ESPN Dives into the World of Sports Betting through a Lucrative Partnership with a Renowned Casino

**ESPN Signs Exclusive Agreement with Penn Entertainment for Sports Betting**

Walt Disney’s ESPN has entered into a long-term exclusive agreement with casino operator Penn Entertainment. The agreement allows Penn to license the ESPN brand for sports betting, further strengthening the media giant’s involvement in the burgeoning online gambling industry.

**Penn’s Rights and Rebranding**

Under the agreement, Penn will have the exclusive right to use the ESPN Bet name in the United States for a period of 10 years. The company plans to rebrand its Barstool sportsbook with the ESPN name, starting in the fall. However, in Canada, Penn will continue to operate under the name theScore Bet.

**Penn Sells Barstool Sports Inc. Subsidiary**

In addition to the exclusive licensing agreement, Penn also announced the sale of its Barstool Sports Inc. subsidiary. The sale will be made to David Portnoy, the founder of Barstool Sports, in exchange for a non-compete agreement and other agreements. As part of the deal, Penn will have the right to receive half of the proceeds from any future sale of Barstool by Portnoy.

**Positive Market Reaction**

The news of the exclusive agreement between ESPN and Penn has had a significant impact on the stock market. Penn shares experienced a jump of up to 35% in after-market trading, reaching $33.45. On the other hand, rival sports-betting operator DraftKings saw a decline of up to 10% in its stock price. Disney shares remained relatively unaffected by the news.

**Financial Details of the Agreement**

As part of the agreement, Penn will make cash payments totaling $1.5 billion over the 10-year term. Additionally, ESPN will receive $500 million worth of warrants to purchase Penn shares. ESPN will also have the right to designate a non-voting board observer at Penn. The agreement can be extended for another 10 years by mutual agreement. According to Penn, this deal has the potential to generate annual earnings before interest, taxes, depreciation, and amortization (EBITDA) between $500 million and $1 billion.

**ESPN’s Existing Involvement in Sports Gambling**

While ESPN has been involved in sports gambling through betting-related shows and marketing deals, it has yet to directly engage in taking actual bets. The media company has previously entered into co-exclusive agreements with Caesars Entertainment and DraftKings, integrating links to sportsbooks on its website. Disney, the parent company of ESPN, also acquired a stake in DraftKings in 2019 as part of its acquisition of Fox’s entertainment assets.

**ESPN’s Delicate Balance**

ESPN has been attempting to strike a balance between generating new sources of revenue and maintaining its family-friendly image. As cable-TV subscriptions decline, the media company is actively seeking alternative revenue streams. At the same time, ESPN recognizes the growing interest in sports betting, particularly as more states legalize it. However, ESPN has been cautious in its approach due to concerns that deep involvement in gambling could undermine Disney’s family-friendly brand.

**Penn’s Acquisition of Barstool and its Consequences**

Penn’s acquisition of Barstool in two transactions totaling over $550 million in 2020 exemplifies the convergence of sports, media, and gambling. The casino operator launched sportsbooks under the Barstool brand to attract a younger audience. However, this affiliation also brought unwanted attention. Sexual misconduct claims against Barstool founder, David Portnoy, led to regulatory scrutiny of Penn’s business. Barstool also faced a significant fine after violating advertising rules in Ohio.

**Portnoy’s Response and Future Plans**

In a video posted on Twitter, Portnoy expressed that operating in a regulated world has proven challenging for Barstool and himself. He suggested that he has been denied state gambling licenses, potentially due to his involvement. However, Portnoy made it clear that he has no intentions of selling Barstool sports in the future, emphasizing a desire to maintain the company’s independence.

In conclusion, ESPN’s exclusive agreement with Penn Entertainment marks a significant step in the media giant’s foray into the sports betting industry. By licensing the ESPN brand, Penn aims to leverage the popularity and credibility of ESPN to expand its presence in the online gambling market. This partnership opens up new opportunities for both companies, with the potential for substantial financial gains. However, ESPN must carefully navigate the exploration of new revenue streams while preserving the wholesome image synonymous with Disney.

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