An empire falls

ESPN Bet was supposed to be the salvation of Penn Entertainment. Now it is looking like its downfall. Penn’s venture into online gambling has had very mixed results. iGaming has brought with it great success. Sports betting, however, has been an unmitigated disaster. After PR and stock-price debacle Barstool Sports turned turtle, irresponsible Penn CEO Jay Snowden sold it back to Dave Portnoy for $1. (That’s not a typo.) Throwing good money after bad, Snowden doubled down with ESPN Bet. At first it looked like a potential winner. But it has lost money hand over fist, with no end to the red ink in sight.

Flailing for answers, Penn recently declared that ESPN Bet would gain “traction” with players in time for football season. But, last week at a Nantucket investor conference, Penn’s chairman reportedly walked that timeline back to the end of NFL season. Quite a difference. Penn really went off the rails on May 31, when Donerail Group founder Will Wyatt lit into Penn (and Snowden in particular) in a six-paid jeremiad on the company’s online follies. Wyatt ripped the company’s “numerous failed investments and destruction of shareholder value,” to say nothing of some very questionable insider trading by Snowden himself (below).

Wyatt’s prescription, a rather simplistic one, was for Penn to be put on the auction block. Specifically, Wyatt called for the sale of Penn’s casino assets, of which it has virtually none left. Perhaps Wyatt hadn’t got the memo that Penn had offloaded its terrestrial casinos to Gaming & Leisure Properties Inc., leaving it asset poor. The casinos perform well, yes, but Penn just runs them and doesn’t own them anymore. One might be better off buying GLPI.

Nevertheless, Wyatt’s slash-and-burn letter gave Wall Street a taste for blood. Even as Snowden ignored Wyatt and promised to triple, even quadruple down on sports betting, the assumption was the Penn was for sale, like it or not. Well, Boyd Gaming evidently liked it. Howard Stutz of the Nevada Independent was first onto the story that Boyd was exploring the purchase of at least some Penn assets. Reuters followed later the same day, while the sleepy and deferential Las Vegas Review-Journal wasn’t on the case until June 21.

As Stutz rightly wrote, some Penn assets would be of interest to Boyd (like M Resort), while others wouldn’t and others still would be duplicative. We can’t imagine Boyd making the same mistake with Hollywood St. Louis that it did with albatross Eastside Cannery. So there could be a lot of potential pickups of one-offs and rinky-dink casinos for small buyers. (Century Casinos, take note!) But who wants ESPN Bet? Since Boyd owns 5% of profitable FanDuel, it neither wants to nor needs money-losing ESPN Bet. Carlo Santarelli of Deutsche Bank hinges his takeover scenario (at $25-$30 per PENN share) on Boyd finding a pigeon, er, third-party buyer to take ESPN Bet off its hands for $500 million or more. That may be an optimistic valuation given A) the entity’s failure to generate substantial market share and B) its perception as damaged goods.

Despite being an excellent overseer of land-based casinos, Snowden has proven himself a complete doofus as a digital mogul, for all his pretensions to that end. We won’t be sorry to see this overgrown frat boy pensioned off in the wake of a Penn takeover, one that will surely make him an obscenely wealthy man. Corporate America likes to reward failure, after all. That being said, we can’t imagine a better steward for what’s left of Penn than Boyd CEO Keith Smith, not to mention his team. If they swing this deal without taking on a crippling debt burden they’ll have validated those who set store by the fable of the tortoise and the hare. Early score: Tortoise (Boyd) 1, Penn 0.

Casino revenues were flat in Massachusetts last month. Encore Boston Harbor slipped 2% to $61 million. MGM Springfield dipped 4% to $22.5 million, while slots-only Plainridge Park outperformed, leaping 12% to $14.5 million. Boyd Gaming executives were seen kicking the tires on MGM Northfield Park in Ohio and were reportedly doing so with MGM Springfield as well. But for now they seem to be wisely abstaining from further intercourse. Still, with MGM CEO Bill Hornbuckle having washed his hands of Springfield, telling the Boston Globe “It is what it is” (a disappointment), its employees can’t help feeling like red-headed stepchildren of Leo the Lion. Sports betting in the Bay State scared up $59 million in revenue on handle of $587 million. DraftKings raked in 50% of the revenue, followed by FanDuel (35%), BetMGM (5.5%), ESPN Bet (4%) and Caesars Sportsbook (3%).

Sticking with sports betting, Michigan saw a 16% vault in revenue, $41 million, aided by astronomical (for OSB) 12% hold and $344 million in handle. Promotional offers sent $13 million back to punters. BetRivers fell into the basement, well below $1 million. Fanatics made $2 million, Caesars Sportsbook $1.5 million and ESPN Bet $2 million. Faring better were BetMGM ($5.5 million), DraftKings ($11 million) and leader FanDuel ($18 million). iGaming brought another $199 million, a 32% skyrocket. FanDuel caught up with BetMGM, $51.5 million apiece, while DraftKings snared $43.5 million. BetRivers ($12.5 million) and Caesars Palace Online ($12 million) duked it out for fourth place. Hollywood Casino ($5 million), FoxBet ($3 million) and GLC Casino ($2.5 million) were also in the mix.

Casinos chugged steadily ahead in Pennsylvania last month, generating revenue of $298 million, 2% better than 2023 and 4% more than in 2019. Then again, factor in all the expansion and Keystone State casinos are 14% behind the 2019 pace. Parx Casino slipped 2% but was the far-and-away state leader with $51 million. Other Philadelphia-area casinos were led by Philadelphia Live, cementing its downtown-leader status with $23.5 million, a 27.5% moonshot. Fading Rivers Philadelphia made $18.5 million (-6.5%), while Harrah’s Philadelphia (above) fell 8.5% to $12 million, incrementally behind little Valley Forge ($12 million & change, +1.5%).

Wind Creek Bethlehem dominated the rest of the state with $44 million (-3%) while Rivers Pittsburgh led that market with $31 million (+4%). It held off Hollywood Meadows ($17 million, +5.5%) and Pittsburgh Live ($10 million, +2.5%) in a very lively marketplace. Mohegan Pocono dipped 3.5% to $18 million, Presque Isle Downs was up 8% to $9.5 million, Mount Airy was flat at $16.5 million (smokers will only get you so far) and Hollywood Penn National was down 3% to $14 million. Lady Luck Nemacolin rocketed 38% to $2 million, Hollywood York dipped a point to $8 million, Hollywood Morgantown (below) jumped 13% to $6 million and Parx Shippensburg slid 20.5% to $3 million.

iGaming brought the Keystone State an additional $174 million. Hollywood Casino (a catchall of Penn Entertainment, BetMGM and DraftKings) was characteristically predominant with $65 million. Then came FanDuel ($44.5 million) and former favorite son BetRivers ($31 million). Sports betting jumped 19% for handle of $592 million, out of which came $62 million in revenue—less $17.5 million in promo outlays. FanDuel clobbered DraftKings, $31.5 million to $15 million. Also in the picture were ESPN Bet ($3.5 million), BetRivers (ditto), BetMGM ($3 million) and Parx ($1.5 million), a surprise contender who bested Caesars Sportsbook ($1 million). Roman Empire, look to thy laurels!