Penn National Gaming eyes Canadian gains with theScore migration

Penn National Gaming (PNG) has committed to a wholesale migration of its theScore and Barstool sportsbooks before the end of 2023, the operator has confirmed.

In the group’s recent Q4 2021 results, PNG CEO Jay Snowden confirmed the Toronto-headquartered theScore brand would transition to Penn’s own proprietary technology stack with effect in Q3 2022.

The migration, envisioned as part of PNG’s $2bn acquisition of the brand in September 2021, will see theScore brand move away from the Kambi sportsbook platform, a move which Kambi CEO Kristian Nylen branded as “frustrating” in October 2021.

“Following this migration, we will begin to realize the immense benefits of a wholly owned and integrated technology stack as we roll off our current third-party platforms, in addition to capital expense reductions as our technology spending rationalizes post-migration,” Snowden said in a statement.

The strategy forms part of PNG’s move towards a more “sustainable growth” led operational footprint, as well as more organic customer acquisition and targeted marketing and promotional spend.

PNG is currently on track to generate an EBITDA loss of $50m in 2022, as the firm looks to scale up its operational infrastructure and expand to other jurisdictions, something it is keen to reverse in 2023.

In the firm’s Q4 conference call, Snowden explained where some of the infrastructure improvements would be made.

“There’s going to be continued ramping and scaling of our headcount and our infrastructure as we are continuing to hire lots of engineers and product development people to work on our tech stack,” he explained.

“So there’s a lot of staff ramping that’s going into the technology investments, which is actually going very well, and we’re so pleased to have a big office in Toronto where we can recruit people and then, of course, the Penn interactive office in Philadelphia where we will do the same thing,” he added.

The strategy will also see PNG increase its 36% stake in Barstool Sportsbook to a 100% ownership stake by 2023, a move financed in part by a $750m share rights issue, announced last week.

In tandem with theScore migration, Barstool Sports will also migrate to the PNG tech stack, with PNG confirming its intention to complete this by Q3 2023.

“Longer term, our leadership position in traditional gaming, digital, and media will create material synergies and cross promotion benefits, and more importantly, provide us with numerous opportunities to be nimble in a rapidly evolving marketplace,” Snowden explained.

PNG is keen to utilise the two acquisitions in a transformation into a “major media and entertainment company”.

One area set to serve as a crucial testing ground for this media first strategy for PNG is the Ontario market, where the theScore subsidiary received a license to operate earlier this month, ahead of an April 4 launch.

Ontario is also set to benefit from the increased operational investment and recruitment drive.

Referencing Canada’s previous status as a gray market jurisdiction, Snowden highlighted the potential issues of gray market operators transitioning to regulated market status.

“I think that’ll be interesting to see how that plays out versus maybe some of the US markets, where it was more of a dynamic where maybe people were betting illegal offshore with bookies, whereas in Canada it was really gray, they [operators] were there, it wasn’t illegal or legal, just kind of gray,” Snowden told investors.

“One of the other factors that I think is encouraging versus what we’ve seen in all the US states is that there are advertising restrictions in Ontario, as it relates to igaming, and you cannot advertise promotions, or discounting to your business which we welcome.

Snowden continued: “It’s going to be a lot more about I think just educating, we’ll spend some money when we launch there, because you’re really an education mode about this move from gray market to above the board market legalized market, and you want to make sure that people know who those legal operators are going forward.”

The PNG CEO suggested that as many as 20% of people of sports betting age had downloaded theScore’s media-based app on their phones, something that has created opportunities for cross-selling once sports betting goes live and placed the firm in what Snowden called “a really strong” position.

“We’re going to be very focused on conversion of sports media to sports betting, we’re going to definitely make sure that everybody in Toronto and Greater Ontario definitely know that we’re now live and that it’s a legal market and that there are legal operators that have offerings there,” Snowden concluded.