PENN NATIONAL GAMING PURSUES A YOUNGER CUSTOMER DEMOGRAPHIC VIA BARSTOOL SPORTS

Penn National Gaming is the largest regional casino company in North America and owns the most horse racing tracks in the United States.  Penn National has 41 properties in 19 states, which includes 10 racetracks. 

Like all casino and racetrack companies, Penn National’s customer profile skews older.  Penn National is implementing a strategy to attract a younger demographic with its purchase of a 36% share in Barstool Sports for $163 million in cash and $28 million in preferred stock.  In three years, Penn National will pay $62 million more to boost its share of Barstool Sports to 50%, with the option to have majority control.

Jay Snowden, Penn National’s president and CEO, commented on the rationale:  “With its leading digital content, well-known brand and deep roots in sports betting, Barstool Sports is the ideal partner for Penn National and will enable us to attract a new, younger demographic, which will nicely complement our existing customer database.  In addition, with 66 million monthly unique visitors, we believe the significant reach of Barstool Sports and loyalty of its audience will lead to meaningful reductions in customer acquisition and promotional costs for our sports betting and online products, significantly enhancing profitability and driving value for our shareholders.”

If the partnership turns out as planned, Penn National will attract a significant number of the 21-to-45-year-old males who access the Barstool Sports website to Penn National’s online sports betting and horse racing account wagering offerings.

Whether the Barstool Sports concept works enough to justify Penn National’s monetary outlay is an open question, but the strategy is aggressive and has promise of achieving what casinos have heretofore struggled with, and that is attracting a younger customer base. With online sports betting in its infancy in the United States, the Penn National/Barstool Sports alignment has huge potential for monetary return.

Copyright © 2020 Horse Racing Business

WALK IN THE MILL TO LAND IN THE 2020 GRAND NATIONAL

The Grand National is an iconic steeplechase known as “a race that stops a nation,” in reference to avid fan attention in Great Britain. With 40 horses in the field, the race draws interest from dedicated bettors to non-fans who just pick a name they like, and office sweepstakes are popular.

The 2020 edition of the Grand National is scheduled for Saturday, April 4 at Aintree Racecourse, near Liverpool, England.

Aintree Racecourse

Over the years, there have been some eye-catching performances and many fairy-tale stories: from victorious longshots to trainers and jockeys winning for the first time.  In 2020, the back-to-back winner in 2018 and 2019 Tiger Roll is looking for an unprecedented threepeat. 

Tiger Roll, owned by Ireland-based Gigginstown House Stud and trained by Gordon Elliott, is the ultimate stayer over jumps and he makes it look so easy.  In 2018, Tiger Roll delivered a superb display winning the Cross Country chase at Cheltenham over 3 miles and then a month later, followed up with a masterful performance in the Grand National—prevailing under a savvy ride by Davy Russell.  The Cheltenham Festival–Grand National double nicely rewarded the bettors who backed the horse in both races.

In 2019, Elliott had Tiger Roll in prime order to have a go at defending the Cross Country race at Cheltenham Festival, which the horse easily won by 22 lengths.  This set the stage for the Grand National at Aintree.

Tiger Roll was well backed into a short favorite of +400 in the Grand National and bettors were right.  He cruised around the difficult course to be in an ideal position to pounce when he was a few fences out.  As in 2018, Tiger Roll got to the front and went on to win by 2 ¾ lengths.  Magic of Light finished second and is likely to have another run in the race this year.

Can Tiger Roll win a third Grand National in a row?  Bettors say “yes.”  At +600 in Bovada (bet $100 to win $600), Tiger Roll is the clear favorite.  However, he will face stiff opposition from a number of talented horses.

Walk In The Mill is one of the challengers.  The Robert Walford-trained horse has twice won over the tough Aintree fences, notably winning a Grand National trial called the Beecher Chase in December 2018 and 2019.

The Beecher Chase requires horses to jump over the Grand National fences, so they have first-hand experience on the Grand National course.  Thus Walk In The Mill could very well dethrone Tiger Roll.  The principal difference between the Grand National and the Beecher Chase is that the former typically has over twice the number of starters.

Grand National

Second in the 2019 Beecher Chase was Kimberlite Candy, who ran well and is +2000 to win the Grand National this year.  The Beecher Chase performance gave the gelding’s backers a reason to believe he has a live shot in the Grand National.

A few veteran horses have also been entered in this year’s Grand National.  For example, One for Arthur and Anibale Fly (runner up in the Gold Cup) can be backed at +3300.

Tiger Roll has a formidable task ahead to win the Grand National a third time.  Walk In The Mill looks to be the horse to beat him; his two wins over the Aintree fences indicate that he is capable of winning a 4-mile race at +2000.

DRAFTKINGS, FANDUEL, SPORTS BOOKS AND THEIR THREAT TO PARI-MUTUEL WAGERING

The American Gaming Association estimates that 26 million Americans will bet on the 2020 Super Bowl, up 15% from last year. This includes bets through brick-and-mortar casinos, legal online sports books, and illegal offshore websites. Estimated revenue is $6.8 billion versus $6 billion in 2019. The main reasons for the increases are the rapid expansion of legal sports betting in the United States and a buoyant economy.

Recently, I was listening to a radio call-in sports show in Cleveland, Ohio.  One of the announcers was lamenting that Ohio has not yet legalized sports betting and therefore, in order to bet on the Super Bowl, he intended to drive 40 miles and cross the Pennsylvania state line, where online sports betting is up and running.  (In fact, the Churchill Downs-owned Presque Isle Downs & Casino in Erie, Pennsylvania has a sports book.)

The talk-show host said that as soon as he enters into Pennsylvania, he will be able to use his app (either DraftKings or Fanduel) to place his wager because Pennsylvania is one of five states that permit online sports betting.  In all, about 20 states and the District of Columbia have legalized sports betting and seven more are about to do so. Of the 20, 14 are operational. But only five states so far allow online betting: Indiana, New Hampshire, New Jersey, Pennsylvania, and West Virginia.  The radio host also said that if he wins his bet, the online sports book will credit his account, which he can withdraw money from without traveling back to Pennsylvania.

Until now, horse racing has had legal remote wagering, via phone or internet, to itself.  Now the competitive advantage has eroded. 

Horse racing has two competitive disadvantages versus sports betting:

First, sports betting is much easier to understand than handicapping horse races.  Second, the house cut on sports betting is about 5% in comparison to the 15%, 17%, or even 35% on pari-mutuel wagering, depending on the state and racetrack and type of bet.

The state of Ohio has seven horse-racing tracks, plus wagering at county fairs on harness racing.  At present, an Ohio resident living near the border of Indiana or Pennsylvania or West Virginia can take a short drive and bet on sports.  And Ohio will likely legalize sports betting in the near future.  Other states with racetracks are in a similar situation.  For example, Louisville, Kentucky residents can cross the bridges over the Ohio River into Indiana and bet online or travel about 14 minutes to Caesars casino and bet at its sports book.

The battle for the gambling dollar has heated up and horse racing’s takeout rates are detrimental like never before.  The dilemma is that racetracks cannot survive on takeout rates anywhere approaching the house cut on sports betting.

(More on possible responses by horse racing interests in the near future.)

 Copyright © 2020 Horse Racing Business