Penn Entertainment said it will not make users download a new app, as it previously did during its transition away from the Barstool brand, after ditching its $2bn ESPN deal eight years ahead of schedule.
The regional casino and online gaming operator will avoid the operational disruptions that plagued its transition from Barstool to ESPN Bet when it rebrands to theScore Bet on 1 December, with customers remaining in the same app rather than being forced to download new software and re-register.
Chief Executive Jay Snowden told analysts on the operator’s third quarter earnings call today (6 November) that the seamless transition represented a stark contrast to the previous rebrand, when the company put customers “through a lot of hoops to jump” including several days of downtime and requirements to re-register and redeposit.
Snowden said the different approach should minimise retention risks as Penn seeks to reach breakeven or better in its interactive business in 2026 following the early termination of its ESPN partnership. The company also clarified it will cease all payments to ESPN at the end of Q4.
Snowden said: “It’s kind of apples and oranges when you think about what we did at the time of that brand change versus where we are now. We had put our customers through a lot of hoops to jump, and we had a new technology stack.
“We were down for several days. We asked them to come back in and re-register and redeposit. There was a lot going on that created noise, in addition to the brand change.”
The multi-billion dollar licensing deal was announced with much fanfare in August 2023, with the businesses initially stating they intended to partner for a 10-year period.
The cancelling of the arrangement today – two years and $300m later – is a black mark for the business, which has repeatedly failed to break into the competitive sports betting market and spent billions of dollars in the process.
The market has had a mixed reaction to the ending of the deal, with the share price initially spiking before falling at around 3% below yesterday’s close.
Wasting no time in moving on, ESPN one hour later announced it had partnered with DraftKings, which will be the sports media giant’s official sportsbook and odds provider, beginning 1 December.
Penn has spent billions on sportsbook acquisitions since 2020 including via the $550m deal to buy Barstool, which was sold back to controversial founder Dave Portnoy for $1, on top of $2bn to purchase theScore.
During this period, Penn’s sportsbooks have been largely loss making in the US, although the business has seen profits in Canada and in its iGaming operations.
‘Why string this along?’
In terms of why the business was moving to end the deal early, Snowden highlighted the initial contract had included a three-year break clause and that he had brought up this eventuality on previous earnings calls.
He said the company was not on the market share trajectory it needed to keep the deal in place through the football season, despite improvements.
The executive said: “And so, you know where it’s headed – why string this along? Let’s get together and figure out the best path forward for both companies.”
The company said its focus on product improvements had already delivered results, with retention significantly higher during the first two months of this football season compared to last year.
Chief Technology Officer Aaron LaBerge noted that ESPN Bet was recently named most improved in a third-party ranking and the product was now very competitive.
Penn will pay ESPN a total of $38.1m in the fourth quarter for marketing services through 1 December, plus an additional $5m from 1 December to 31 December for traditional media supporting theScore Bet and Hollywood iCasino.
ESPN will also retain approximately 8 million vested warrants with a weighted strike price of around $29, representing potential dilution of roughly 320,000 shares or 0.2% of Penn’s 138m outstanding shares.
Snowden said Penn would have complete control over its digital cost structure and marketing budget for 2026, which will primarily focus on the highest margin markets and customer cohorts.
The company has prepared a full calendar of targeted and personalised marketing campaigns to support retention following the rebrand.
Snowden added: “We have the ability to target and personalise from a marketing and CRM perspective today that we just didn’t have even a year ago. And so we’ve got a full marketing plan, and we’re going to be ready to go. And if some don’t respond initially, there’s going to be bounce back follow up offers, and we feel pretty good about the overall strategy.”
Penn generated Interactive segment revenues of $297.7m in the third quarter, including a tax gross up of $139.5m, and an adjusted EBITDA loss of $76.6m.
Chief Financial Officer Felicia Hendricks said the fourth quarter would be impacted by one-time expenses that would not recur in 2026, but the company expected the fourth quarter loss to be smaller than Q3’s loss.
Penn CEO: prediction markets ‘existential threat’ to industry
Snowden also used the earnings call to deliver a stark warning about prediction markets, describing them as an “existential” threat to the gambling industry that could extend beyond sports betting into casino gaming.
He said the industry’s current defensive posture was unlikely to succeed and called for operators, regulators and lawmakers to work together.
Snowden added that Penn believed it could outperform prediction market operators if competing in the same markets with the same product, but warned they were building businesses in states where traditional sports betting remained illegal.
Snowden continued: “I think as an industry we feel like we can outperform those guys if we’re in the same market as they are with the same product, i.e. sports betting. We think our sports betting product is much better than prediction markets, and I think that’s proving out. But where they are building a real business is in states where it’s not legal.”
Snowden went further by suggesting prediction markets could threaten casino operations, noting that historical horse racing and sports betting overlaid with casino mechanics were already being explored in some jurisdictions.
Hard Rock, which holds a sporting betting monopoly in Florida, recently launched slots-style games using historical NASCAR data – which some have interpreted could be a model for how prediction markets might launch their casino-style products.
Snowden questioned what would stop prediction market operators from offering contracts on slot machine spins, blackjack hands or roulette spins.
The CEO continued: “This is existential. This is not like we’re going to be talking about this in a matter of months, not years. And I think as an industry we got to play offence and figure out how do we stay ahead of this.”