FanDuel parent company Flutter faces some significant questions if it plans to acquire Penn Entertainment's digital assets, according to a recent report by TheDeal.com.
The report suggests that Flutter might consider purchasing Penn's online gaming arm if Boyd Gaming acquires the remainder of Penn's business. This potential deal makes sense given that Flutter and Boyd have an existing partnership: FanDuel teamed up with Boyd in 2018 for US online gaming access, resulting in Boyd holding a 5% stake in FanDuel.
However, the specific plans Flutter has for Penn’s online assets, including the license to use the ESPN Bet brand on proprietary technology, remain unclear.
Why Would FanDuel Get Involved?
A third party would likely need to buy Penn's digital assets for Boyd, as a bid for Penn's retail casino assets could be both expensive and complex.
Flutter would need more compelling reasons than just a partnership with Boyd. Given FanDuel's leading position in the market, two main factors stand out:
- Market Share Advantage: Acquiring ESPN Bet could help FanDuel expand its market share further beyond its closest competitor, DraftKings.
- Brand Management: Flutter might prefer to shut down ESPN Bet rather than allowing a potentially strong brand to compete against FanDuel.
Could FanDuel and ESPN Bet Coexist?
Based on past practices, it seems unlikely that Flutter would support both the FanDuel and ESPN Bet brands equally. Previously, when Flutter acquired the FOX Bet brand through its purchase of The Stars Group in 2019, it provided minimal internal support. FOX Bet, which often had less than 1% handle shares in some markets, was eventually closed last summer.
Given this history, it is hard to envision Flutter maintaining ESPN Bet alongside FanDuel, especially considering the costs involved. Penn's contract with Disney requires a $150 million annual payment for the ESPN Bet brand.
Expert Opinion: ESPN Bet's Value
Chris Krafcik, Managing Director of Sports Betting and Emerging Verticals at Eilers & Krejcik, doubts Flutter's interest in ESPN Bet. He mentioned on LinkedIn that while Flutter might be able to address ESPN Bet's issues—such as integrating FanDuel's same-game parlays to improve revenue—he believes the effort might not be worthwhile.
Krafcik stated, "There are lots of challenges (e.g., potential tech stack switch, hefty marketing spending commitments, ESPN media ecosystem integration) to navigate. Our view is that the juice is probably not worth the squeeze—especially given FanDuel's market-leading position in U.S. online gambling."
Earnings Season Insights
All three companies are set to hold public earnings calls for the second quarter within the next month. While companies typically avoid commenting on rumors during these calls, analysts might pose questions that could shed light on the companies’ strategic thinking. For instance, analysts might inquire whether a stronger-recognition brand like ESPN Bet could coexist with FanDuel in the US market.