To the surprise of absolutely no one, the biggest name in US sports wants to enter the country’s largest legal sports gambling market.
ESPN and new gambling partner Penn Entertainment would like to find a way into the New York sports betting industry. Earlier this week, the two companies announced the creation of ESPN Bet, which is expected to launch in 16 states this fall.
New York, which has been the US leader since the Empire State launched online sports betting in January 2022, does not currently have any licenses available for ESPN Bet. Penn and its prior sports media partner, Barstool Sports, were unable to obtain a license in NY.
But, could ESPN somehow find a way into the NY sports betting landscape?
ESPN and Barstool are not in the same league
The $2 billion, 10-year partnership with ESPN is widely expected to produce more favorable returns for Penn than Barstool Sportsbook.
The controversial Barstool lacks mainstream appeal and its sportsbook product never gained serious traction. In the states where Barstool Sportsbook was available, it struggled to gain much more than a single-digit percentage of market share.
During Penn Entertainment’s recent earnings call, three years after Penn boasted that it would drum up 66 million customers via the new partnership, CEO Jay Snowden indicated that Barstool added just 1.5 million customers to Penn’s database.
ESPN is everything Barstool is not. The legacy sports giant has a history of strong corporate responsibility, multi-generational appeal and significant financial resources from its parent company, Disney.
‘Behind the scenes’ effort to get in on NY sports gambling
New York has the highest tax rate on sports betting revenue in the country at 51%.
During an earnings call Wednesday, Snowden said the NY tax rate was not ideal. Nonetheless, Snowden said, “there could be opportunities in the short-term, medium-term to gain access to New York creatively, and those are the things we’re working on behind the scenes.”
Snowden appears more willing to enter NY today than in 2021 when he said, “I don’t think a single operator will make money,” because of taxes. On Wednesday, Snowden doubled down on that assertion.
Last year, the nine online sportsbooks in NY generated more than $1.36 billion in revenue while paying out over $693 million in taxes.
Buying into NY sports betting
So how could ESPN and Penn wiggle their way into NY?
The easiest way would be for ESPN/Disney and Penn to simply buy up an underperforming operator.
Following the lead of Fanatics, which recently purchased PointsBet’s US sports betting operations, the team behind ESPN Bet NY could look to buy its way in. PointsBet has less than 2.5% of the NY market, based on handle, go enough for sixth place out of the nine.
State gaming regulators are reviewing Fanatics’ suitability to be licensed and could make a decision as soon as next month.
FanDuel Sportsbook (>40%) and DraftKings Sportsbook (>30%) dominate the domestic market, and NY is no exception. Behind them is Caesars (15%) and BetMGM (8%).
Those four are not for sale (as of now), even for Disney.
The remaining online sportsbooks in NY include BetRivers (<3%), WynnBet, Resorts World and BallyBet. The last three account for about 1.1% of the state’s total monthly online handle.
For what it’s worth, Richard Schwartz, CEO of BetRivers parent company Rush Street Interactive, noted during the SBC Summit North America conference earlier this year that “we’re always open to evaluating opportunities. … We have to be open-minded.”
When money fails, try changing the law
The other option for ESPN Bet is via a change in state law.
Sen. Joseph Addabbo, D-Queens, told Legal Sports Report that he would be open to exploring a legislative change.
Addabbo, the state’s most prominent gambling expansion proponent, reportedly said:
“I always think the market for New York sports betting is so robust, and can include and welcome others that bring a certain amount of professionalism and success to the market. I’m always hoping to having that type of discussion.”