Penn National Gaming announced Monday it has reached a 20-year “strategic partnership” with Capital Rivers Gaming — known as Rivers Casino & Resort — that will provide access to New York state for mobile sports betting and iCasino gaming, should legislation and regulations permit the company to deploy its platforms via the “second skin” arrangement.
Legal sports wagering currently exists in New York on a limited, in-person basis at four commercial casinos and four tribal casinos in upstate New York. It is one of the four largest states in terms of population alongside California, Texas, and Florida, all of which do not currently permit legal statewide sports betting. However, Gov. Andrew Cuomo, after expressing indifference for three years, has signaled a willingness to bring mobile sports betting to the Empire State to potentially help plug budget shortfalls created by the COVID-19 pandemic.
The deal provides a potential path for Penn to launch the Barstool Sportsbook platform in New York via the Rivers Casino in Schenectady. Penn purchased a 36% stake in Barstool Sports for $163 million in January 2020.
Of course, Penn is far from a lock for market entry, as the legalization conversation continues in New York and Barstool would be second in queue behind the platform BetRivers, the online sportsbook arm of Rivers casinos owned by Chicago-based Rush Street Gaming.
The deal provides a reciprocal arrangement in which Rush Street Interactive would receive second-skin access in Maryland, Missouri, Ohio, and Texas. Each state is at a different point in the legislative process of legalizing sports betting — Maryland voters approved sports betting in a November vote; Missouri and Texas have had bills filed with state legislature; and Ohio’s Senate has convened a select committee to cobble together a bill for passage after falling short last year.
Portnoy and New York appear a match made in heaven
How is $PENN getting market access in NY not front page news on every trading platform?*
*I own a shit ton of Penn stock and am not a financial advisor pic.twitter.com/CfNBSwOYnA
— Dave Portnoy (@stoolpresidente) February 22, 2021
Penn National is a newcomer to sports betting, at least in terms of the promotion of its own sportsbook and not another company’s, with marketing of the site led by loquacious Barstool CEO Dave Portnoy. After launching in 2020, Barstool has quickly established itself a formidable presence in both Pennsylvania and Michigan.
“Gaining potential access to what could become one of the nation’s most lucrative sports betting markets has been a major priority for our Company,” Penn National Senior Vice President of Interactive Gaming Jon Kaplowitz said in a statement. “We are hopeful that the New York State Assembly will follow those leading revenue producing states that allow for multiple skins for mobile sports betting.
“A state the size of New York certainly warrants open competition and a free market approach.”
Kaplowitz’s statement indicates support for the sports betting model presented last month by New York State Sen. Joe Addabbo and Assemblyman J. Gary Pretlow, which calls for retail books having two online skins and license fees of $12 million per operator. Cuomo has expressed a preference for a state-run system that, if implemented, likely would create a situation where the state lottery offers a single sportsbook to the state’s nearly 20 million inhabitants.
In a speech outlining his budget last month, Cuomo claimed the potential for annual revenue of $500 million in a fully mature market in the sole-source lottery mold. Critics and analysts have serious doubts about that, believing an open, competitive market with multiple operators akin to New Jersey‘s would generate the most revenue and best serve the clientele.
A reputation that precedes
Regardless of how one views Portnoy — be it the brash braggart opining on the GameStop controversy or philanthropic common man who has raised more than $36 million to help COVID-affected businesses — there is no question he generates attention and, therefore, revenue when it comes to Barstool’s mobile sports betting. The young book ranked third in both Pennsylvania and Michigan in sports betting handle in the most recent revenue reports released by both states’ gaming boards, while having substantially lower customer acquisition costs than competitors.
In Michigan, where a shotgun launch sent 10 sportsbooks online at the same time one month ago, Barstool Sports was a competitive third, totaling nearly $27.5 million in handle the first 10 days and finishing slightly more than $5 million behind first-place FanDuel Sportsbook. More importantly to shareholders, Barstool Sportsbook was the most profitable mobile book in Michigan in that small sample size while generating nearly $1.7 million in revenue.
You're basically making it plain as day that every other major site gives their players a hell of a lot more value than yours.
It's almost like your fanbase has to be incredibly stupid for you to glamourize this. https://t.co/ybIMotTdEl
— Robert DellaFave (@RobertDellaFave) February 20, 2021
Getting a similar common-ground starting point in New York — where as much as 20% of New Jersey’s monstrous handle comes from people in the New York City metropolitan area crossing the Hudson River to place bets — coupled with Portnoy’s public presence and promotional prowess would likely provide similar results on a larger scale.
The New York State Gaming Department does not release handle in its monthly revenue reports, but the more than $3.5 million in revenue generated by the four retail sportsbooks in January represented an all-time high since launching in July 2019. By comparison, New Jersey set a national record with over $82.6 million in operator revenue last month — $46.8 million of which was generated in person and online via FanDuel Sportsbook at the Meadowlands Racetrack in nearby East Rutherford.
“We’re very encouraged by the initial results we’ve seen in Michigan, as we registered over 48,000 new customers and generated total handle of $27.5 million during the first 10 days of operation,” Kaplowitz added. “We remain very confident in our ability to win sizable share in new markets based on the power of the Barstool brand and media assets, which allows us to begin to leverage the meaningful cross-sell opportunities from the Barstool Sportsbook, iCasino and our ‘mychoice’ loyalty program audiences.
“We hope to bring our unique and exciting brand of sports entertainment and iCasino to the Empire State.”
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