ESPN Bet sets its sights on DraftKings and FanDuel

The new ESPN-branded sports betting service is launching today, but the self-proclaimed "worldwide leader in sports" has a long way to go to become a worldwide leader in gambling.

Why it matters: Five years after the Supreme Court allowed states to legalize sports betting, Americans are expected to wager about $130 billion on sports in 2023, according to research firm Insider Intelligence.

Driving the news: Penn Entertainment today converted its Barstool Sportsbook service into ESPN Bet after agreeing in August to pay the Disney property $1.5 billion in cash over 10 years.

• ESPN, which also got $500 million in Penn stock warrants, agreed to actively promote ESPN Bet throughout its network.

State of play: Gambling giants FanDuel and DraftKings boast a gaping lead in the sports betting business, having parlayed their early investments in fantasy sports into digital gambling empires.

• FanDuel had market share of 44% in the 12 months through August, while DraftKings had 29%, according to consultancy Eilers & Krejcik Gaming.
• FanDuel's lead narrowed to 39% in the three months through August, compared with surging DraftKings' 34%.
• Barstool was a limited player with market share of only 1.8% in that three-month period.

What they're saying: "We're launching this to be a real top player," Penn Entertainment CEO Jay Snowden told investors at a conference in September, adding that the company is "probably a year to 18 months behind" DraftKings and FanDuel.

The big question: Will ESPN's promotional prowess be enough to help its eponymous betting app climb into the upper echelon of sports gambling?

• "In our view, differentiation will be one of the factors most critical to ESPN Bet's success," Chris Krafcik, managing director of sports betting and emerging verticals for Eilers & Krejcik, tells Axios in an email.

• "As we've seen in our secret shopper app testing, all of the leading online sports betting operators are currently offering the same-ish product and experience."

💭 Nathan's thought bubble: To lure bettors away from its competitors, ESPN Bet may have to ramp up promotional spending — but that could compromise Penn's profitability.

• Promotional activity in sports gambling had been waning after an initial period of massive spending that crippled some of the smallest players in the space.

The bottom line: ESPN Bet has a lot on its side, but name recognition alone isn't enough to guarantee success in a well established space.

Go deeper: Fox Bet flops as FanDuel and DraftKings dominate sports betting