Disney’s ESPN Moves into US Sports Betting with $2bn Penn Entertainment Deal
ESPN, the well-recognized sports broadcaster Disney owns, has forged a weighty $2 billion deal with casino owner Penn Entertainment. The partnership aims to launch a sports betting enterprise operating under ESPN Bet. Penn Entertainment will rebrand all of its sports betting portals in the US. The portals, which are in 16 states and currently called Barstool sportsbooks, will become ESPN Bet. The significant move is barely six months after Penn’s $555 million acquisition of Barstools, a sports betting platform established by Dave Portnoy in 2003. The brand gained popularity fast for its exuberant and often controversial commentaries.
Disney and Penn’s Financial Agreements
According to the agreement, Penn Entertainment will pay ESPN $1.5 billion in cash and $500 million in stock warrants. The payment will be made for acquiring 31.8 million shares of Penn National over ten years. In return, ESPN offers the use of its brand for promotional services and access to its talented employees. The rebranding is expected to kick off this autumn!
Penn Entertainment will sell all of the common stocks in Barstool to its founder, Dave Portnoy, “in exchange for certain non-compete and other restrictive covenants.” Moreover, the deal between ESPN and Penn Entertainment was bound to happen. Disney hopes to expand its ESPN+ network, with Penn’s input being a remarkable catalyst.
ESPN Reach and Strategy
ESPN has over 105 million monthly digital visitors and 370 million fans across social media platforms. Undoubtedly, ESPN is a dominant force in the sports mediascape. Using this extensive viewership is at the core of the partnership. According to the ESPN chairperson, Jimmy Pitaro, “the goal is to create a space where sports fans can get engaging sports betting content and a seamless betting experience all within their product.”
Pitaro stated, “The strategy here is simple: to give fans what they’ve been requesting and expecting from ESPN. Penn Entertainment is the perfect partner to build an unmatched user experience for sports betting with ESPN Bet.”
A Shift from Existing Partnerships by ESPN
This elaborate move came with a loss. In 2019 when it bought 21st Century Fox, Disney acquired a five-percent of DraftKings. The media leviathan also made a deal with Caesars Entertainment, providing the right to offer betting odds for ESPN.
However, the deal with Penn Entertainment marks a change. The new venture with Penn marks a wound down of ESPN’s existing collaborations with DraftKings and Caesars Entertainment. Silencing the speculations of them becoming potential partners.
Integration and Synergy
Jay Snowden, Chief Executive of Penn Entertainment, pointed out that the integration of ESPN Bet and the resources from ESPN will be highly resourceful. He also emphasized that ESPN Bet will benefit significantly from Penn Entertainment’s expertise, propriety technology platform, and market access.
Jay Snowden states, “Together, we can utilize each other’s strengths to create the type of experience that existing and new bettors will expect from both companies, and we can’t wait to get started.”
Sports betting is at its burgeoning state in the United States. This form of online gambling was launched in 2018 after the US supreme court ruling struck down the federal ban. According to the American trade group, 34 states, including the District of California, have legalized the practice after the ban was lifted. No doubt this has made the battle for share of the market fast and fierce. According to Eilers and Krejcik Gaming, FanDuel and DraftKings, daily fantasy groups control about 70% of the market share as of July. Penn held approximately 2% with Barstool sportsbooks. However, we are curious to see how ESPN Bet will perform!
Barstool’s transition is a part of the deal between Penn and ESPN. Penn Entertainment acquired Barstools in 2020 at $550 million, but it is set to be returned to the owner, Dave Portnoy. However, the return involved specific clauses to be followed. They include non-compete and restrictive covenants.
The details of the covenants aren’t entirely clear. Also, we are still determining if the clause will impede how Dave Portnoy will run the organization. Nonetheless, Penn Entertainment will receive 50% of the gross proceeds of any succeeding sales or monetization event by Barstools.
Jay Snowden said: “Barstool has been a great partner, and we are thankful to Dave Portnoy, [CEO] Erika Ayers, [media personality] Dan Katz, and their team for helping to rapidly scale our digital footprint across 16 jurisdictions in the US and introducing their audience to our retail and digital products.” Due to the divestiture that hit Barstools, they can return to their roots. The brand can provide authentic content to its devoted fans without restrictions on a publicly traded, licensed gaming company.
The move by ESPN is due to Disney chief Bob Iger’s reversal. For years, Bob Iger had viewed sports betting as too racy for the Disney family-friendly brand. In 2019, he made it clear that he wanted to avoid Disney getting involved. However, early this year, his moves made him more lax about it.
April 2023, Bob Iger told Times Magazine, “I was probably on the more conservative side about this for a long time. But I have changed because the acceptance of sports betting has grown significantly. ”
The partnership between Penn and ESPN was born from the dependence on betting products from ESPN viewers.
“We know [sports fans] want betting content and the ability to place bets with less friction from within our products,” Jimmy Pitaro, the chair of ESPN, said.
Undoubtedly, the move to give the viewers what they want will certainly breed a highly profitable future for both parties involved in the partnership. As the US states become more liberal towards sports betting, we can expect higher turn-ups and better results.
Just a few hours after the alliance between Penn and ESPN was announced, the shares of Penn rose by nearly 10 percent to $27.20. At the same time, Disney’s share entered $88!