Disney and PENN need to act in their “best interests” over ESPN Bet, says PENN CEO
Jay Snowden suggests that should progress not be made with the brand, the three-year break clause included in the pair’s decade-long deal could be explored
PENN Entertainment CEO Jay Snowden has said the operator and Disney will need to act in their respective “best interests” should the ESPN Bet brand fail to progress further.
Speaking on an analyst call following the release of the operator’s Q4 earnings report, Snowden said that while the company is “laser-focused,” there remains the possibility of terminating the partnership.
The CEO noted there were “levers” the business could pull to ramp up efforts to secure a podium position in US online sports betting, as was expected for ESPN Bet when PENN and Disney entered the 10-year, $1.5bn partnership in summer 2023.
Snowden said: “Both sides of this partnership made it very clear that we expected to compete for a seat at the podium, and we’re not on pace right now to do that.
“Our expectations as we’re moving through 2025 are that we’re continuing to show improvements in both sports betting and online gaming. If we’re not hitting the levels that we expect to as we move through the year, then you’ve got levers operationally.
“There’s a lot of dollars in the marketing category of our digital business. We’ve got a cost structure that right now is built for us to be a scale player because that’s where we expect to be. That’s where ESPN expects us to be.
“But if you’re not trending in that direction, then obviously you’re not going to be operating a business from a cost structure standpoint at a scaled level. So, we have levers at our disposal.”
Snowden went on to touch on the break clause included in the deal between PENN and Disney, suggesting “best interests” for each party could come into play.
He continued: “We are heads down and laser focused. We have tremendous plans in place for 2025 and 2026, but if for whatever reason we’re not hitting the levels that we need to, then obviously, as you’re approaching that third anniversary and you have a three-year break clause in the contract, both sides will have to do what’s in their best interests.”
The CEO added that Q4 2025 will be the first profitable quarter for the group’s digital arm since the launch of ESPN Bet in November 2023.
PENN’s full-year 2025 guidance for the digital arm is set at adjusted EBITDAR losses of between $100m and $200m, which management said would represent a midpoint $350m improvement.
The firm reported adjusted EBITDAR losses on interactive for full-year 2024 was $499.5m, up from a $402.5m loss in full-year 2023.
PENN’s losses have continued to shrink since ESPN Bet’s rollout in November 2023, replacing Barstool Sportsbook.
In Q4 of that year, following large promo and launch spend, interactive adjusted EBITDAR losses hit $334.8m.
Those losses shrank to $196m in Q1 2024, followed by a $102.8m loss in Q2 and losses of $90.9m in Q3 of that year.
The three months to 31 December came with adjusted EBITDAR losses of $109.8m.
In comparison, DraftKings is expecting full-year 2025 adjusted EBITDA to land between $900m and $1bn.
PENN CFO Felicia Hendrix added the guidance is assumed on the basis ESPN Bet secures an online sports betting handle share of 4.7%, excluding New York, representing a 100 basis point increase on 2024.
That figure is based on internal company estimates, while boutique analyst firm Eilers & Krejcik Gaming put ESPN Bet’s market share at just 1.5% in November 2024.
Other caveats include an online sports betting hold of 9%, promotions as a percentage of handle at high 2% and igaming market share of 3.5%.