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Penn Entertainment (NASDAQ: PENN) has provided an update for its shareholders regarding the first quarter of 2024. Among the aspects of the company’s performance during that period that Penn highlighted was a record amount of gross revenue from its online casino products.
While the key metrics highlighted in that regard are strong in terms of a year-over-year comparison, questions about the future of the Hollywood online casino brand in the US remain. Many of those questions could be answered later in 2024.
Penn Entertainment points to growth in online casino win for Q1 2024
According to the company’s investor presentation for Q1 20241, the company saw single-quarter records for both the amount of money played on its online casino platforms and gross revenue from that play during the quarter. That included play from Penn’s Hollywood online casino in four US states and theScore Bet in Ontario, Canada.
The presentation does not give an exact total for the amount played or won by players. Furthermore, it does not segment out how much of the record totals came from its Canadian or US customers.
Penn did show a 32% increase in its gross revenue from those online casino platforms in comparison to Q1 2023. Additionally, Penn says that the number of monthly active users on both Hollywood and theScore Bet online casinos increased by 166% year-over-year when combined.
Penn’s presentation included the addition of three proprietary games to its online casino products among its highlights for Q1 2024. Much of the rest of the presentation focused on the company’s ESPN Bet sports betting product for the US, however.
From an online casino standpoint, that’s where the questions begin.
The rest of the story for Hollywood online casino in the US
If the focus on ESPN Bet and online sports betting makes the online casino seem like an afterthought for the company in the minds of Penn investors right now, it seems that the Hollywood online casino in four US states is the same for players right now.
For example, Hollywood online casino’s win sum represented just 1.6% of the record March online casino win total in New Jersey. In Michigan, Hollywood’s win accounted for 2.4%2 of what was also a record total for the online casino industry in March.
Although expected, Penn’s investor presentation also shared a decline in monthly average users for its online casino products compared to Penn’s Q4 2023 earnings statement. That quarter likely experienced some inflation in that metric due to the launch of ESPN Bet and the consolidation of Hollywood online casino into a single app with ESPN Bet in the US.
The main questions that arise from all this information for Hollywood online casino players and Penn investors in the US are what strategy the company will employ to grow its share of the online casino market and how that strategy might affect the user experience. Answers could start to surface as soon as Q4 2024.
Will a standalone online casino app help grow market share for Penn?
For Hollywood players in Michigan, New Jersey, Pennsylvania, and West Virginia, change is coming. The investor presentation again highlighted that Penn plans to separate Hollywood online casino from ESPN Bet.
A standalone app for Hollywood is expected to launch either in late 2024 or early 2025. US online gambling companies have taken a divided approach to that factor. Caesars has gone the route of separation in several states while other brands like BetMGM, DraftKings, and FanDuel have maintained consolidated apps.
Only time will tell whether Penn is about to make the right move in separating its online casino and online sports betting products in the US. Penn’s current focus on ESPN Bet, perhaps to the exclusion of devoting the same resources in Hollywood, might be a concern for some investors and players.
For instance, the company’s recent hire of Aaron LaBerge as its new Chief Technology Officer doesn’t scream investment in online casino play. A quote from LaBerge in the release3 announcing his hiring makes no mention of the online casino but touts how he will use his experience “from Disney and ESPN to help make ESPN Bet an essential piece of the sports fan experience.”
While Penn might be holding back on heavily backing Hollywood until online casino games are legal in more of the US, that does nothing to shore up its market share in its existing markets. At the same time, Hollywood’s small market share could emphasize the need for Penn to devote the majority of its resources to where it believes they will have the best return.
At some point, however, that becomes a self-fulfilling prophecy. Investors and players need to note that while Penn touted record revenue online casino revenue in Q1 2024, that segment was overshadowed otherwise.
