There was further evidence today from the PENN Entertainment third-quarter report that Ontario online casinos are where the money is and using online sportsbooks as a tool to drive business to the casino may be a successful strategy.
PENN’s Q3 earnings report, released Thursday, touted Ontario as a successful model as executed by its Toronto-based partner theScore Bet.
‘Ontario: A case study for success’
One section was called “Ontario: A case study for success” and said:
“Our integrated media strategy with theScore and theScore Bet in Ontario is providing a blueprint for success that we intend to replicate in the U.S. with ESPN Bet.
“Strong year-over-year performance in Ontario after launching on our proprietary technology stack demonstrates impressive retention from our improved, vertically-integrated product.”
The graphics show how theScore hoped to funnel its existing theScore media app customers to theScore Bet and then, by using its proprietary technology stack, convert those sports bettors to Ontario online casino customers.
The report said that in Q3, ending Sept. 30, 73% of theScore Bet’s total handle came from “ecosytem users.” Then, using a “cross-selling strategy,” greater than 50% of theScore Bet’s Ontario online sportsbook users were converted to becoming users of theScore’s online casino.
PENN said theScore Bet is converting its Ontario sportsbook users to its online casino 44% better than it did a year ago.
Year-over-year, gross gaming revenue from theScore Bet’s online casino was up 105% and sports betting revenue was up 54%.
PENN CEO: October was a record month in Ontario for gross gaming revenue
Since PENN will use theScore Bet’s tech to power its ESPN Bet online sportsbook and casino in the United States, it hopes to use theScore’s Ontario strategy to drive business from the media product to the sportsbook and on to online casinos in the six states where they are legal.
On Thursday morning’s earnings call, PENN CEO and president Jay Snowden said:
“ESPN BET will be powered by our proprietary and proven technology platform, which has been driving impressive performance in Ontario for over a year now under theScore Bet brands. In fact October represents a record month for us in GGR (gross gaming revenue) and NGR (net gaming revenue) in both online sports betting and iCasino… We’ve had great success in terms of media integration, retention, and cross sell results, leading to double digit market share in a highly competitive market.
“Notably 73% of our total handle in Ontario comes from users already within the score media’s ecosystem and in terms of cross selling, there’s over 50% conversion, five zero, of online sports betting players into iCasino. Besides Sky Bet in the UK we think Ontario with theScore Bet provides one of the best blueprints for success in the US with ESPN BET.”
In August, it was announced that ESPN would replace Barstool Sportsbook as PENN’s sports betting partner in the US. However, in Canada, theScore Bet would remain PENN’s online sportsbook and casino.
On Thursday, PENN announced it hoped ESPN Bet would debut in most US jurisdictions by Nov. 14. Of course, that’s pending regulatory approval in each state.
Snowden: Integration between sports media and betting is winning formula
Snowden said there is a simple reason he expects the success of theScore Bet’s formula to work in the US with ESPN.
“We don’t see any of the competitors in Ontario, or in the US, that have really focused on this deep integration between sports media, and sports betting,” Snowden said. “And I think we’ve got it to a point in Ontario, where it’s pretty frictionless.
“When you’re in theScore media app, and you’re populating a bet slip, and then you’re ready to place the bet, you click and it takes you right over theScore Bet, you place your transaction, and you move right back over the score and finish reading your story or whatever you were doing checking scores and stats, etc. And we envision getting there very quickly here in the US with ESPN. … And we have a shared vision of getting there in here in the US as quickly as possible.”
Snowden highlighted that theScore Bet is seeing success in the province despite there being 47 legal Ontario operators running nearly 70 different online gambling sites.
“We continue to grow our business at or above market growth levels,” he said, ” … especially on the online casino side as we get more and more effective at cross selling between online sports betting and online casino.”
Ontario online casinos driving the success of the Ontario iGaming sector
Clearly, it is online casinos and not sports betting that is driving the Ontario online gambling success story.
In the fiscal quarter that ended Sept. 30, iGaming Ontario reported that 75% ($407 million) of total online gambling revenue of $540 million came from online casinos. Sports betting made up 22% ($118 million) and online poker 3% ($16 million).
Barstool sale forced PENN to take a huge loss in the third quarter
Despite the promising news out of Ontario, PENN still lost $725.1 million the third quarter and shows a loss of $132.6 million through the first nine months of 2023. This despite showing a third quarter profit of $123.2 million in 2022 and a profit of $200.9 million through the first nine months of last year.
The losses are mainly due to the $923.2 million loss PENN “incurred on the sale of 100% of the outstanding shares of Barstool which was completed” during the third quarter.
Recouping that money will take some time. On the earnings call, Snowden said PENN expects ESPN BET to “be showing losses every quarter in 2024. And then we’ll talk more about what that looks like, cadence wise, in ’25 and then rolling into ’26.”
