**Penn Entertainment Strikes $1.5 Billion Deal with ESPN for Sports Betting Brand Licensing**
Penn Entertainment, a prominent casino company, has made a groundbreaking deal with sports media giant ESPN to license its brand name for its sports betting operations. In exchange for a staggering $1.5 billion, Penn Entertainment will be able to use ESPN’s renowned brand for its sports betting business over the next decade. This partnership reflects the growing trend of gambling companies aligning themselves with sports media brands and marks ESPN’s first collaboration of this kind with a sports betting firm. The move also serves as a response to ESPN’s struggles amidst the decline in cable viewership. Let’s delve deeper into the details of this significant agreement.
**Penn Ends Partnership with Barstool Sports**
Penn Entertainment’s sportsbooks were previously affiliated with Barstool Sports, a sports media company that was fully acquired by Penn in February. However, with the new contract with ESPN, Penn has decided to sell Barstool back to its founder, Dave Portnoy, for a nominal fee of $1 and an additional 50% of any future sale proceeds. Portnoy welcomed this arrangement, as it allows him to regain the editorial freedom that he felt was compromised under the regulated gambling industry. He also acknowledged the need to align Barstool’s image more closely with the preferences of state gambling regulators.
**ESPN and Barstool Swap Roles**
This collaboration has led to a role reversal for ESPN and Barstool Sports. Disney-owned ESPN was initially reluctant to enter the sports betting market due to its family-friendly image. However, as ESPN faces financial pressure from cable cord-cutting in the streaming era, the brand is forced to confront declining revenue. At the same time, Barstool Sports gained popularity by incorporating sports betting lingo into its unconventional sports commentary. Yet, Barstool’s recognition among the general public pales in comparison to the prominence of ESPN.
**Disney’s Aversion to Gambling**
Disney’s aversion to gambling has delayed its entry into the sports betting industry. Nevertheless, the strength of ESPN’s brand allowed the company to bide its time and carefully assess the industry’s development before making any moves. Penn Gaming, on the other hand, purchased a 36% stake in Barstool Sports in 2020 for $163 million before acquiring the remaining portion in February for $388 million. Penn’s intention was to leverage Barstool’s brand to attract future bettors to its casinos and online gaming platforms.
**Penn’s Deal with ESPN**
Penn Entertainment’s collaboration with ESPN suggests that they may not have achieved the desired marketing boost from the Barstool partnership. Despite its initial expectations, Penn currently ranks third in the online sports betting market, trailing FanDuel with a 47% market share, and DraftKings with 32%, as reported by their latest earnings reports. The agreement with ESPN includes additional payments to Penn if it manages to capture 20% to 25% market share in online sports betting. Although ESPN will not operate the new sportsbooks, known as ESPN BET, it plans to actively promote them through various television and streaming programs.
**The Role of ESPN in Sports Gambling**
ESPN’s new venture aligns with Disney CEO Bob Iger’s vision for the network’s involvement in sports gambling. Iger believed that ESPN, with its extensive sports coverage, could cater to the interests of bettors without directly engaging in the gambling business. ESPN BET will consist of a mobile app, website, mobile website, and brick-and-mortar retail locations. By pursuing this licensing deal, ESPN managed to secure a lucrative partnership without assuming any direct gambling-related risks.
**Thriving Sports Betting Industry in the U.S.**
Since the legalization of sports betting in the United States in 2018, the industry has experienced remarkable growth. In 2022, the sports betting sector generated $7.5 billion in revenue, marking a substantial 72.7% increase from the previous year, according to the American Gaming Association. Currently, 34 states and Washington D.C. have legalized sports betting, while an additional four states have approved legislation awaiting implementation. As the market expands, both domestic and international industry leaders, such as FanDuel and DraftKings, along with renowned casinos like MGM and Caesars, are vying for market share. The recent acquisition of the Australian sportsbook Pointsbet by Michael Rubin’s sports memorabilia giant Fanatics further illustrates the competitive nature of this thriving sector.
**The Measure of Success for ESPN**
In the face of a crowded market, ESPN’s success will ultimately hinge on the financial gains it realizes from this collaboration. With its substantial stake in the sports media industry, ESPN is poised to benefit greatly from the licensing deal without assuming significant risks. Ultimately, as long as the checks clear, ESPN’s partnership with Penn Entertainment has the potential to elevate both brands and drive further growth in the sports betting industry.