ESPN has made a significant move in the realm of sports betting, outmaneuvering Barstool Sports by striking a major deal with Penn Entertainment. In this partnership, the Disney-owned sports giant will venture into gaming and wagering on a large scale.
Under the agreement, Penn will pay ESPN $1.5 billion in cash over a period of ten years. Furthermore, ESPN will receive approximately $500 million worth of warrants to purchase around 31.8 million Penn common shares, which will vest gradually over the course of ten years. In return for these financial arrangements, Penn will provide media, marketing services, brand rights, and various other privileges to ESPN. Recently, Penn acquired a 36% stake in Barstool Sports and has now sold it back to its founder, Dave Portnoy. However, certain non-compete agreements apply, and Portnoy would need to relinquish up to 50% to Penn if he decides to sell or engage in another transaction involving the company.
Jimmy Pitaro, the Disney executive overseeing ESPN, expressed confidence in the partnership, stating, “We are confident that the combination of our unparalleled audience along with Penn’s operational expertise and state-of-the-art technology provides us with a tremendous opportunity to serve the ever-growing number of consumers interested in betting.”
This pact allows Disney to tap into the rising national interest in legal wagering without directly engaging in betting on its own platforms. ESPN has already been catering to gamblers through shows and related content centered around odds-making. However, the executives have always been cautious about becoming directly involved in facilitating betting activities.
Last month, Disney CEO Bob Iger revealed the company’s search for a strategic partner for its ESPN business, which is partially owned by Hearst. It should be noted that this betting deal is not the type of agreement Iger referred to.
This deal marks a new phase for Barstool Sports, known for its viral and sometimes edgy sports content. Penn’s president and CEO, Jay Snowden, stated, “The divestiture allows Barstool to return to its roots of providing unique and authentic content to its loyal audience without the restrictions associated with a publicly traded, licensed gaming company.”
Despite ESPN’s widespread popularity among sports enthusiasts, there is no guarantee that their well-known brand will gain significant traction in the gambling industry. The legal wagering market has been largely dominated by companies like FanDuel and DraftKings. Fox Corp. recently ended its Fox Bet operation with Flutter Inc., the owner of FanDuel, but managed to secure a stake in the parent company and its operations.
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