ESPN said it made a deal with Penn Entertainment under which Penn sportsbooks will be rebranded as ESPN Bet, effective this fall.
Penn Entertainment operates sports books in 16 legal-gambling states where it has licenses. The sportsbooks had been operating under the Barstool Sports brand.
Penn is paying $1.5 billion in cash over 10 years. ESPN also receives $500 in warrants that will convert to Penn stock. There are options to receive bonus warrants depending on the performance of ESPN Bet.
ESPN Bet will become ESPN’s exclusive sports book and Penn Entertainment will receive odds attribution and promotional services from ESPN, including product and content integrations and access to ESPN talent.
Financial terms were not disclosed.
ESPN, controlled by The Walt Disney Co., has seen its profits squeezed as cord-cutting erodes its subscribers, its distribution revenue and its advertising reach.
Last month, Disney CEO Bob Iger said the company might be willing to sell a stake in ESPN to a partner. Disney and ESPN have reportedly been involved in talks with various sports leagues about partnerships.
"Big picture, we will see if this is the first step for Disney to reposition ESPN through new partnerships and even a potential new strategic equity partner that might help ESPN with distribution and content as well as capital to de-risk the asset for the company," said Robert Fishman, analyst with MoffettNathanson Research.
ESPN already had a non-exclusive deal with DraftKings. Disney owns a less than 5% stake in DraftKings. The deal with Penn raises a question about whether or not Disney will hold onto its DraftKings stake, Fishman noted.
“Our primary focus is always to serve sports fans and we know they want both betting content and the ability to place bets with less friction from within our products,” Jimmy Pitaro, chairman of ESPN, said. “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.”
ESPN has been ramping up its sports betting content as legalized betting has spread across the country. The ESPN Bet brand will be home to ESPN’s sports betting content across platforms.
“This agreement with ESPN and collaboration on ESPN Bet allows us to take another step forward as an industry leader,” Jay Snowden, CEO of Penn Entertainment, said. “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.”
ESPN said it would use its platforms to promote responsible gaming to sports fans. The company said it will maintain its high standard of journalistic integrity when covering the sports betting space and would implement responsible marketing policies and guidelines to protect fans.
