the steady decline of its pay-TV package. Its brand is synonymous with sports globally and has an unparalleled reach with an audience of hundreds of millions of sports fans through pay TV, streaming, its website and social media.

Penn’s new strategy for ESPN involves creatively leveraging this advantage by integrating ESPN Bet-branded betting lines and content on ESPN platforms and sending personalized bets to players based on fantasy rosters. The company hopes its massive platform and popular talent will attract new users to ESPN Bet.

“It’s very early in the journey for ESPN Bet and it’s an exciting opportunity for us to really be a disruptor in this space,” Mike Morrison, ESPN’s vice president of sports betting, said at his company’s media day in late August .

However, ESPN Bet faces long odds. Industry analysts expect the service to carve out a niche for itself, though it may be too late to really challenge top services like FanDuel and DraftKings.

“When you consider the structural advantages that so many of their competitors have, it becomes a challenge to see how Penn can actually make up a substantial amount of ground over the rest of the decade — let alone in a single NFL season,” Chris Grove. , partner emeritus at research firm Eilers & Krejcik Gaming, told Business Insider.

ESPN declined to make an executive available for this story. Penn did not respond to a request for comment.

Why securing a bronze medal is not a safe bet

ESPN Bet was unveiled last August when ESPN licensed its well-known brand to casino operator Penn, which previously ran Barstool Sportsbook. The service launched in November and made a major splash by capturing 8.1 percent of the fast-growing U.S. online sports betting market in its first month, according to Bank of America.

But as the NFL season ended, so did ESPN Bet’s momentum. A much lower expense ratio than its peers drove the service’s market share below 4 percent in the first quarter of 2024, BofA estimated.

That’s troubling for Penn, given that its CEO specifically said last summer that “we’re not in this business to be a 4% or 5% market share player. It’s early days, but analysts noted that ESPN Bet is far from Penn’s projections, which were for the service to capture as much as 20 percent market share by 2027.

“Given the expectations Penn has set for ESPN Bet, it’s hard to give him anything higher than a C,” Grove said.

Eilers & Krejcik estimates that ESPN Bet has less than 3 percent of the online sports betting market, though Grove noted that the newer service should be judged by its share in the markets it’s in, not its national share. In those states, ESPN Bet’s odds are generally between 3% and 6%.

Morningstar gaming analyst Dan Wasiolek reached a similar conclusion, noting that the service accounted for 6.2 percent of the sports betting market in Michigan and had a 4.7 percent share in Pennsylvania in July.

But while ESPN Bet is just getting started, industry experts say it’s unlikely to beat FanDuel or DraftKings, which have consistently accounted for 70 percent to 75 percent of the market thanks to a years-long lead.

“It’s FanDuel, DraftKings and then everybody else,” Wasiolek said in an interview. He said he’s keeping his expectations in check for ESPN Bet.

Grove shared that skepticism about ESPN Bet’s prospects.

“There are both entrenched operators like BetMGM and Caesars who are not going to let Penn walk past them without a fight,” Grove said. “And then there are also up-and-coming brands that are arguably just as well-positioned—if not better-positioned—than Penn to claim that third-place award; Bet365 and Fanatics are two good examples out there.

In its second-quarter investor presentation, Penn boasted that it was right on par with its biggest competitors when it came to weekly active users, according to Sensor Tower data. The research firm also found that ESPN Bet is third in app download share at 13%.

While that sounds promising, Wasiolek said it doesn’t bear out in the company’s market share or revenue data. This suggests that ESPN Bet users are engaged but placing smaller bets, or that the service is collecting less money on the bets they place.

A world leader in sports betting?

Despite those heavy odds, Grove and Wasiolek agreed that ESPN Bet shouldn’t be ruled out. Even if the service is never a top player, it can be profitable for Penn and ESPN.

“They’re going to have a piece of a huge, growing pie that we think is already becoming increasingly profitable,” Wasiolek said.

While avid sports bettors may already be attracted to a betting app, casual bettors who enjoy ESPN content may flock to ESPN Bet, especially as it launches in new states.

“They have the brand power of ESPN, and the monthly users on that platform are in the hundreds of millions,” Wasiolek said. “So it’s about getting those people involved.”

That gives ESPN’s namesake betting app a big advantage, but it’s unclear if that will be enough in the cutthroat sports betting market.

“ESPN is a unique brand, and there’s no doubt that it provides Penn with unique opportunities, and there’s no doubt that you’ll see Penn unlock more of those opportunities as the integrations into the ESPN ecosystem become deeper and more meaningful, and as ESPN The betting product is getting better,” Grove said. “The problem is, Penn’s competitors aren’t standing still.”