Preparing to fail
Penn making ‘same mistake’ with ESPN as it did with Barstool, claim departing employees
Fears expressed over Penn’s ESPN Bet strategy by former insiders.
Breaking news: Gavin Isaacs appointed Entain CEO.
Evolution ships $2bn in value in post-earnings slump.
The week ahead looks forward to LVS, Boyd and Red Rock.
Startup focus is programmatic ads provider Soundwave.
And in the middle of the celebrations, I break down.
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Just a little bit of history repeating: Penn Interactive employees let go as part of last week’s layoffs have suggested management is pinning its hopes for ESPN Bet on the strength of the name attached to it much as it did previously with Barstool.
“We were doing the same thing with ESPN that we did with Barstool: we relied on the name and it didn’t work,” said one insider.
They added that the lack of market share for ESPN Bet was now a “big problem.”
A note last week from the analysts at JMP noted ESPN Bet “continues to decline” in operational states, down to ~2% share in June.
Ain’t helping: The insiders’ comments are unlikely to assuage the fears expressed by Penn’s activist investor critics that it could end up “fumbling the ball” with ESPN Bet, having previously squandered over $500m on Barstool.
Speaking on condition of anonymity, multiple ex-Penn employees suggested that internally there is a lack of faith in the quality of the product with key personnel of the customer acquisition side not having been replaced.
One cited the departure of Sabrina Pinto, formerly VP of VIP at Penn Interactive, who left to join Fanatics in December last year and now “reports directly” to Michael Rubin, Fanatics CEO.
“They never replaced her,” the insider said.
Falling flat: The scale of the redundancies became evident last week after reports from LegalSportsReport and CNBC suggested up to 100 staff had been let go. A letter from CEO Jay Snowden cited by LSR said Penn had “hit the ground running” after buying theScore, which “led us to temporarily set aside any potential organizational changes that would typically follow a major acquisition.”
Multiple sources confirmed the bulk of the redundancies affected the Penn Interactive business, with between 30-40 going in the marketing department and more jobs being lost in VIP management, talent acquisition and other HR roles.
One source characterized the current atmosphere within the PI office in Philadelphia as being “really bad.”
A house divided: They also claimed the scale of the layoffs at PI would have exacerbated tensions between the two arms of Penn’s online empire. Multiple sources confirmed a “hostile us vs. them environment” exists between Penn Interactive and theScore, which dates back to the immediate aftermath of the $2bn acquisition of theScore in 2021.
Post-sale, the sources alleged theScore founders, the Levy family, managed to have loyalists appointed to leadership positions across the business.
Another said “most leaders in PI” were let go by Penn after the acquisition. “theScore heavily recruited only in Canada for leadership positions,” they added.
On hold: The sources also suggested tech hires had largely been put on hold until the arrival of new online CTO Aaron LaBerge, who officially started in his post on July 1. “There was a huge pause on hiring,” said one ex-PI source, who added that there is internal “frustration” with the lack of UI/UX capability.
Outlook cloudy: The ex-employees also suggested there was widespread fear internally at PI that either ESPN/Disney would “take back ESPN Bet” or that the business would be sold. Recall, recent reports suggested Flutter might team up with Boyd Gaming in a joint bid that would split Penn’s B&M business from the interactive arm.
Purple plane: Meanwhile, one source claimed Penn splashed $100k on having one of its corporate jets repainted after Penn CEO Snowden took a dislike to its particular shade. Recall, E+M reported in May on what some investors termed as “excessive” usage of corporate jets.
Penn Entertainment was contacted for this story but was yet to respond at pixel time.
Breaking: Entain CEO
It’s Isaacs! Gaming veteran Gavin Isaacs has been appointed as CEO at Entain, ending months of speculation. Isaacs was last in an executive role at Scientific Games, where he was CEO until 2016. Since then he has taken on a number of non-executive director roles including at DraftKings and most recently at Games Global.
Entain has been lacking a permanent CEO since Jette Nygaard-Andersen quit late last year in a cloud of aircraft fumes.
Isaacs will work alongside current temporary CEO Stella David before she becomes the permanent chair in September after Barry Gibson retires.
As E+M wrote just last week, Isaacs will have his work cut out turning Entain around.
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Nothing to see here: The global gaming sector appeared to come through Friday’s Microsoft outage relatively unscathed, with scattered reports of slot machines going down at some Las Vegas locals venues and Entain’s various sites being out of action at points during the day.
PA Betting Services is to provide horse racing and greyhound racing along with Timeform’s tipping content to Kaizen’s Betano brand in the UK.
Career paths
The trading director at Superbet, Terry Pattinson, has confirmed via LinkedIn that he has left the post. Prior to joining SuperBet in 2020, Pattinson served as trading director for William Hill.
Hard Rock has appointed Stephanie Piimauna as senior VP of people and inclusion and Meaghan Ryan as head of human resources.
SkyCity Entertainment has confirmed that recently appointed CEO Jason Walbridge has officially begun his role.
QTech Games has appointed Crystal Nadal to the position of sales director.
Evolution earnings reaction
Losing streak: Evolution saw its shares slump by 8% following the release of its earnings on Friday, leaving its market cap some $2bn lighter at the end of the day. The slippage follows somewhat innocuous figures that showed revenues rose 15% to €508m while EBITDA rose 11% to €346m.
Still, the Stockholm-listed shares fell by SEK90 on the day, equating to a market cap loss of nearly SEK24bn or $2.2bn.
😱 An evolving picture for Evolution’s shares YTD
Behind the curve: Investor skittishness was likely not helped by comments on the call from CEO Martin Carlesund, who admitted Evolution was not growing in line with the US iCasino sector. “We are losing market shares in slots as the number of actors are increasing quite significantly,” he said.
“It's been hard to defend our position,” he added. “So that’s the whole story.”
Carlesund noted that one positive from the $85m all-cash deal for Galaxy, also announced Friday, was that the company was linked in 28 states in the US already.
Through buying Galaxy, he said Evolution might be able to “fast track” future online licensing in those states.
North American revenues rose 8% to €60.2m but were down slightly sequentially and have been essentially static for the past three quarters. The big driver of revenue remains Asia, which rose 22% YoY to €201m.
Asked about Evolution’s exposure to gray markets, Carlesund was keen to emphasize, as previously, the company’s arm’s length relationship to individual players.
See Compliance+More tomorrow for more on Evolution and the B2B point of consumption questions.
Betsson earnings reaction
Bulging pockets: With cash on the balance sheet totaling €264m and with a track record of M&A – the most recent deal being the buyout of Holland Gaming Technology in February – management was asked on the call with analysts whether more deals would be forthcoming or whether the company would be looking at share buybacks.
“We are in a growth phase,” said CFO Martin Öhman. “We like M&A and if we find good M&A opportunities, that’s kind of the first priority.”
He also noted that if “the right opportunity arises”, Betsson would also consider taking on more debt.
888’s horror show
Putting the boot in: Patience with 888 is running very low, according to the team at 888 who noted that following Thursday’s profit warning “finding marginal buyers of the shares is now further off.”
The umpteenth cut is the deepest: The team added that they have “taken a butcher’s knife” to forecasts, cutting FY24 and FY25 adj. EBITDA by £50m.
This despite management expectations being “unchanged.”
While the team maintained a Buy rating, they lowered their target price by over a third to 110p.
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The week ahead
Boyd of summer: The Q2 earnings season truly kicks into gear this week, with Las Vegas Sands, Red Rock Resorts and Boyd Gaming heading the list. Of most interest, certainly with regard to potential future M&A, is Boyd, which reports on Thursday AMC. The team at Truist noted in their Q2 preview that expectations for trading are “reasonable” after “multiple” soft quarters.
The team at Jefferies said their focus will be on competitive pressures on Boyd’s Las Vegas locals division, given how well Red Rock’s Durango has performed since debut at the turn of the year.
A better impression of how Durango is performing will come earlier in the week when Red Rock reports on Tuesday.
Crisis, what crisis? At Las Vegas Sands, Deutsche Bank analysts have previously suggested there may be some investor disquiet over recent market share slippage in Macau. But Jefferies said their biggest concern remains the China macro situation.
Meanwhile, Jefferies also reported that LVS has overcome another hurdle in its pursuit of a downstate license in New York.
The company received unanimous approval from the Nassau County Planning Commission for a 42-year lease despite vocal community opposition.
“It appears that LVS will be able to proceed with its initial proposal,” the team suggested.
Venture playground
Startup focus – Soundwave
Who are you? HQ’d in Richmond, Virginia, Soundwave was founded in 2022 by Jon Kim, Holland Rhoads, Neil Kuchins and Richard Rhoads, who have a combined 40 years of experience in the industry.
What’s the big idea? The technology-focused, managed-service programmatic media partner boasts large-scale access to DSPs, proprietary bidding systems and custom audiences.
It takes a boutique approach to its agency and brand partnerships, with a focus on middle-market relationships where “there is an increasingly large demand” for “industry-leading” service, pricing, transparency and performance.
The company offers cutting-edge tools and technology, with its “nimble size and independence” resulting in “exemplary service levels,” compared with its competition, claims COO Richard Rhoads.
What they say: “Soundwave is entering the online gaming and casino vertical because of the overall growth and continued new entries to the marketplace,” says Rhoads. “The need for effective strategies, profitable engagement models for advertisers and differentiation creates an ideal ecosystem for the Soundwave model to provide significant value for its partners.”
Funding backgrounder: Soundwave is independently owned.
Growth company news
MetaBet and FTN have teamed up to pre-integrate FTN's player and team projections into MetaBet's market-leading sports and gambling data API. MetaBet was one of E+M’s Top Startups to Watch in 2024.
7bet, a subsidiary of Anakatech Interactive, has launched an iCasino and sportsbook offering in the UK. The company has been exclusively operating in the Lithuanian market for the last three years.
XGENIA has launched 'Ignite', an AI-driven tool that enables rapid slot game prototyping and iteration, significantly reducing time to market for operators and studios.
916 Gaming has launched its latest iLottery game, ‘Team USA’, exclusively on the Virginia Lottery online platform through a partnership with EQL Games.
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Calendar
Jui 24: Kambi, Churchill Downs (e)
Jul 25: Churchill Downs (call), GLP (e), Boyd Gaming
Jul 26: GLP (call)
Jul 30: IGT, Red Rock, Caesars Entertainment
Jul 31: MGM Resorts, Rush Street
Aug 1: DraftKings (earnings)
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