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SportsTranscript
00:00Let's start off with the latest on Penn and their investors as it pertains to ESPN bet.
00:09I know very mixed results for quarter number one, quarter number two.
00:13Trying to change and upgrade the technology means some things I guess have to go budget-wise.
00:19Tell us more.
00:20Yeah, you know what, Craig?
00:22It's been interesting to see how Penn is playing through this process.
00:27And basically what we know now is that where they've had bigger losses than expected in the first and second quarters,
00:34those losses from the interactive side will be smaller for the third quarter.
00:38And we see that it's because already they're seeing a boost to their parlay system.
00:43And we've talked about how for forever now that they have to get their parlays and they have to get their app integration down correctly.
00:51And the parlays are looking good so far.
00:53They have their parlay lounge up and it gives you all kinds of different options to go in and make your parlays, same game parlays,
01:01whatever it may be.
01:04They expect to lose about $95 million from interactive this quarter.
01:09It's down from $125 million at the last EBITDA guidance midpoint.
01:17They're also holding better.
01:18The more parlays mean you're going to hold more.
01:21And they're also over-indexing with the mass market is how they put it,
01:26which basically means that more casual bettors are coming to ESPN than they expected and they're winning more than they expected.
01:33So that's all positive moving forward.
01:36That's what we want to see.
01:38You know, it was interesting because the presentation included a slide about September successes for ESPN bet and showing all kinds of growth.
01:49But if you remember, we didn't have ESPN bet last September.
01:53We had kind of a zombie Barstool sports book out there from Penn because they weren't promoting the Barstool brand anymore.
02:00They were doing everything on the back end they had to to get ready to flip over to ESPN bet, which happened mid-November.
02:07So those were kind of irrelevant.
02:11We didn't include them in the story.
02:12We linked to the whole presentation so obviously everybody could go through it.
02:15But it doesn't really show the true picture of what's going on.
02:19What I do think is interesting, Craig, is if you remember when this ESPN deal came out, Penn went through and they gave a whole bunch of different scenarios for market share that they expect to hit in 2027.
02:33You know, their base, their bull, and their bear case, right?
02:38Well, they gave us some information for 2026.
02:41And while they had previously said that in 2027 a 10% sports betting share would be around the point where both sides started to get excited about what they were doing, now they're saying that in 2026 a 10% sports betting share is their best case scenario.
03:01That's where they're bullish.
03:03So it's interesting because last time for 2027 they gave breakdowns at 10%, 15%, and 20% of the online sports betting share.
03:13And now they're looking at between a 6% online sports betting share at the bottom and 10% at the top.
03:21So are we seeing moving goalposts there?
03:26I'm not sure.
03:27They may just come back and say, well, you know, it's a year off.
03:30We still expect this for that.
03:32Whatever it may be.
03:33What's interesting, Craig, is we're seeing a huge boost in their online database.
03:38They're up to 3.9 million customers at the end of the third quarter.
03:42And that's up 1.8 million customers or 85% since ESPN and Penn signed this deal.
03:50So we see that there is movement based on the ESPN brand.
03:55And now we're seeing that there is that casual pickup from people as well that, you know, maybe they went to a DraftKings or a FanDuel before because that was just what they were used to, right?
04:07And now they know that, you know, the network that they watch every day to catch their highlights.
04:11I got a sports book too.
04:13May as well check them out.
04:14Now they seem to be a little bit more on par with the other guys.
04:18So it will be interesting to see what Penn can do moving forward.
04:23Now, they still don't have their account linking down.
04:26That is supposed to come by MBA tip-off on October 22nd.
04:31So should be able to link your ESPN and your ESPN bet account by October 22nd.
04:38And that will help with betting from that main ESPN app, building a bet slip, and then moving it over to ESPN bet and pushing it through.
04:49So everything from what they're saying looks like it's moving in the right direction, Craig.
04:55You know, they're seeing great value out of customers that bet both at their retail properties and online.
05:02Those customers that bet at both places, there were four times more than a customer that just bets on one of those channels.
05:09So there's a lot of positives in there for ESPN bet and Penn.
05:12But it worries me that we're starting to look at different expectations for the sports betting share.
05:20Because if you remember, Disney can end this after three years.
05:24It's a 10-year deal.
05:25But Disney can end this after three years if it's not going well.
05:28And then where would Penn be when it comes to the sports betting game?
05:32They would have failed on Barstool.
05:34It just did not turn out the way they thought it would.
05:37And then that would be a failure with ESPN and Disney.
05:40So we know Penn doesn't want that to happen.
05:42We know they're working hard behind the scenes to get it working.
05:45And we'll see how well it goes, Craig.