Analyst: 2025 is a ‘make-or-break year’ for ESPN Bet as contract opt-out looms

Roughly 18 months after first launching in 2023, ESPN Bet has yet to establish a significant foothold in the online sports betting industry.

As a result, the Penn Entertainment product is now on the clock.

“This is a such a make-or-break year,” Kyle Owusu, a credit analyst at bond market data and analysis firm Octus, told Sportico. “Firstly, contractually, ESPN has the right to terminate the sportsbook agreement if, at the end of year three, the market access is not at least a specified percentage of the total market access … The other reason is the activist pressure in the background.”

While it’s unclear what level ESPN and Penn would like to see that market share at, it’s a safe bet it’s well above the 3.2 percent it currently lays claim to outside of Nevada, per Casino Report. That puts the product well behind industry leaders DraftKings (37 percent) and FanDuel (35 percent), as well as competitors such as BetMGM (8 percent) and Caesars (5 percent).

Pointing to comments Penn CEO Jay Snowden made ahead of the product’s launch in 2023, Sportico notes that the online sportsbook operator was hopeful to obtain a market share of at least 10 percent.

While Penn signed a 10-year, $2 billion licensing agreement with ESPN to rebrand its previously Barstool Sports-branded sportsbooks in 2023, Disney’s ability to opt out of the deal if certain milestones, such as market share, aren’t met, makes 2025 a critical year. Owusu speculated that Disney would begin to consider its alternatives if Penn doesn’t make the necessary progress toward being competitive in the industry by the end of the year, with an eye on opting out of the deal when it’s first able to do so at the end of 2026.

During an investor’s call earlier this month, Snowden recently pointed to the impending launch of ESPN’s direct-to-consumer streaming service as possessing the potential to give ESPN Bet a much-needed boost. That, however, could prove easier said than done, while Owusu also noted that an activist investor group, HG Vora Capital Management, is already calling on Penn to shift its strategy away from its online sportsbook in order to refocus on physical casinos.

Suffice it to say, pressure is mounting for Penn and, to a lesser degree, ESPN, which would suffer its own embarrassment if its first online sportsbook fizzles out after just three years. And while opting out of the deal would give the company the ability to strike a licensing deal with another sportsbook operator, it’s fair to wonder what that market would look like, considering that ESPN has yet to prove that it’s much of a draw in the sports betting world.

After getting off to a relatively strong start, ESPN Bet’s initial success quickly faded, with the sportsbook seemingly bringing little more to the network than fodder for Pat McAfee. And while there’s still time left for the product to reverse course, all indications appear to be that ESPN’s partnership with Penn will ultimately hit the under.