A confluence of events triggered the busiest month in Pennsylvania’s era of legalized sports betting as a full slate of NFL, NBA, NHL, as well as college football and basketball action gave bettors ample opportunity to wager. Moreover, the launch of a national brand, ESPN BET, in the middle of the month created even more interest.
Records Set in Consecutive Months
Pennsylvania’s handle surpassed $800 million for the first time in October but that record didn’t last very long as November’s handle would set a new high of $934.1 million, a 12.7% increase over the previous month and an 18.3% increase over November 2022.
Although Pennsylvania bettors were more active than they had ever been in the Keystone State, they were also quite good at keeping their money away from the sportsbooks. The sportsbooks hold was 8.9% in November 2022, but that plummeted to 5.3% this November, which meant less money for the online sports betting sites and the state that taxes those profits.
The gross revenue, before accounting for signup bonuses and promotional credits was $49.1 million, but when allowed the deduction of $36.3 million in promo write-offs, the adjusted gross revenue (AGR) was a mere $12.9 million, the lowest since June of 2022 despite the prodigious handle.
Pennsylvania taxes the sportsbooks at a 36% clip on AGR, which means state and local governments received $4.6 million of those profits.
ESPN BET Makes a Splash
Penn Entertainment made the switch from its Barstool Sportsbook to ESPN BET on November 14th in Pennsylvania and 16 other states. It was a rebrand from the bro culture of Barstool to an internationally recognizable sports broadcasting giant.
The deal was announced in August, and it revealed that Penn Entertainment paid ESPN $1.5 billion over 10 years plus $500 million worth of Penn common shares in exchange for the rights to use the ESPN brand name as its sportsbook and access to its programming, content, and on-air talent.
But the caveat was that Penn had to divest itself of the Barstool brand that they just finished paying $550 million to founder Dave Portnoy, aka El Presidente. Because Penn didn’t want to lose the deal and the football season was right around the corner, Penn hastily sold the Barstool brand, not including the sportsbook that would be rebranded ESPN BET, back to Portnoy for $1 with the guarantee that should he ever sell it, Penn would receive 50% of the proceeds.
Fast forward to November 14th when Barstool turned into ESPN BET and the results in Pennsylvania showed Penn’s handle doubled from Barstool’s 3.7% market share in October to Barstool/ESPN BET’s 7.4% in November.
The Winning Strategy
Although industry leaders FanDuel and DraftKings are typically the most generous with their promotional credits, ESPN BET outspent all the others in Pennsylvania last month with $14.8 million in promotional credits which generated $65.1 million in handle between Penn’s Barstool Sportsbook in the first half of the month and ESPN BET in the second half.
Penn’s revenues in Pennsylvania last month were $7 million, but when deducting the $14.8 million in promotional credits, it showed a monthly loss of $7.8 million. However, the old adage, “it takes money to make money” will likely hold true, as ESPN BET has won a good chunk of its new customers because of the promos, and sooner or later, that marketing plan will pay dividends as it always does.