Penn Entertainment (NASDAQ: PENN) is set to implement job cuts at its Penn Interactive division, which encompasses the ESPN Bet online sports betting operation.
The exact number of jobs to be cut was not disclosed, and the information was first reported on Wednesday by Legal Sports Report.
"This week, we are implementing changes at PENN Interactive to help streamline reporting lines, enhance operational efficiencies, and leverage shared resources across PENN,” wrote Penn CEO Jay Snowden in an email to staffers. “Unfortunately, these changes will result in a limited number of team member separations. While it is difficult to see colleagues impacted, we deeply appreciate their contributions and are committed to supporting them through the transition.”
Snowden's statement did not refer to layoffs specifically at ESPN Bet, but the CEO highlighted that the gaming firm will keep progressing "on the momentum of our partnership with ESPN with forthcoming product improvements and a more profound integration into the ESPN ecosystem."
The announcement of layoffs at Penn Interactive came as reports indicate ESPN Bet is facing significant challenges in securing a strong presence in the online sports betting market.
The app began reasonably well, creating optimism that it might outperform its predecessor, Barstool Sportsbook, but evidence suggests otherwise. In a recent report, JMP Securities observed that ESPN Bet's online sports betting market share fell to 3.2% in the second quarter from 4.7% in the initial quarter of the year, as determined by handle.
With a 3.2% share, ESPN Bet holds less than half of BetMGM's portion, which is also trailing, and captures under 10% of the shares held by DraftKings and FanDuel, the two biggest players in the industry.
ESPN Bet’s difficulties offer additional material for investors who have criticized Penn’s online betting blunders and may raise doubts about the logic of the gaming firm consenting to pay Walt Disney (NYSE: DIS) $1.5 billion over 10 years for utilizing the ESPN brand. That agreement can be terminated after several years if specific financial criteria are not achieved.
“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,” added Snowden in the email to staffers.
Shortly after Penn investor Donerail Group wrote a letter to the gaming company's board encouraging a sale, speculation emerged that Boyd Gaming (NYSE: BYD) might pursue its competitor. Nonetheless, there are concerns about that assertion, many of which arise from the notion that Boyd wouldn't be willing to spend as much as $500 million for Penn Interactive.
This means that an external party would have to become involved. Last week, industry speculation indicated that Flutter Entertainment (NYSE: FLUT), the parent company of FanDuel, which has ties to Boyd due to the casino operator holding a 5% stake in FanDuel, might engage in the matter.
Flutter has not validated any interest in Penn Interactive/ESPN Bet, and the conjecture seems exaggerated since FanDuel does not require such a high payment for merely 3.2% of the sports betting market share.
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