Why Penn Entertainment’s split from ESPN was inevitable
Marketing firm Hot Paper Lantern’s Chief Executive Ed Moed argues that ESPN failed to leverage its brand to differentiate ESPN Bet from other sportsbooks, leaving no other likely outcome than the annulment of its ten-year US$150 million-per-year deal with Penn Entertainment.
What does the failure of the ESPN Penn partnership tell us about the limitations of brand recognition in this market?
I think the biggest challenge is that the business of sports betting operators is one of the most difficult models I have come across in the last decade. Creating meaningful market share, where new users are either new bettors, or more likely, coming from the two big players, DraftKings or FanDuel, is a challenging task. Those two books control roughly 80% of the entire marketplace and have done an amazing job, becoming the place to go.
Incumbents in any category are challenged all the time, but it takes a lot to unseat one. There are reasons why Coke and Pepsi have remained dominant for over 100 years. No one has unseated them. DraftKings and FanDuel are like the Coke and Pepsi of this category. If ESPN Bet was going to unseat them, it was going to take more than having a recognizable brand within sports. No, ESPN Bet needed to create something powerful enough to pull users away from incumbents, and obviously ESPN Bet and Penn didn’t have what it took to do that.
Another factor that comes into play here is user acquisition. It costs sportsbook operators somewhere between US$200 and US$800 to acquire new customers. And even after you acquire them, you don’t know whether their lifetime value is going to be US$5 or US$10,000. DraftKings and FanDuel are also going to aggressively spend on retaining its customers. Add that challenge to building a product compelling enough to stand out, and it’s going to be extremely hard to gain a substantial market share and even harder to turn a profit. We’ve seen it with Barstool and WynnBet and now we get to add ESPN to those that have ended up in the graveyard.
Was this outcome inevitable?
I believe it was, for a few different reasons. The product and user experience simply were not competitive. I was both a customer and a brand observer, I saw gaps in the variety of what was offered, excitement emanating from the app, prop bet options, promotional offerings, and overall usability. The entire journey, from logging in to placing bets to cashing out, was slower and less intuitive than the competition.
ESPN Bet did not introduce a fundamentally new kind of sportsbook, so there was no compelling reason for users to switch. If an upstart is going to come in and unseat an incumbent, it won’t be successful by offering a similar but weaker version of the same experience. You have to offer something that is truly unique, and maybe even a head turner.
On the surface, ESPN Bet looked like the perfect fit. ESPN is one of the most dominant and recognizable brands in all sport, and it could have piggybacked on the success of ESPN Fantasy and a giant user database. This could integrate betting content across the sports property’s entire ecosystems. Even all that wasn’t enough.
I also saw little third-party validation from influencers, analysts, or media voices promoting ESPN Bet as a superior option. I never saw someone not already associated with ESPN say, “Here is why ESPN Bet is great.” That type of credibility matters, and competitors have mastered it. Fanatics has even carved out a small foothold by doing this well.
Given all that, the outcome felt inevitable. Without a differentiated product and with prediction markets adding new pressure, the path to meaningful share of the market simply was not there.
Do you think this was a classic example of players in adjacent markets underestimating the market they are moving into?
Yes. Since the Professional and Amateur Sports Protection Act was repealed, it has become clear how expensive and complex this market is. Licensing, regulation, user acquisition, staffing, and marketing costs add up quickly, and the return just isn’t there unless you are already a top operator. When two incumbents dominate the market, a new player has to steal customers directly from them, which is incredibly difficult and costly.
ESPN Bet launched two years ago, and it felt like Penn was giving the market one last attempt. Penn is strong as a regional casino operator but not as a digital player.
Even large fantasy companies like Underdog and Betr, which initially showed interest in sports betting, have pivoted back toward DFS. PrizePicks stayed out entirely. It recognized that fantasy offers stronger opportunities, and the barriers for profitability are much lower.
If you were advising a media brand entering betting in North America, or emerging markets like LatAm or Asia, what is one learning they should take from this to avoid repeating Penn and ESPN’s mistakes?
For North America, I would say do not even try, unless the strategy includes a prediction-market component. Even before prediction markets emerged, the US sports betting market was exceptionally hard to break into. With prediction platforms now driving user adoption and the hundreds of millions of dollars behind it, the challenge has increased dramatically.
State-by-state regulation adds time, cost, and operational complexity. This is not a market that rewards experimentation without a very strong plan.
In LatAm or Asia, similar fundamentals apply. If incumbents are already dominant and new-user acquisition is expensive, an entrant must clearly articulate how its product is different and why users would switch. Without a strong product narrative and a differentiated experience, it will be difficult to succeed.
Prediction markets may spread globally, but regulatory structures will determine its impact. Regardless, the core lesson remains the same. A strong brand is not enough. A new entrant needs a distinct product and a clear user experience advantage.
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The Backstory
How a headline deal lost its edge
Penn Entertainment’s exit from its 10-year online sports betting pact with ESPN was years in the making. The partnership launched with fanfare and a mandate to vault ESPN Bet into podium position. But Penn’s leadership ultimately concluded the economics and product performance did not support the ambition. On an earnings call, CEO Jay Snowden said both sides “figured out a path forward” and ended the relationship without acrimony, underscoring a pragmatic reset rather than a rupture. The company simultaneously unveiled a new direction: a U.S. rebrand to theScore Bet and a tighter focus on profitable channels and markets. In short, the Penn-ESPN divorce was less a shock than the logical end to a costly push for market share that never arrived.
The split reflects a broader reality of U.S. sports betting: two entrenched leaders, DraftKings and FanDuel, remain hard to dislodge. Marketing dollars, brand recognition and media reach are necessary but insufficient in a market where users are sticky and product differentiation is scarce. The stakes for Penn were clear—own the customer relationship and economics, or keep spending against a ceiling.
From splashy launch to strategic retreat
The pivot was formalized when Penn terminated its agreement with ESPN and set plans to rebrand its U.S. sportsbook as theScore Bet, starting Dec. 1. Snowden emphasized reduced marketing spend and tighter control over the business, citing ownership of brands, database and tech stack as advantages the company can now deploy with “greater precision.” The rebrand leans on Penn’s acquisition of theScore and its technology, positioning the company to tailor investment to markets that generate returns rather than chase nationwide parity with the leaders.
That reallocation is already mapped: Penn will shift resources to Canada, where management says it has competed “really well” with modest marketing outlays, and to U.S. hybrid iCasino states with more attractive unit economics. The strategy reprises a familiar Penn playbook—lean on a durable regional casino footprint, cross-sell into digital and manage costs—after a cycle of big media tie-ups that included Barstool and ESPN. The through line is discipline over splash.
The traction problem in the nation’s biggest market
Measured where it mattered most, ESPN Bet underwhelmed. In New York, the largest U.S. online sports betting market, ESPN Bet captured just 2.2% of handle in May, according to state data summarized by Deutsche Bank. FanDuel and DraftKings controlled more than 70% combined. ESPN Bet’s hold of 8.3% lagged peers, translating to a smaller share of revenue and less fuel for reinvestment. While a single state snapshot doesn’t tell the whole story, New York’s scale and competitiveness make it a stress test of product-market fit. The result mirrored broader trends: promotional spending continued to normalize and parlay-led operators pressed their advantages in product depth and pricing.
That imbalance compounds a basic math problem. Customer acquisition costs remain high, and lifetime values are uncertain without strong engagement loops. With incumbents defending aggressively and monetizing more efficiently, latecomers must spend heavily or offer a meaningfully better experience—preferably both. ESPN Bet could not clear that bar often enough in the markets that count.
Integrations and team deals couldn’t close the gap
Penn and ESPN tried to fuse media, fantasy and wagering to create a stickier funnel. The companies rolled out a “For You” page and a Fantasy Bet Builder that pulled ESPN Fantasy rosters into the betting app, aiming to turn casual game managers into bettors with personalized props and insights. The approach aligned with a longer-term hope: convert ESPN’s massive fantasy and media audience into steady sportsbook users through convenience and content adjacency.
They also sought local scale and visibility. In Washington, ESPN Bet secured market access through a partnership with Monumental Sports & Entertainment, tying the brand to the Capitals, Wizards and Mystics and leaning on broadcast and in-venue activation. The push created more touchpoints but did not materially change the national picture. Integrations and team deals helped awareness; they did not fix core frictions in product, pricing and retention versus better entrenched rivals.
Financials reveal a sharper focus
Despite the betting drag, Penn’s financials showed operating resilience and digital growth tempered by costs. The company reported fourth-quarter revenue of $1.7 billion, up from $1.4 billion, and full-year revenue of $6.6 billion. Penn Interactive’s Q4 revenue rose to $275 million from $31.5 million year over year, with full-year interactive revenue climbing to $959.9 million. Yet adjusted profitability remained pressured by customer-friendly outcomes and promotional discipline, a reminder that revenue without efficient acquisition and retention can strain margins.
Snowden framed the end of the ESPN deal as a chance to lower marketing expense “significantly” and redeploy spend to higher-return segments. He also highlighted a key strategic win: Penn keeps the younger-skewing database built during the ESPN era, a pipeline for cross-selling to profitable land-based properties and iCasino. Owning that relationship is central to Penn’s omni-channel thesis—the company believes it can monetize the audience better within its ecosystem than under a shared-brand model.
What’s next: regulation, rivals and a moving target
Looking ahead, Penn’s management has flagged a new competitive variable: prediction markets. Snowden called them a “major threat” and suggested the industry must play offense through regulatory and legal channels. In the near term, that uncertainty clouds the economics of traditional sportsbooks, particularly for subscale operators that lack the cushion to outspend or out-innovate. The company’s bet is that tighter focus, owned tech and brand control, and selective market exposure offer a clearer path to sustainable returns than chasing share in a duopoly.
That calculus echoes the broader lesson of the ESPN unwinding: media reach and sports credibility are not substitutes for a differentiated product and superior unit economics. The integrations, access deals and promotions delivered lift, but not escape velocity. With the rebrand to theScore Bet and an emphasis on Canada and iCasino-led states, Penn is signaling a return to fundamentals—optimize where the math works, simplify where it doesn’t, and let the balance sheet, not the billboard, guide the next phase.
