Will An ESPN Casino App Follow The ESPN Bet Launch?

Disney finally joined the sports betting gold rush by lending the ESPN brand to PENN Entertainment for an insane amount of money. With ESPN BET competing within the sportsbook market, the logical question followed: Will there be an ESPN Casino app?

We will take a look at some evidence pointing to a possible ESPN Casino app and documentation that would lead us to think otherwise. With online casino revenue tracking at 4x that of sports betting, it must be on the radar of ESPN.

What Are The Details Of The ESPN bet Deal?

  • At the core of this deal, is a simple branding agreement
  • PENN paid an extraordinary amount of money to rent the ESPN brand for 10 years, but PENN has an out at the 3-year mark.
  • The Barstool Sports brand has been divested by PENN and given back to Dave Portnoy for 50% revenue if it is sold in the future.

PENN has secured the exclusive right to the ESPN BET trademark for online sports betting in the U.S. for an initial 10-year term which may be extended for an additional 10 years upon mutual agreement.

PENN Entertainment agreed to pay $1.5 billion to ESPN over the initial 10-year term and grant ESPN approximately $500 million of warrants to purchase 31.8 million PENN common shares.

Will We See An ESPN Casino App?

There was no real mention of a casino platform in the top-line messaging of the ESPN BET deal, but buried a bit down in the PENN press release we see the following:

Rebranded i-Casino Product: Powered by our new promotional engine, our new app will include a separate Hollywood-branded i-Casino product in those states where permitted

Ok, so after reading this, it would seem like an ESPN Casino app is not on its way to the market. PENN rebranding from Barstool Casino back to Hollywood Casino makes sense. Disney CEO Bob Iger was asked about a casino product on the Q2 Disney revenue call. Iger seemed to leave the door open to a potential casino brand. He certainly did not shoot it down.

Referencing the PENN-ESPN investor presentation, PENN CEO Jay Snowden surprised many with growth estimates for their online sportsbook and casino business that seemed ultra aggressive. More on this below.

Where is the Big I-Gaming Growth Coming From?

Described as “significant value creation,” PENN estimates it could see an annual adjusted EBITDA of $1 billion by 2027, IF It captures 20% of the online sports betting market share in North America AND 16% of the i-gaming market. Considering the pure dominance of DraftKings Casino and BetMGM, how is PENN stealing online casino market share?

The investor deck details three market share scenarios and their potential adjusted EBITDA for 2027. PENN estimates a total addressable market of $15 billion for sports betting and $14 billion for online casino:

Adj. EBITDASports Betting Market Sharei-Gaming Market ShareBlended adj. EBITDA margin, GGR
$500 million10%8%16%
$700 million15%12%17%
$1 billion20%16%18%

According to Snowden, the exact market share required to prevent ESPN from terminating the 10-year deal after three years was not disclosed. However, he did mention that reaching around 10% market share in the online sports betting industry would generate excitement from both Penn and ESPN regarding the progress of ESPN Bet.

A 16% online casino market share may actually be more aggressive than the 20% OSB projection, which most industry insiders viewed as insane.

PENN Commits $300M Ad Budget for ESPN Bet

Penn plans to spend around $150 million on marketing outside of ESPN to help push the product. That is in addition to the $150 million annual guaranteed spend to ESPN in the deal.

Can PENN place ads for Hollywood Casino within the rotation for ESPN Bet? If they can, that would be a major win. If not, they have to play the convert your sports bettor to a casino game that the rest of the industry is trying to master.

With such a focus on spend and customer acquisition costs of $200+, PENN has pushed all profit estimates to 2025.

ESPN User Database Will Be Key to Success

The manner and timing in which PENN will gain access to ESPN’s customer database remains at the discretion of ESPN.

In regards to this, Snowden mentioned that ESPN has been diligently working on this aspect behind the scenes for a significant period. He emphasized that ESPN has developed a comprehensive and exciting plan in this regard.

As per the investor presentation, ESPN currently boasts an impressive user base, with over 25 million ESPN+ subscribers and 11 million unique fantasy sports accounts. Furthermore, the brand has garnered a massive following on social media, with 370 million followers, and experienced 100 million monthly digital unique visitors in 2022.

Snowden reiterated that any customer data obtained through ESPN Bet will be the sole property of Penn as a regulated company, emphasizing the importance of maintaining the security and privacy of such information.