In a recent statement, CEO Bob Iger revealed Disney’s strategic move towards deeper involvement in sports betting to engage the younger demographic. This decision led to the selection of Penn Entertainment as the partner of choice, mainly due to their exceptional proposal.
Disney’s announcement on Tuesday outlined a significant $2 billion collaboration with casino proprietor Penn Entertainment, resulting in the creation of ESPN Bet—an online sports betting brand. As per the agreement’s terms, Penn will hold the rights to utilize the ESPN brand exclusively for betting purposes over the next decade, with an option to extend this agreement for an additional ten years, subject to mutual understanding.
Over the next ten years, Penn Entertainment will provide ESPN with a substantial cash sum of $1.5 billion, alongside $500 million in warrants that will vest during the specified term.
During the Disney earnings call on Wednesday, Bob Iger expressed his optimism regarding the partnership’s potential to foster growth for both ESPN and Penn Entertainment.
“We’ve been engaged in discussions with numerous entities spanning a considerable period. Our pursuit of this endeavor is driven by recognizing an opportunity to significantly enhance engagement with ESPN consumers, particularly the younger demographic,” Iger stated.
“As for the selection of Penn, their proactive and robust offer truly stood out among the competition. We were particularly drawn to Penn’s ambitious approach, which positions this collaboration as a catalyst for their business expansion. We have full confidence in their capacity to foster positive growth within our partnership while concurrently driving the growth of our own business,” he elaborated.
The launch of ESPN Bet is scheduled for the upcoming fall season, exclusively in the 16 states where Penn holds active sports betting licenses. This marks the replacement of Penn’s Barstool Sportsbook. Notably, part of this arrangement involves the sale of Barstool back to its founder, Dave Portnoy, for a nominal fee of just $1.
In November 2022, ESPN’s chairman, Jimmy Pitaro, hinted at the network’s intention to explore the realm of sports betting further. He confirmed that discussions had taken place with various industry players. Pitaro emphasized that ESPN focused on forging partnerships rather than independently setting odds and facilitating monetary transactions.
At that time, the presumed collaborator was DraftKings, in which Disney held a stake. However, Disney subsequently divested its approximately 5 percent stake in DraftKings in the previous quarter, resulting in a $90 million gain.
Simultaneously, Disney’s CEO, Bob Iger, conveyed ongoing conversations with potential strategic partners for ESPN, aiming to transition the cable network towards a direct-to-consumer model. Jimmy Pitaro later corroborated this, emphasizing ESPN’s interest in partners capable of enhancing the flagship product’s appeal.
“Our aspirations for direct-to-consumer expansion extend to our sports division. The direct-to-consumer transition for our flagship ESPN channels is not a matter of ‘if’ but ‘when.’ Our team is diligently evaluating all facets of this decision, encompassing pricing and timing,” Iger affirmed during the earnings call.
Regarding partnerships, Iger noted that Disney is actively exploring a wide range of options and is greatly encouraged by the current level of interest. These potential partners could play a role in content creation, distribution, marketing support, or a combination thereof.
