PNG CEO Jay Snowden on bringing tech in-house and key states beyond Illinois

Penn National Gaming (PNG) CEO Jay Snowden is the first to admit that the operator took its time in forging its media partnership with Barstool Sports. And while it was hashing out the details of the deal which saw PNG pay $163m in cash and stock to take a 36% equity stake in the media company, its competitors were storming into new states, throwing money at every possible marketing opportunity, and gaining market share.

But with the weight of the Barstool brand behind it, PNG has made swift gains in its first three live states of Pennsylvania, Michigan, and most recently Illinois. And Snowden believes the Barstool Sportsbook has the capacity to grow the market, instead of just stealing share from others.

Here, he speaks candidly with EGR North America on his plans for geographical expansion beyond Pennsylvania, Illinois, and Michigan, and why the sportsbook crash during Super Bowl has sparked a renewed interest in acquiring back-end technology.

Watch out for part two of the Q&A later this week.

EGR North America (EGR NA): You said in January you were in no rush to bring your back-end tech in-house. Despite the ongoing scramble to acquire tech platforms in the US, is this still the case?

Jay Snowden (JS): I’m probably a bit less relaxed today than I was on that earnings call because of the Super Bowl debacle where most of the [sports betting] apps went down for an hour before the game. We were down because of third-party platform issues, all the way up until half-time on the biggest betting event of the year. That just can’t happen.

I think Kambi and White Hat [Gaming] have been great partners and we know that we are their number one US client in both cases, so they give us the attention that we need. But the app went down on the biggest betting day of the year in the United States, which can’t happen.

Internally, we have talked a lot about the parts of that tech stack that might make sense for us to own long term, and which parts we plan on outsourcing for a longer period of time, maybe forever, like payment processing and geolocation services. But the closer you get to touching the customer, the wallet, the PAM, and risk management, we do think about [bringing that inhouse], especially after you go through something like we did on the Super Bowl.

Again, I’m not threatening to do anything tomorrow, but it does make us think about what we might want to do longer term around owning technology. I do think your point is a good one – it has been a bit of a mad rush around some companies that don’t even necessarily have a good brand or marketing strategy already going after tech solutions.

I’m not sure that’s the right order of events. We’ve thought this through and we were a little bit late to the game in announcing who our media partner was going to be, but I think by the time we announced it there was an appreciation for why we took the time that we did because we did our research and became educated on the entire space and met with every potential partner before making a decision.

We’re going through the same exercise on the tech side to decide if we are to go more vertical, [including investigating] who has the best technology in Europe, and who has the best techstack in the US? How vertical is it? What is outsourced? So, we’re doing our due diligence now to figure out what the right approach is for Penn as we move forward, and I’m very open minded about this, so stay tuned.

EGR NA: Are you wary there might not be much left by the time you decide what is the best route for PNG?

JS: For us, everything’s on the table. Everything that we have built out, including our own app here in the case of Barstool Sportsbook, I’m very happy with. It’s really a matter of time, resources, and prioritization, and there are some really strong technology stacks in Europe.

Some are B2B or B2C, and some do both. We’re doing our research, not just on what’s available and what has been done here in the US, but any technology that we think could be applicable here in the US as well.

I think there are still plenty of options to consider today. It’s not always just the most obvious, but there are some smaller operators that have great technology.

EGR NA: How much of your front-end has been developed in-house?

JS: We really have done everything other than the wallet. The PAM and the wallet White Hat assists us with 100%, and with Kambi it is risk management and trading services. Everything else in the app we have developed with our team of engineers that is well over 100 people now.

We initially outsourced areas like KYC and we’re just bringing it in now because we know we can do it in a way that we’re very comfortable with and we think can be more efficient.

EGR NA: Considering your recent market- access deal with Rush Street Interactive in New York, what are your expectations for the state now the budget bill has been determined?

JS: We wanted to make sure we had access to what is a significant opportunity given the population of New York, and also the relevance of our sports betting brand, Barstool Sports. New York is one of the top three states in the country for us in terms of brand equity and brand recognition.

So, we’re in this really unique position where, because of our footprint in 20 states, which is the most of any gaming company in the US, we end up with all of these excess skins and we’ve partnered with a number of our competitors – DraftKings, Fox Bet, PointsBet, BetMGM, and the- Score – in terms of brokering skin relationships, and in return for giving those companies access in a specific state, we get revenue shares.

We essentially did a skin swap where we gave RSI access on a second-skin basis to three states – Ohio, Maryland, Missouri – and in return we got access to New York. What was important to us was that we had alignment with the land-based casino operators in New York.

If you were to talk to the folks at Rush Street, they would probably say they would have preferred only one skin unless they could partner with somebody like us because they know that we’re going to be a top-three market share player.

For them it became a meaningful rev-share opportunity. But time will tell in terms of how things play out [in the state]. We wanted to make sure that if the state did allow for multiple skins we had that access.

EGR NA: In your Q4 2020 earnings report you mentioned that Illinois is going to be a big state for Barstool Sportsbook, but which states beyond New York and Illinois are you particularly bullish about?

JS: We have the luxury of operating in so many of these states that we’ve got a full list we want to launch in 2021. After Illinois, it will likely be New Jersey, Indiana, and probably Virginia or Colorado, those would be one of the next two.

We also have a number of other states that we want to launch in, including West Virginia, Iowa, Tennessee, to name just a few. And then, of course, there is active legislation right now in a number of states that we operate in like Ohio, Maine, Kansas, Missouri, Massachusetts.

We anticipate staying really busy for the next 12 to 15 months, just launching in all the states that are legal and that we are prepared, due to our geographical footprint, to have access to without having to pay anyone else a revenue share.

Penn National Gaming CEO Jay Snowden