PENN Entertainment had been under heavy scrutiny for nearly two months because of lagging performance. Skepticism about the direction of the company, along with growing turmoil in the company’s Philadelphia office, has gotten louder after PENN Entertainment laid off approximately 100 employees last week.
Company CEO, Jay Snowden, called the reduction of staff a “limited number.” However, despite PENN Entertainment being “well-positioned,” according to Snowden, the fate of the company remains up in the air.
Some of the employees laid off spoke to the Earnings+More newsletter and said they were concerned PENN Entertainment is making similar mistakes with ESPN BET as it did when it was partnered with Barstool.
Reports of bad morale at PENN’s Philadelphia office
PENN is a Pennsylvania-based company. Some 200 employees work at its headquarters in Wyomissing. Prior to the layoffs, another 300 or so worked in Philadelphia for the company’s interactive division handling the online product.
It’s unknown how many Philadelphia and/or Pennsylvania employees were affected by the layoffs. However, multiple sources told Earnings+More that the majority of job cuts impacted the interactive department.
Despite the unknown quantity of roles affected in Pennsylvania, Earnings+More described the current atmosphere in the Philadelphia office as “really bad.”
The bad morale has, according to Earnings+More, been compounded by alleged discord with PENN’s theScore product based in Toronto. The newsletter depicted the situation as an “us vs. them environment” between theScore leadership and PENN Interactive.
Those sources claimed that the latest job reduction decision would not improve the tension that already exists. In fact, it’s likely going to make it worse.
PENN repeating failed history, relying too much on ESPN name
One of the criticisms for PENN’s failed investment with Barstool was the reliance on the name. There were hopes the loyal following Barstool has would attract bettors, and therefore, market share.
That ultimately did not happen, resulting in Snowden to sell the company back to founder, Dave Portnoy, for $1, after purchasing the company for $550 million last year.
ESPN has been trademarked for being the worldwide leader of sports. It obviously is a much bigger, and trusted, name in the sports industry. However, one former PENN employee expressed fears that PENN is repeating the same mistake it made 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,” the insider told Earnings+More.
While PENN appears to be counting on the brand awareness of ESPN, employees within the company don’t appear confident in the product. Former VP of VIP at PENN Interactive, Sabrina Pinto, left the company last December for Fanatics, where she “directly reports” to CEO Michael Rubin.
“They never replaced her,” the insider said.
Where does PENN go from here?
The patience of top shareholders at PENN have been growing thin. That started when the Donerail Group published a letter questioning the direction of the company and called for a sale in May.
That has led to multiple reports of other gambling companies inquiring about a merger. One possible deal suggests a joint acquisition involving Boyd Gaming and Flutter.
Should that happen, Flutter would acquire PENN’s online business. That would bring ESPN BET sportsbook under the same umbrella as market-leading FanDuel.
PENN Entertainment launched ESPN BET in Pennsylvania last November, which means it has yet to experience an entire football season. Judging by performance so far in 2024, ESPN BET has seen its market share drop from 8.9% in January to 5.2% in June.
Early returns on ESPN BET has shareholders worried. However, the layoffs could also be a sign that PENN is preparing for a launch in New York. That state boasts a tax rate of 51%, the highest of any state.
It’s certainly plausible that PENN is gearing up to go live in the Empire State, with one last ditch effort to impress investors.
