Penn Entertainment is offering a great example of how market factors can force a huge change of business strategy and potentially reshape part of the United States sportsbook landscape in the process.
The sports betting and casino paid an amount of $25 million. The purpose of this is to acquire the New York sports betting license recently held by Wynn Resorts. ESPN Bet will use that license to bring itself into the industry’s largest individual United States market. The later part of this year will see its debut in New York.
Jay Snowden is the Penn Entertainment CEO. In late 2021 earnings call, he stated that the high operating costs of New York, particularly a 51% tax on operators’ gross gaming revenues, would prevent any company from being profitable in the Empire State. Furthermore, calls the locale “a margin killer.”
Snowden also added that he does not think a single operator will make money in New York. He told this to the analysts then, when the company was still aligned with Barstool Sports. So he has always struggled with that. He thinks that objectively speaking, anyone would rather be in than not be in. But if you are not in the state, it does not crush you either.
He now brings a different mood a little more than two years later. Previously, Snowden called the deal an important development that will bring ESPN Bet to the largest regulated online sports wagering market in North America.
Most obviously, the cause of this change is that Penn Entertainment struck a $2 billion deal last summer. This is to bring the biggest brandi n sports media to legal sports betting. Aside from this, that agreement carries a series of aggressive growth targets for the venture as it challenges established market leaders. This includes FanDuel and DraftKings.
