10 August 2023

ESPN enters sports betting in the US

Disney enters the US sports betting industry with a US$2 billion partnership between cable broadcaster ESPN and casino and online gambling company Penn Entertainment. The strategic move marks a significant shift for Penn Entertainment as it seeks to establish itself in the highly competitive US sports gaming market.

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In the next few months, Penn Entertainment plans to rebrand its existing sportsbook to ESPN BET in the 16 states where it holds licenses. This rebranding will include the creation of a mobile app, website, and the establishment of mutually agreed upon points of sale. Penn has committed to pay ESPN $1.5 billion in cash over 10 years and grant ESPN warrants (securities representing the right to buy or sell a predetermined amount of the underlying asset at a predetermined exercise price and on or before a fixed date) worth $500 million to purchase approximately 31.8 million shares of Penn common stock. Penn boasts a portfolio of 43 casinos in 20 states and recorded total revenue of $6.4 billion in the prior year, of which $663 million was attributable to its online casinos and sports betting operations.

It was also announced that Penn Entertainment has divested its ownership stake in Barstool Sports and transferred it back to its founder David Portnoy. Notably, this transaction does not appear to involve any initial cash payment. However, Portnoy has committed to specific non-compete agreements and agreed to donate 50% of any future proceeds from the sale or monetization to Penn. Penn's original acquisition of Barstool was accomplished through two transactions totaling $550 million.

Sports betting in the United States has seen significant growth over the past five years, generating $7.5 billion last year. This phenomenon has led to the legalization of sports betting in 38 states as well as the District of Columbia. Despite these developments, sports betting companies still face the dominance of FanDuel and DraftKings, which together control approximately 70% of the market share.