PENN CEO downplays M&A talk to focus on deeper ESPN integration

PENN Entertainment CEO Jay Snowden has played dismissed M&A rumors as he insisted deeper integration with ESPN would allow the operator to make incremental gains once the NFL season starts this September.

Speaking on an analyst call following the release of the company’s Q2 trading update, Snowden refused to be drawn on questions relating to reports Flutter Entertainment and Boyd Gaming could team up to acquire the Wyomissing-based firm.

Reports had suggested the duo could work together, with Flutter taking on PENN’s digital arm and Boyd assuming control of land-based operations.

However, Snowden downplayed this speculation as he instead focused on the gains to be made for ESPN Bet through closer ties with the ESPN brand.

Snowden said: “I would say don’t believe everything you read. We haven’t commented and we won’t comment on market rumors and speculation.

“What I will say is that as a company and as a board we always, and always will, evaluate opportunities to enhance value.

“We’ll continue to take actions that we believe are in the best interest of the company and our shareholders. We’re very confident in our strategy and the value that it’s going to deliver for shareholder of the short-term, medium-term [and] long-term.”

That strategy, according to Snowden, will see ESPN Bet pushed more actively via ESPN channels as the operator looks to convert users from within the closed ecosystem.

Those plans, Snowden said, could make ESPN Bet “America’s sportsbook.” He added: “We don’t want just to complete here, we want to win.”

The sportsbook will be plugged into various ESPN apps, including the ESPN Fantasy app, while bosses also talked up product improvements including profit boosts, enhanced parlays, and a cleaner UX.

Snowden added: “When we think about the fan, ESPN Bet and ESPN are inextricably linked. The goal is that you can move between these apps really fluidly and get what you want, where you want it.

“When we have account linking in November, if you place a parlay on ESPN Bet, it is going to appear in the ESPN app. You have to do no work; it’s going to be seamless. We’re going to package that for you with no work.”

The deeper integration, which PENN said would deliver top-of-funnel growth, comes ahead of the operator’s launch in New York.

ESPN Bet is due to go live in the Empire State in late August, after PENN snapped up Wynn Resorts’ online sports betting license for $25m.

PENN’s presentation deck noted the company will use an “organic user acquisition strategy” when tackling the market, placing further emphasis on ESPN’s 10 million monthly visitors from New York.

Having seen costs soar in Q4 2023 after launching the ESPN Bet brand last November, with online adjusted EBITDA losses hitting $333.8m, Snowden and his team are aiming for a less promo-intensive play.

In his prepared remarks, Snowden talked up the “leverage of reach of the ESPN brands in New York, without the heavy promotional lift” before further expanding on the topic later in the call.

He added: “We’re going to continue to take a different approach in terms of launching in New York versus what we did when we launched across 17 states in Q4 and really lean a lot more on the product improvements, the integrations, and of course, the connection ESPN has with millions and millions of New York-based sports fans.

“With regard to New York, the tax rate is high. We’re going to be very thoughtful around user acquisition. I don’t want to give a timeframe on exactly when that’s going to inflect to profitability, only because we need to see how things go.

Staying with New York, where DraftKings is planning to implement a gaming tax surcharge on winning bets to lessen the burden of the 51% GGR tax rate, analysts pressed Snowden for his views on the topic.

Rush Street Interactive has already ruled out putting such a policy in place, while BetMGM parent Entain said it would keep a close eye on proceedings.

Snowden said a gaming tax surcharge in early 2025 was “not even on our radar” as he once again insisted product gains will deliver success for the business.

He said: “We find it to be very interesting. It was unexpected from our perspective. We have a lot going on in front of us right now over the coming quarters.

“It doesn’t mean that I hesitate to never say never, it just means that we’re really focused on continuing to improve products, drive top of funnel and loyalty and retention. We would never be a first mover on something like that.

PENN shares were up more than 8% to almost $19 following the results release, despite a $102.8m EBITDA loss for the online arm in Q2.