ESPN, Penn Entertainment strike $2B deal to rebrand sportsbooks as ESPN Bet

ESPN announced Tuesday that the sports media giant will partner with gambling operator Penn Entertainment to launch a nationwide string of ESPN-branded sportsbooks.

Penn’s online app is available in 16 states, including Indiana, and the company owns casinos in 20 states that will relaunch as ESPN Bet this fall. It oversees operations at Hollywood Casino in Lawrenceburg.

The deal, according to the announcement by Penn, will pay ESPN $1.5 billion over 10 years with an additional $500 million in stock options.

Since the Supreme Court overturned a law that restricted most sports gambling to Nevada five years ago, ESPN, with its millions of linear TV and streaming viewers, digital reach and name recognition, has had the potential to reshape the legal betting landscape. Until Tuesday, it had stuck mostly to advertising deals with gambling companies such as DraftKings and FanDuel. Tuesday’s announcement shows the company’s complete embrace of the gaming industry and the broadening of its own business at a critical moment.

The cash infusion from Penn comes as ESPN confronts a deteriorating cable business that, while still lucrative, has lost some 30 million homes over the last decade. ESPN’s parent company, Disney, has lost billions of dollars on streaming, while the costs for top sports rights continue to rise. The $1.5 billion payment from Penn to ESPN is still a few hundred million dollars less than a year of rights fees the network pays the NFL.

“ESPN now has another revenue stream,” said Adam Kaplan, COO of SportsGrid, a dedicated TV network offering 24/7 coverage of sports betting. “Penn has a bolstered market cap and a new strategy that on paper looks more compelling. It will be interesting to see how and if it affects the other top betting companies’ media strategies.”

In a rush to corner the nascent market, betting companies have sought partnerships with the largest sports media companies and personalities in recent years, as one of their key strategies for customer acquisition. DraftKings has a partnership with “The Dan Le Batard show”; FanDuel launched its own TV network. The Penn-ESPN partnership will make the promotion of ESPN Bet a ubiquitous presence on all of ESPN’s platforms, though a company spokesman said ESPN will still take ads from other gambling operators.

As part of the deal with ESPN, Penn announced it would divest from Barstool Sports, a divisive sports media company founded by Dave Portnoy. Penn first bought a stake in Barstool in 2020 that valued the company at $450 million. Penn acquired the rest of the company earlier this year. But the Barstool-branded sportsbook struggled to gain traction in the gambling market and was stuck mostly in the mid-single digits for market share in the states in which it operated. Penn announced Tuesday it had sold the company back to Portnoy but did not specify financial terms.

Portnoy’s conduct, particularly his harassment of women, has made regular headlines over the years, and Tuesday he said in comments he distributed on social media that Barstool had been denied operator licenses because of him. “We underestimated just how tough it is for myself and Barstool to operate in a regulated world,” Portnoy said.

He added Barstool will return to its roots as a content company.

The nascent betting market has been difficult to crack for many companies, even those that have been well funded. FanDuel and DraftKings have cornered big chunks of the market, leaving dozens of other companies to fight for smaller pieces or downsize their investments.

“With Barstool, Penn had a known ceiling,” said Chris Grove, president emeritus of gaming analysis firm Eilers & Krejcik. “It wasn’t clear there was a path for generating more market share with that company. Penn’s gamble is that the ESPN brand has a broader reach and a higher ceiling.”