The 2024 football season was seen as a key test for Penn Entertainment’s (NASDAQ: PENN) ESPN Bet, and as the NFL moves into its fifth week, the online sports betting platform seems to be making strides.
In a recent report to clients, Jefferies analyst David Katz highlighted that while ESPN Bet hasn’t yet captured significant market share from leaders like FanDuel and DraftKings, it is attracting new bettors from ESPN’s wider audience. This is crucial, as Penn is paying Walt Disney $1.5 billion over 10 years to leverage the ESPN brand.
“ESPN Bet has made considerable progress in establishing itself as a prominent sports betting platform, particularly in terms of initial volume, which supports continued momentum for Penn in the near-term,” Katz stated.
However, the analyst noted that while ESPN Bet’s growth is important, it represents only a modest influence on the broader Penn Entertainment strategy. Katz still favors DraftKings (NASDAQ: DKNG) and FanDuel’s parent company, Flutter Entertainment (NYSE: FLUT), as his top picks in the sports betting sector.
Positive Signs for ESPN Bet
Despite facing scrutiny from investors and the daunting challenge of breaking the FanDuel/DraftKings duopoly, ESPN Bet has shown some promising signs.
Jefferies surveyed 302 avid sports bettors, with roughly a third reporting they use ESPN Bet, and 92% said they placed their first wager using the app. Notably, 41% indicated they wager between $51 and $100 on ESPN Bet, up from just 23% in November 2023.
“This trend is reflective of the broader sports betting industry, where customer spending per bet is increasing, which will ultimately benefit sports betting operators financially.”
The platform also earned high marks for its promotions and visual appeal.
Challenges Ahead for ESPN Bet
While ESPN Bet has made progress, challenges remain. The Jefferies survey revealed that many users may revert to competitors after using up promotional funds. Bettors also criticized the app for lacking the parlay options available on FanDuel and DraftKings.
Additionally, users expressed frustration over ESPN on-air personalities promoting bets with long odds or wagers that aren’t available on the app, which they felt damaged the platform’s credibility. Katz emphasized that Penn will face challenges in trying to lure customers away from FanDuel and DraftKings.
“The ESPN partnership has helped grow the overall sports betting market by converting non-bettors, which is a positive for the digital segment,” Katz concluded. “However, our data suggests that it’s unlikely many bettors will switch from their current platforms to ESPN Bet. In fact, the top two players may continue to thrive as the market grows, given their superior user experience.”
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