On Tuesday, ESPN and Penn Entertainment, a casino firm, announced a 10-year partnership to launch ESPN Bet, ESPN’s online sports betting brand. This will propel the sports entertainment network into the lucrative realm of online gambling.
Penn said in a press statement that it would manage the online sports book and pay ESPN $1.5 billion in cash for the right to use ESPN’s brand, marketing, and “access to ESPN talent” in advertising. ESPN will be given the opportunity to purchase $500 million in Penn shares, according to the press release.
ESPN chairman Jimmy Pitaro said in a press release that the company saw a “tremendous opportunity to serve the ever-increasing number of consumers interested in betting” by combining ESPN’s strong brand with Penn’s technology and expertise operating a sports book.
Penn CEO Jay Snowden described the transaction as “transformative,” adding that it will enable Penn in becoming a “North American entertainment leader.”
Both Penn and ESPN have been tight-lipped about the deal, indicating only that further details would be shared with investors on Wednesday during Penn’s quarterly financial reporting call.
Penn is returning ownership of Barstool Sports to its original owner, David Portnoy, as part of the deal. Penn purchased Mr. Portnoy’s remaining shares in the firm this year, giving him complete control. And Penn’s online sports book, which went by the moniker Barstool Sportsbook but was failing to compete with sites like DraftKings and FanDuel, was known by that name. This logo will soon be replaced by ESPN Bet.
Mr. Portnoy, who launched Barstool in 2003, expressed his joy upon regaining control of the company in a short video posted to Twitter.
In an interview, Mr. Portnoy said that he and Penn had been wrong about “just how tough it is for myself and Barstool to operate in a regulated world.” He said that he had to overcome obstacles like gaming authorities and negative press from publications like The New York Times and Business Insider that detailed claims of sexist behaviour and sexual misbehaviour against him.
With the rise of the sports betting industry, ESPN and Penn have decided to join forces. More than half of states now allow sports betting, and since 2018, Americans have legally wagered over $220 billion on sports. This is five years after the Supreme Court struck a statute banning most states from legalising sports betting.
Sports betting advertisements and sponsored sponsorships have been commonplace in broadcasts, including those on ESPN. Already having minor arrangements with Caesars Entertainment and DraftKings, the network has been debating how best to participate in this cash bonanza for some time.
Many people’s first thought when they hear the words “sports entertainment” is ESPN, which is owned by Disney. The network is nonetheless profitable despite rising expenditures and declining income due to cord-cutting among traditional cable subscribers. Disney CEO Robert A. Iger has shown interest in selling a minority investment in ESPN after the network dismissed a number of prominent commentators in June.
Lawyer and founder of sports legal company Heitner Legal Darren Heitner said Penn took a risk by investing so much money into the partnership, which is only worth roughly $3.8 billion. Penn’s sports betting site did not benefit as much as hoped from the Barstool branding, he added; thus, switching to a more well-known brand like ESPN was the best option.
Mr. Heitner said, “It’s a second opportunity for Penn.” Penn will benefit from ESPN’s established reputation and massive audience, which have been built up over many years.
ESPN may profit greatly from gambling without straying too far from Disney’s family-friendly image by creating a sports book itself thanks to this partnership. Mr. Heitner stated that the transaction “should make Disney shareholders happy,” especially considering the fact that many have questioned whether or not ESPN remains a good vehicle for the Disney brand as a whole, or if it should be split off.