Penn Entertainment is offering a prime example of how market factors can force an abrupt change of business strategy, potentially reshaping part of the U.S. sportsbook landscape in the process.

The sports betting and casino company has paid $25 million to acquire the New York sports betting license previously held by Wynn Resorts, and will use that license to bring ESPN Bet into the industry’s largest individual U.S. market. ESPN Bet is now set to debut in New York later this year. 

In a late 2021 earnings call, Penn Entertainment CEO Jay Snowden said the high operating costs of New York, particularly a 51% tax on operators’ gross gaming revenues, would preclude any company from being profitable in the Empire State, calling the locale “a margin killer.”

“I don’t think a single operator will make money in New York,” Snowden told analysts then, when the company was still aligned with Barstool Sports. “So I’ve always struggled with that. Would you rather be in or not? I think objectively speaking, you’d rather be in than not be in. But it’s one of those states where if you’re not in, you’re not crushed by that either.”

A little more than two years later, Snowden is conveying a very different mood. This week he called the deal “an important development that will bring ESPN Bet to the largest regulated online sports wagering market in North America.”

So what changed? Most obviously, Penn Entertainment last summer struck a $2 billion deal to bring the biggest brand in sports media to legal sports betting, and that agreement carries a series of aggressive growth targets for the venture as it challenges established market leaders FanDuel and DraftKings.

Too Big to Ignore

New York, meanwhile, has solidified its status by far as the country’s top sports betting market—particularly as the larger-population states of California, Texas, and Florida have yet to fully embrace legalization—and ended 2023 with $19.1 billion in total handle, an 18% increase over ’22, and $1.7 billion in gross gaming revenue. That handle is also nearly 60% larger than the No. 2 state, New Jersey. And even with the potential of smaller operating margins and the current market dominance of FanDuel and DraftKings, New York is simply too large a force in sports betting to ignore.

“Operating in the New York market is key as we grow ESPN Bet across the U.S.,” Snowden said.

The future of the College Football Playoff continues to inch toward gaining clarity.

ESPN’s reported $7.8 billion extension for the CFP’s full package of media rights through 2032 is contingent on CFP leaders approving a new format for the expanded 12-team field, which has been in limbo since last summer’s realignment moves. But now, ESPN (perhaps not so coincidentally) is reporting that the CFP board of managers is set to vote on a new format next week, on Feb. 20. The expectation is that a 5+7 model (five conference champions plus seven at-large bids) will be approved, therefore greenlighting the new media rights deal.

Meanwhile the two remaining members of the Pac-12—the conference most responsible for throwing the CFP into chaos—are crystallizing their future, too. 

Oregon State and Washington State announced a formal measure to move on from Pac-12 commissioner George Kliavkoff, releasing a statement that they had “given the departing 10 schools notice of a proposed leadership transition with an invitation to provide comment” and that they “expect to provide more information following a decision in the coming days.” 

The move isn’t a surprise, given the turmoil surrounding the Pac-12, and Oregon State and Washington State’s plans to partner with the Mountain West Conference and West Coast Conference over the next two seasons. Kliavkoff’s contract was believed to have at least two years remaining, according to the San Jose Mercury News, with an expected annual salary of approximately $3.5 million. It is unclear whether a buyout was reached or Kliavkoff will receive his full remaining salary.

Basketball Changes, Too?

As March Madness approaches, college sports leaders are also thinking about making the men’s NCAA basketball tournament bigger.

Over the last three weeks, at two separate meetings, high-ranking college leaders took the initial step in exploring significant change to the NCAA men’s basketball tournament and the College Football Playoff. Last month, commissioners of the ACC, Big Ten, Big 12, and SEC spoke with NCAA president Charlie Baker about exploring NCAA tournament expansion, according to Yahoo Sports. Any change would require additional work with CBS Sports and TNT Sports, which together are paying $700 million annually for the media rights to March Madness through 2032.