Penn Entertainment’s missteps in navigating the tumultuous waters of mobile sports betting have been well documented. But now that the deal with ESPN, forming ESPN Bet, has been terminated eight years earlier than expected, one critic, theScore founder John Levy, is revealing how Penn’s upper management mishandled its new acquisitions.
Penn’s Mismanagement of Assets
John Levy, founder of theScore, was not shy about sharing his opinion regarding his experience with Penn Entertainment. It was in 2021 that Penn bought Toronto-based theScore and proceeded to eliminate 75 jobs related to its new brand. According to Levy, there was very little listening from Penn but plenty of unilateral changes.
“It’s just nuts. And quite frankly, from a personal perspective, it’s a bit hard to take,” Levy said of PENN and its relationship with theScore following the $2-billion acquisition in October 2021. “It was our family. … They never respected the brand, never invested in the brand, and they never listened to us.”
“When you look at it from 60,000 feet, when (PENN purchased theScore) they had all the elements there,” Levy added, noting theScore’s strong technical team and brand presence in an emerging Canadian market for sports betting. “But almost as soon as we did the deal, it was kind of like, s**t fell apart.”
Levy went on to add, “I kind of thought what was originally going to be this collaborative effort of smart people dealing with smart people. … Unfortunately, it was right from the get-go that there were kind of two teams in place.”
“This thing hasn’t been managed properly,” he said. “That’s what everybody says under their breath, and outwardly now.”
A Comedy of Errors
Once the federal law, PASPA, was struck down in 2018, giving states the autonomy to determine for themselves whether they would allow mobile sports betting, gaming companies became enamored with venturing into this new market that was catching on like wildfire.
The conventional wisdom was that a company so successful in one gaming market would be able to apply that knowledge and become successful in another gaming market. Penn Entertainment, under the helmsmanship of CEO Jay Snowden, was just such an example. It was a successful land-based casino business that felt the pull of the new opportunities presented by online sports betting.
Land-Based Expertise Fails to Translate Online
However, the expertise the company applied to its land-based casino business did not translate to the world of mobile sports betting. In fact, the stock has taken a precipitous tumble from its high of 136.47 on March 15, 2021, to where it now flounders at $14.60. This has virtually everything to do with the billions spent on acquisitions that were supposed to propel Penn into a mobile sports betting powerhouse.
The first step in this perilous journey began in August 2021, when Penn announced the purchase of Toronto-based Score Media and Gaming, which operated theScore, for $2 billion. The company initially launched theScore as its US mobile sports betting brand, in addition to being a market leader in the Ontario market, but Penn pulled the plug on its US operations in 2022 as it began migrating its platform to the Barstool Sportsbook brand, whose purchase was eventually completed in March 2023.
The Shift From Barstool to ESPN Bet
However, things were not moving fast enough for Snowden and Penn’s C-suite executives, so they pivoted quickly, only six months after spending $650 million for the entire Barstool Sports media empire, by agreeing to a 10-year, $2 billion deal with ESPN to form ESPN Bet.
However, the caveat was that Disney-owned ESPN demanded Penn divest itself from the bro-cultured Barstool brand, which necessitated Penn selling it back to Barstool founder David Portnoy for $1 and the promise that Barstool would split any future sale 50% with Penn. Portnoy has vowed never to sell.
But now, only two years after that deal and billions of dollars later, instead of capturing 20% of the US mobile sports betting market, ESPN Bet managed only 3%, although some reports have it closer to 2%. Thus, Penn decided to cut its losses, and ESPN Bet will shutter its bookmaking operations on December 1st, but the name will survive in terms of ESPN’s sports betting media content.
DraftKings has recently signed a partnership with ESPN to become the company’s official sportsbook. Financial details were not disclosed.
