Challenges in Sports Betting: PENN's Struggle with ESPN Bet

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00:00You and I are doing a show, and we're sort of thinking like, you know, anybody that opens

00:09up a sports book is going to do great when sports betting is legalized, you know?

00:13And we have really found that that is not the case.

00:15The giants are the giants, and everybody else is trying to pick things up, and it leads

00:19me into Penn, where you would have probably thought several years ago, wow, like they

00:23have a great footprint, they've got Barstool behind them, all these people that talk about

00:27gambling anyway, they're going to do amazing.

00:29They did not, it gets shifted over, ESPN and the whole thing.

00:33I don't want to go any further into it, but the bottom line is, I think, it's not necessarily

00:37a cautionary tale here, but it shows you that we really don't know what the landscape of

00:41any sports betting operation is going to be until it plays out.

00:46Yeah, that's so true, Craig.

00:48I mean, so much of it depends on not just the company, but then the market you get into

00:52and what the different tax rates are and everything like that.

00:55There's so much that goes into it, but you're right, the giants are the giants, and everybody

00:58else is trying to catch up.

01:00Penn with ESPN bet is one of those companies that's trying to catch up, and when you're

01:04trying to catch up and make your product better, it is a bit of a concern to hear that they've

01:08had their second round of layoffs in the interactive company.

01:13First round came mid-July, we just had this last week.

01:16We don't know how many people, we don't know who exactly, but as you were explaining, needless

01:21to say, it's not good when you're trying to ramp up and beat these big guys, and you're

01:26losing people along the way.

01:29Now, what's interesting is on LinkedIn, Penn shared a statement from Aaron LaBerge, and

01:35it was really more of a written essay than a statement from him saying why he is so bullish

01:41on ESPN bet and Penn, and look, there are some good things in that.

01:46He mentioned that they currently have a database of 4 million players.

01:50If you remember, Craig, the database that they got from Barstool out of the 66 million

01:55stoolings they were touting at the beginning of that deal, they got 1.5 million people.

02:01The fact that they're up to 4 million at Penn, that's great.

02:04He also notes that they have played around with the Parlay program, and they've improved

02:09it.

02:10They've made it so you can search for people now.

02:12They made a deeper product with more markets.

02:15You're hearing good things from ESPN and Penn right now, but you worry about the layoffs

02:22and where they're coming.

02:23You worry about the fact that they didn't get into New York when they said they were

02:27going to.

02:28They're almost a month late, and that's going to affect things, right?

02:33We know that New York isn't a market that people go to make money in, but they go to

02:37acquire customers there, and they go to enhance their profile, and the fact that they missed

02:42the first three weeks of NFL betting is not ideal.

02:48The ESPN bet story, it's one that we are watching really closely.

02:54We're going to find out at the beginning of November, they'll have their third quarter's

02:58earnings call.

02:59That'll give us a deeper dive into what the NFL season looked like for ESPN bet and what

03:04we can be expecting going forward, but it's definitely mixed messages right now.

03:11Usually, Craig, when you see layoffs, usually a stock price will go up because it means

03:16at the very least that they're trying to save money, and that hasn't been the case

03:21with this latest round with Penn.

03:24You wonder what investors are thinking, and we really just have to wait about another

03:28month until we can get the nitty-gritty of how these first couple of weeks of NFL went

03:34for ESPN bet.

03:35That'll really tell us a lot about the rest of the year.

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