• Questions over market share thresholds are crucial to ESPN Bet’s future.

• In +More: Predictions prediction, Playstudios turns to sweeps.

• Dead cat bounce: sector sell-off runs its course, for now.

• Venture playground: EmpowerYourPlay in focus.

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What’s my motivation?

Whom do I have to fuck to get off this movie? A crucial issue for Penn Entertainment and its partner in ESPN Bet, Disney, is the level of market share below which the partnership – signed in August 2023 – can be dissolved come the three-year anniversary next year.

• On the Penn earnings call in late February, CEO Jay Snowden admitted ESPN Bet was “not on course” for a podium position.

• With 2026 looming, both partners would have to “do what’s in their best interest.”

False bottom: Snowden said in August 2023 that 4% or 5% market share was “not going to be acceptable” to either Penn or Disney/ESPN.

• A recent note from Wells Fargo suggested that while Penn has not disclosed the GGR and handle share targets they were in the ~10% range.

• Current shares are ~3-4% and Penn’s target for GGR at the end of this year is 4.7%.

He who signs a lease must pay rent: The market share undershoot will be more painful for Penn financially than ESPN, which, according to the original agreement, is guaranteed $150m of media and advertising spend plus the share warrants regardless of performance.

• In 2024, Penn laid out $407m on media spend, including $179m to Disney, $67.9m on warrants and a further $160m on other media.

• On the call, Snowden admitted ESPN Bet had a structure “built for us to be a scale player” and that it had levers to scale back spend.

Exorbitant privilege: But any moves to cut its cloth would all but condemn the business to its current market share – and any move to break out to reach 10% would come with a possibly unaffordable price tag.

• Expensive tastes: Wells Fargo argued ESPN Bet “appears prohibitively expensive to operate.” The team suggested that, given the shortfall in expectations, Penn “could start signaling its intent” via a lessened spending on NFL kickoff in the fall.

Insurance job: One source suggested Penn “intentionally built in some downside protection here with the ability to walk away.”

• “I’m sure it’s not the outcome they are hoping for, but it seems like they may end up acting upon their contingency plan,” the source added.

• Wells Fargo noted that, while ESPN Bet provides a “top of funnel tool,” they “no longer assume Penn will have a major OSB presence.”

Which do you choose, the hard or soft option? Notably, the Wells Fargo team argued Penn has a route to a “viable, profitable, albeit small” online business if it dumps ESPN Bet and the associated costs.

• The remaining online business would consist of the Hollywood iCasino business, theScore in Ontario and the cash Penn receives for its market access agreements.

• By Wells Fargo’s estimates, an ESPN Bet-less interactive business would produce an adj. EBITDA profit of $52m in 2025 vs. a projected loss of $207m with ESPN Bet.

Who pulls the trigger? An equally important question as to whether to bring the experiment to an end will be who gets to pull the plug. The proxy battle with activist investor HG Vora over three suggested board placements will be resolved one way or another in the summer.

• Should HG Vora win that fight, the chances are the team that made the deal with Disney might not be the one to call a halt.

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+More

• Predictions prediction: DraftKings’ likely entry into the prediction market could see it grab a sizable share of a sector that might be worth up to $1.7bn, according to the analysts at Morgan Stanley. The company, reported to have registered ‘DraftKings Predict’ with the National Futures Association, is likely to see the opportunity presented by the market as outweighing the risks, the team argued.

• Social call: Social casino operator Playstudios said sweepstakes would be one of its initiatives for the year ahead after it reported a 12% YoY drop in Q4 to $67.8m. On the earnings call, CEO Andrew Pascal said consumers playing social casino games are “no different” than those playing on dedicated sweep sites. He told the analysts that surveys suggested 90% of social casino players have “sampled and tried” sweeps offerings.

• Not interested: None of Acroud’s bondholders participated in its debt-to-equity swap proposed under its restructuring, which would have allowed holders of Acroud’s outstanding bonds to exchange their holdings for shares.

• Inspired Entertainment and Rush Street Interactive have announced an expansion agreement that will see the supplier’s gaming content made available in RSI’s LatAm markets – Mexico, Colombia and Peru – alongside its operation in Delaware.

• Giddy up: Racecourse Media Group and Playtech have partnered to bring in-play on horseracing from RMG’s 37 courses to Playtech’s betting shop SSBT offering in time for this week’s Cheltenham Festival.

Shellacking pt. 2

The deadest of dead cats: Shareholders in the leading lights of the US gaming sector were nursing their wounds yesterday with the mildest of rebounds after a bruising Monday.

• Monday’s falls came after a tough previous week when billions were lost on fears over the state of the US economy.

• This continued at the start of this week as investors took fright over seemingly complacent comments from the Trump administration about the threat of a downturn.

Flutter lost over 8% of its value on Monday having dropped nearly 10% at one point. It ended the day with a market cap of just over $40bn, nearly 25% down on its all-time high of over $52bn as recently as mid-February. Flutter was up just 1.5% on Tuesday.

• DraftKings managed a marginally more respectable near 4% rise after falling 5.5%% on Monday.

• Penn Entertainment saw a 2% increase yesterday after a near 10% drop on Monday.

Salutary lesson: It is worth noting the extent to which stock-trading platform Robinhood was hit by Monday’s falls, down just under 20% on the day and off by 30% from its all-time peak in mid-February.

• Investor fears are exacerbated by the extent to which the company is a leveraged play on the markets themselves, whether that is stocks, crypto or, potentially in the near future, prediction markets.

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Venture playground

Growth company news

• Voice technology provider Voxbet went live on the At The Races app ahead of this week’s Cheltenham Festival with the industry's first voice-activated betting and navigation tool. Branded ‘BetCaller’, it allows users to place bets quickly and easily using voice recognition. The voice-recognition software automatically picks up any horse’s name, alongside the requested bet type and bet stake, and then sends users a pre-populated betting slip with their details to confirm.

• MetaBet has reached an agreement with DraftKings to integrate its automated sports-betting widgets into the DraftKings Network offering, connecting relevant wagers to sports content. The partnership will enable DraftKings Network to display betting markets within its articles using MetaBet’s AI-driven technology.

• EveryMatrix has announced that its sportsbook platform OddsMatrix has integrated nVenue’s AI technology for real-time predictions and microbetting odds into its sportsbook feed coverage. The partnership will allow OddsMatrix customers to access popular US sports, including American football, basketball, baseball and ice hockey.

• Social gaming technology provider Sparket has launched its real-money skill gaming contests in 43 states, enabling users to gain access to various weekly contests, including its flagship college basketball contest.

In focus – EmpowerYourPlay

Who are you? EmpowerYourPlay was founded by customer retention expert Tiffany Santisteban Lagos, who previously worked with the likes of Betway, Lottoland and Betsson.

• Having started out in customer support, she built loyalty programs, ran high-value customer and marketing verticals, and managed multi-million P&Ls.

• The company recently won the ICE Pitch competition in Barcelona.

What’s the big idea: EmpowerYourPlay says it offers “feel-good” player retention rewards that engage players and drive loyalty while, at the same time, “doing good.” “On average over half of all bonuses go unclaimed,” says Santisteban Lagos. “Loyalty programs feel generic.”

• Instead of throwing bonuses at players who don’t care, Santisteban Lagos argues that EmpowerYourPlay “lets them donate a small part of their gameplay – win or lose – to a cause they choose.

• For operators, it’s a plug-and-play retention tool that boosts retention, cuts bonus abuse and differentiates the brand.

• The company is set to launch in the UK in H125, with two customers in contract negotiations and three LOIs signed.

Funding backgrounder: EmpowerYourPlay is self-funded via family and friends. Following the recent ICE Pitch win, Santisteban Lagos says investor interest has surged, so the company is now raising £750k to scale to £8.2m ARR in 48 months.

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