In a letter to employees warning of an impending round of layoffs, PENN Entertainment CEO Jay Snowden maintained that PENN Interactive is “well-positioned” for growth.
Snowden sent an internal email on Wednesday explaining that PENN is reorganizing its interactive division “to help streamline reporting lines, enhance operational efficiencies, and leverage shared resources across PENN.”
Snowden’s note said the number of lost jobs would be limited. While the total extent of the expected layoffs hasn’t been confirmed, CNBC reported on Thursday it could be around 100. Many of those positions are thought to concern workers under the ESPN Bet brand.
The CEO made direct reference to the acquisition of Canadian media brand theScore in 2021 and the $1.5 billion ESPN Bet venture in partnership with Disney’s ESPN.
“As you know, when PENN acquired theScore, we hit the ground running with the build-out of our proprietary tech stack and the migration of our sportsbook to theScore’s best-in-class platform. This led us to temporarily set aside any potential organizational changes that would typically follow a major acquisition.
“These evolutions will enable us to better capitalize upon our new phase of growth.”
PENN CEO Jay Snowden
“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. This includes building upon the momentum of our partnership with ESPN with upcoming product enhancements and a deeper integration into the ESPN ecosystem.”
What those ESPN Bet product enhancements are remain to be seen. Snowden said in May that plans are afoot to tie theScore Bet’s wagering functionalities directly into theScore legacy sports media app, something that could be extended to ESPN Bet.
ESPN Bet struggles to take hold
ESPN Bet launched in November 2023 as a rebrand of Barstool Sportsbook, as part of a 10-year partnership between PENN and ESPN. It’s still very early but so far, results have been mixed.
Under the combined power of PENN’s gaming expertise and ESPN’s world-renowned sports brand, expectations were high for the new product. But the brand has struggled to make headway as it looks to compete with second-tier operators such as BetMGM and Caesars in the bracket below market leaders FanDuel and DraftKings.
In terms of gross gaming revenue, research from JMP Securities analyst Jordan Bender suggests that ESPN Bet’s U.S.-wide market share fell from 4.7% in its first full quarter to 3.2% last quarter. However, its gross margin appears to be rising.
At PENN’s Q1 earnings call in May, Snowden admitted the ESPN Bet launch had bumps in the road but expressed confidence in its future, citing strong customer acquisition trends.
Sale speculation continues
Meanwhile, rumors about the future of PENN continue to swirl.
A few weeks ago, prominent investor the Donerail Group called on the board to sell the casino company in order to realize the full value of the company.
Donerail Managing Partner Will Wyatt said at that time that PENN has failed to meet expectations for its online sports betting business.
“Unfortunately, after less than a year into pivoting its attention to ESPN Bet, there has been no improvement in the company’s ability to execute in Interactive,” Wyatt asserted. “While we understand that ESPN Bet appears as the company’s newest bright and shiny object that may very well have significant value under the right owners, we ask that the board take a moment to reflect objectively on the past four years of execution, assess the shareholder capital that has been destroyed, and recognize that shareholders may simply be tired of continued gambling on uncertain outcomes.”
Since then, talk has linked the likes of Boyd Gaming and Flutter to potential bids for PENN.
PENN will hold its second-quarter earnings results early next month, with the basic results set to be released on Aug. 8.