One billion dollars evaporated in twenty-four months.
That’s what Penn Entertainment lost chasing market share in sports betting through its ESPN Bet partnership. The platform launched in November 2023 with unprecedented fanfare, became the #1 app in Apple’s App Store for 100 straight hours, and drew 1.1 million downloads in its first week.
Then reality hit.
ESPN Bet captured only 2.6-3.2% of market share versus initial targets of 10-20%. It never broke into the top three operators. It finished seventh in a market increasingly dominated by two players.
On December 1, 2025, ESPN Bet shuts down. Penn and ESPN mutually terminated their exclusive partnership after just two years of a planned ten-year deal.
The Capital Destruction Pattern
Penn’s sports betting strategy represents one of the most expensive strategic failures in recent gambling industry history.
Since 2020, Penn invested over $4.3 billion in shareholder capital on online sports betting. That’s nearly double Penn’s entire current market capitalization.
The company bought Barstool Sports for $551 million, then sold it back to founder Dave Portnoy for $1. It paid $1.5 billion to ESPN over the planned partnership term. It acquired theScore for $2 billion.
Penn’s stock dropped 84% from its 2021 high of $130 per share. Market cap fell from $20 billion to $3.3 billion.
Each partnership promised to leverage media brand power into betting market share. Each failed to crack the duopoly that controls the market.
The Retention Problem
Launch momentum means nothing without retention.
ESPN Bet’s first week looked like validation. Bank of America projected the platform was trending toward 9-10% market share after four weeks. Monthly active users peaked at 771,000 in Q4 2023.
Then users stopped coming back.
By the end of 2025, ESPN Bet had only 300,000-400,000 monthly active users. FanDuel and DraftKings each maintained 3-4 million.
The original Penn-ESPN agreement included exit clauses tied to performance thresholds. Either party could terminate after the third year if ESPN Bet’s market share wasn’t at least 10% by the end of 2026.
They didn’t wait that long.
The Instant Pivot
ESPN’s exit from Penn lasted exactly one hour before announcing its new partnership with DraftKings.
DraftKings becomes ESPN’s exclusive official sportsbook and odds provider effective December 1, 2025. The betting tab within the ESPN app will now be powered by DraftKings, which operates in 28 states plus Washington D.C. and Ontario with over 10 million customers.
ESPN returned to an integrated marketing model rather than operating a branded sportsbook. The company previously had co-exclusive deals with Caesars and DraftKings that paid nearly half of the $150 million annual fee Penn was providing.
The speed of the pivot reveals the calculation. ESPN traded exclusivity and upside for guaranteed reach and reduced risk.
DraftKings gets direct integration with ESPN’s massive audience. ESPN gets a proven operator instead of building market share from scratch.
What Consolidation Looks Like
FanDuel commands approximately 44% of U.S. sports betting market share. DraftKings holds around 34%. Together they control roughly 74% of the market.
ESPN Bet’s failure accelerates the trend toward three major players by 2026. The gap between established operators and new entrants continues widening.
Penn will rebrand its U.S. app as theScore Bet and refocus on iCasino and omnichannel casino operations across its 43 brick-and-mortar properties in 20 states. The company retains 2.9 million users acquired during the ESPN partnership, who will automatically transition without needing to download a new app.
The lesson cuts deeper than one failed partnership.
Brand power alone cannot overcome structural disadvantages in markets with strong network effects and established user bases. Media reach drives awareness but doesn’t guarantee retention when product experience and promotional spending lag behind entrenched competitors.
Penn spent over $4 billion learning what the market already knew. The duopoly exists because scale creates compounding advantages in user acquisition costs, betting liquidity, and feature development.
ESPN Bet’s collapse won’t be the last consolidation story in sports betting. It might be the most expensive.
