On December 20, 2023, Bank of America analyst Shaun Kelley expressed in a recent report that Penn Entertainment’s (NASDAQ: PENN) ESPN Bet mobile sports wagering application may attract more casual bettors and women, thus expanding the sports betting market. The app, which debuted in 17 states on November 14, exceeded market expectations, garnering more than one million downloads in its first week.
Kelley suggested that ESPN Bet’s growth could be contributing to an increase in more casual and female bettors, something that is currently lacking in the U.S. sports betting market. In contrast, European regions show that women actively participate in sports betting, particularly on women’s competitions. ESPN Bet is also attracting market share from competitors, including BetMGM, Caesars Sportsbook, and DraftKings, while FanDuel managed to gain a 1% increase in market share, potentially due to increased marketing and the NBA season.
Despite the increased competition, it is estimated that DraftKings’ customer churn and client spending habits remain normal in states where it competes with ESPN Bet. Bank of America continues to have confidence in DraftKings’ growth story despite the heightened competition. However, scrutiny is placed on how much promotional spending sportsbook operators allocate for customer acquisition, with some concerns that ESPN Bet may have achieved its market share through promotions.
Kelley noted that ESPN Bet’s promotional spending in Maryland and Kansas is around 35% of the handle, in line with the offers for the launch in Kentucky. Consequently, Bank of America increased its loss estimate for the fourth quarter from $130 million to $185 million, surpassing Penn’s forecast of $100 million to $150 million. This suggests that ESPN Bet may not become profitable until 2025. Despite the obstacles and competition, analysts continue to praise ESPN Bet’s strong start and its potential to lure new bettors to the sports betting market.