Scott Van Pelt, best known as an American sports commentator, is suddenly all over ESPN pitching something new, an online betting site called ESPN Bet, which is the powerhouse combination of the most important sports network and Penn Entertainment, the sports giant and gaming company.
Both ESPN parent Disney and Penn Entertainment are likely to spend millions on the new venture because parent Disney needs to bolster ESPN because of its shrinking cable audience and Penn Entertainment needs to repair its reputation after a failed partnership with Barstool.
Their target is none other than DraftKings, which has dominated the sports betting industry since 2012. The move is forcing DraftKings to intensify its marketing efforts, which may wind up cutting into its profits.
“Any new entrant into a marketplace is a threat,” said Rick Burton, a David B. Falk Endowed Professor of Sport Management at Syracuse University. “A brand like ESPN and an organization that Disney owns means that you’ve got a lot of firepower behind them if Disney decides to invest in that.”
ESPN and Penn Entertainment are a threat because if Disney decides to invest in the sportsbook app as it does for its amusement parks, movies, and TV shows, it possibly could gain shares from DraftKings at a faster rate.
ESPN is also a tremendously recognizable brand that reaches millions of sports fans annually and has many relationships with some of the biggest names in sports. Since Penn Entertainment is licensing ESPN’s name, the gambling brand can leverage ESPN’s name and connections to create advertising with some of the biggest athletes in major league sports.
“If they play their cards right to be a major player in that field, they definitely would be competition for DraftKings,” said Joel Maxcy, a sports business and general business professor at Drexel LeBow College of Business.
Not only is ESPN Bet ramping up advertising, but other sports betting companies are stepping up, too. Almost all sports betting companies offer bonus bets when new users sign up with their sportsbooks. Currently, Caesar Entertainment offers $1,000 in bonus bets if the user loses their first bet, MGM Resorts International offers $1,500 when users sign up with Bet MGM and lose their first bet. And Fanduel offers new users the promo to bet $5 to receive $150 in bonus bets, if your team loses its match.
DraftKings competitors are also endorsing celebrities to promote its mobile sports betting app on commercials airing on Sunday Night Football, Monday Night Football, and NBA games.
For instance, Jamie Foxx starred in BetMGM’s campaign spot, where he is seen playing the piano at NoMad Library within Park MGM, while professional athletes make appearances using the BetMGM sports betting app. “DraftKings is also going to have to go out and get celebrities to compete,” said Burton.
But DraftKings is responding and has strengths— the brand entered the market early with fantasy sports, making it an easy transition into the sports betting industry when it became legalized in 2018. This stepping stone allowed DraftKings to build customer loyalty with its user base, giving them the advantage over new entrants entering the sports betting market.
Another strength of DraftKings is that they have tons of resources to do a lot of advertising, and they frequently appear on sports, radio, sports programming and games. Therefore, sports enthusiasts think DraftKings can respond to its competition by advertising more heavily to fend off challenges from ESPN Bet and its competitors .
“DraftKings has a considerable market share, and they have no reason to take their foot off the gas for advertising,” said Maxcy in a statement. “So I would think that that would be their response.”
Recently, DraftKings launched “All About Sweat,” a 30-second ad featuring long-term spokesman Kevin Hart and former NBA player Patrick Ewing. The energetic spot highlights DraftKings’ no sweat bet offer, which allows users to get “another chance to score ” if they lose a bet.
Burton said DraftKings may also respond by offering users different promotions and more bonus bets. He said DraftKings may try to get more people into prop betting— a bet that is predicated on the athlete hitting or not hitting a specific performance mark.
Justen Scott, a former veteran from North Carolina and an active user on DraftKings, said he is loyal to the brand because of the offers DraftKings has on its app and claims his favorite feature is the profit boosts on the sportsbook. The 29-year-old said he hopes one day DraftKings can incorporate live games into the app so he can watch live games and place bets on the app.
“If DraftKings could place all the live games on the app, as far as sports, it would be dope,” said Scott.
But all of this will come with a financial cost. In the last nine months, DraftKings reported that its sales and marketing expenses increased 8.2% to $909.9 million from $840.7 million— DraftKings attributed the increase to $69.2 million in advertising expenses. The sports betting company also reported in its latest quarter that it had a net loss of $283.1 million compared to analyst’s estimates of a net loss of $328 million.
Meanwhile, analysts expected DraftKings revenue to hit $3.7 billion this year, an increase from $2.24 billion a year earlier, a byproduct of “continued healthy customer engagement, efficient acquisition of new customers and the expansion of the Company’s Sportsbook product,” said DraftKings CEO, Jason Robins. Moreover, the DraftKings stock has performed well against its competitors and has been up 149.36% this year. And currently stands at $39, its highest price this year.
“DraftKings continues to gain share in a competitive market due to a strong user experience on its platform,” said Dan Wasiolek, an analyst for Morningstar.
