The deal also includes ESPN Bet taking over existing Penn Entertainment’s existing U.S. betting brands, including Barstool Sportsbook.
ESPN made an enormous leap into sports betting Tuesday when it announced a partnership with Penn Entertainment to rebrand its current Penn Entertainment sportsbook offerings in 16 legalized states to ESPN Bet starting this fall. Penn will pay ESPN $1.5 billion over an initial 10-year term which could be extended an additional 10 year upon mutual agreement.
ESPN Bet will take over for DraftKings as the company’s official sportsbook, and Penn Entertainment will receive attribution for odds, promotional services, and other product and content integration across the network’s numerous platforms.
“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,” ESPN Chairman Jimmy Pitaro said in an official release. “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.”
As part of the deal, ESPN will also get the right to purchase an additional 31.8 million Penn shares for $500 million of warrants, and if market share thresholds are met, the warrants to purchase 6.4 million additional Penn Shares. The long-term strategic partnership will also include existing Penn betting brands, including Barstool Sportsbook, rebranding as ESPN Bet. Penn Entertainment will sell off 100% of Barstool Sports as part of the transaction.
On the heels of the news, the Worldwide Leader said it would continue its high standard of journalistic integrity when covering the sports betting space while developing a committee for responsible gaming to review compliance and policies across its business, including working with industry experts on best practices.
“This agreement with ESPN and collaboration on ESPN Bet allows us to take another step forward as an industry leader,” Penn Entertainment CEO Jay Snowden 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.”
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ESPN has long been rumored to directly enter the sports betting business in some way. Now, it has done so without — and specifically without partnering with American market share leaders like FanDuel, DraftKings, BetMGM, and Caesars.
All told, it’s a win for Penn Entertainment’s long-term future and an intriguing move for ESPN as Disney considers selling off the iconic cable network or bringing in a sports league as an equity partner. Penn estimates an additional potential $500 million to $1 billion annual added EBIDTA earnings as part of the deal. How getting involved in sports betting in 16 states — and likely more over time as it tries to earn approval elsewhere in the US — will impact ESPN’s own long-term future will be an increasingly intriguing subplot to monitor in the coming months.
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