ESPN enters sports betting in a deal complicated by Disney’s desire to maintain its family-friendly image.

ESPN enters sports betting in a deal complicated by Disney's desire to maintain its family-friendly image.

ESPN and Penn National Gaming Strike Deal

Penn National Gaming has announced a groundbreaking deal with ESPN that will see the popular sports betting company rebrand its Barstool sportsbook with the ESPN Bet name in the United States. Under the terms of the agreement, Penn will have exclusive rights to use the ESPN Bet name for ten years in the US market, while continuing to operate as theScore Bet in Canada. The news sent Penn shares soaring as much as 35% in after-market trading, while rival sports-betting operator DraftKings Inc. saw a dip of up to 10%. Disney shares, however, remained largely unchanged.

The deal also includes the sale of all of Penn National Gaming’s Barstool Sports Inc. subsidiary to David Portnoy, the founder of the popular sports and pop culture media company. In exchange for this acquisition, Penn will receive a non-compete agreement from Portnoy, as well as other agreements that grant Penn the right to receive half of the proceeds from any future sale of Barstool.

In addition to the rebranding and sale, Penn National Gaming will make cash payments totaling $1.5 billion over the ten-year term of the deal, and will grant ESPN $500 million of warrants to purchase Penn shares. ESPN, on the other hand, will have the right to designate a non-voting board observer at Penn. The potential benefits of this agreement are significant, as Penn estimates that it could generate between $500 million and $1 billion in annual earnings before interest, taxes, depreciation, and amortization.

This partnership marks an important move for ESPN, which has already been dipping its toes into the world of sports gambling through betting-related shows and marketing deals. However, this deal allows ESPN to step further into the sports betting arena without taking actual bets. In 2019, Disney, ESPN’s parent company, acquired a stake in DraftKings as part of its purchase of Fox’s entertainment assets.

The decision to partner with Penn National Gaming and rebrand the Barstool sportsbook indicates ESPN’s efforts to generate new sources of revenue. With the increasing number of customers canceling traditional cable-TV service, ESPN recognizes the need to adapt and capitalize on the growing interest in sports betting. However, the company must be cautious not to compromise its family-friendly image, which is highly valued by Disney.

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The affiliation with Barstool has not been without its challenges. While the acquisition of Barstool helped Penn National Gaming reach a younger audience and strengthen its presence in the media and gambling industry, it also attracted unwanted attention. Last year, sexual misconduct claims against Portnoy led to regulatory investigations into Penn’s operations in some states. Earlier this year, Barstool faced a $250,000 fine in Ohio for breaking rules on advertising near a college campus and targeting customers under 21.

David Portnoy acknowledged the difficulties faced by Barstool in a video posted on social media, stating that they had underestimated the challenges of operating in a regulated environment. He also emphasized that they had no plans to sell Barstool sports again and expressed his excitement about the new partnership, saying, “For the first time in forever, we don’t need to watch what we say, how we talk, what we do. It’s back to the pirate ship.”

The collaboration between ESPN and Penn National Gaming will undoubtedly shake up the sports betting market in the US. With ESPN’s wide reach in media and Penn’s experience in the gambling industry, this partnership has the potential to create a powerful and innovative player in the market. As sports betting continues to grow and evolve, this deal could be a game-changer for both companies and pave the way for further developments in the industry.