Penn Entertainment Planning Layoffs at Digital Unit
Penn Entertainment (NASDAQ: PENN) is set to implement job cuts within its Penn Interactive division, which encompasses the ESPN Bet online sports betting segment.
The total jobs to be cut was not disclosed, with the news initially reported on Wednesday by Legal Sports Report. Information regarding the workforce cuts at Penn Interactive came roughly nine months following the launch of the ESPN Bet mobile app.
"This week, we are implementing changes at PENN Interactive to help streamline reporting lines, enhance operational efficiencies, and leverage shared resources across PENN,” wrote Penn CEO Jay Snowden in an email to staffers. “Unfortunately, these changes will result in a limited number of team member separations. While it is difficult to see colleagues impacted, we deeply appreciate their contributions and are committed to supporting them through the transition.”
Snowden’s communication did not address layoffs particular to ESPN Bet, yet the CEO emphasized that the gaming firm will keep advancing “on the momentum of our collaboration with ESPN through future product improvements and a stronger integration into the ESPN framework.”
ESPN Bet Struggling to Gain Traction
News of the layoffs at Penn Interactive came as data shows ESPN Bet is having significant difficulties in capturing a reliable share of the online sports betting market.
The app had a promising launch, generating optimism that it might outperform its earlier version, Barstool Sportsbook, but statistics suggest a different story. In a recent report, JMP Securities indicated that based on handle, ESPN Bet's market share for online sports betting in the second quarter decreased to 3.2% from 4.7% during the year's first quarter.
With a share of 3.2%, ESPN Bet holds under half of what BetMGM commands, which is already a slow performer, and under 10% of the share held by DraftKings and FanDuel — the top two companies in the industry.
ESPN Bet’s difficulties offer additional material for investors who have criticized Penn's online wagering errors and may raise doubts about the rationale for the gaming firm agreeing to pay Walt Disney (NYSE: DIS) $1.5 billion over a decade to use the ESPN brand. That agreement can be terminated after a few years if specific financial criteria aren't achieved.
“While we recognize that change is never easy, these evolutions will enable us to better capitalize upon our new phase of growth. Our Interactive business, which is a core pillar of PENN Entertainment, is well-positioned, and we continue to add capabilities and key talent to advance our digital growth strategy,” added Snowden in the email to staffers.
Challenges at ESPN Bet May Hinder Acquisition Opportunities
Shortly after Penn investor Donerail Group sent a letter to the gaming company’s board urging a sale, speculation emerged that Boyd Gaming (NYSE: BYD) might pursue its competitor. Nonetheless, there are uncertainties regarding that thesis, many of which arise from the notion that Boyd wouldn’t be willing to spend as much as $500 million on Penn Interactive.
This suggests that an outside party would have to be engaged. Last week, speculation in the gaming sector indicated that Flutter Entertainment (NYSE: FLUT), the parent company of FanDuel, might engage due to its connection with Boyd, as the casino operator holds a 5% stake in FanDuel.
Flutter has not verified any interest in Penn Interactive/ESPN Bet, and the speculation seems exaggerated since FanDuel doesn't require such a high payment for merely a 3.2% share in the sports betting market.
