ESPN’s business model is about to change, and one part of that is a billion-dollar licensing deal for online sports betting.
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As ESPN’s future drifts in the direct-to-consumer wind, a deal with Penn Entertainment will let the sportsbook rename existing properties, like its Barstool Sportsbook, to ESPN Bet. In return, Penn is scheduled to pay ESPN $1.5 billion over the next ten years, as well as $500 million in warrants to buy shares of the operation and, potentially, the ability to appoint a board member.
In early 2022, then-Disney CEO Bob Chapek said Disney’s opportunity “extends to sports betting, gaming, and the Metaverse.” Now, Chapek is gone, the metaverse team is dismantled, and new/old CEO Bob Iger described its gambling strategy in an interview as “…we’re not actually causing the bets to be made. We’re just enabling people to link to companies that do that.” Iger is also trying to navigate to a direct-to-consumer future for ESPN and is reportedly looking for partners (including major sports leagues, maybe) as the network’s cable TV customer base continues to shrink as viewer habits move to streaming.
In practice, this is what Iger’s plan looks like, with ESPN providing promotional services, access to ESPN talent, and branding betting content on its platforms under the ESPN banner.
As part of the deal, Penn is undoing its arrangement with Barstool, the company it purchased, in steps that were completed in February, for over $500 million, and selling that company back to founder Dave Portnoy “in exchange for certain non-compete and other restrictive covenants,” as well as an agreement that Penn gets half of any deals he makes to resell or monetize Barstool.
In a video posted to social media, Portnoy confirmed that “for the first time in a decade,” he again owned 100 percent of Barstool, complimenting Penn and saying he continued to own stock in that company. According to Portnoy, “Every time we did something, it was one step forward, two steps back. We got denied licenses because of me. You name it.”
Besides the Insider reports detailing “degenerate gambler” Portnoy’s sexual misconduct allegations in 2021 (a lawsuit over the report was dismissed and then appealed before the appeal was eventually withdrawn), other issues the partnership experienced included running into trouble for stuff like a “Can’t Lose Parlay” promotion.
The potential of online gambling mixed with sports entertainment hasn’t blended nearly as smoothly as operators projected a couple of years ago. Fox Bet just shut down after Fubo TV turned off its gambling integrations last year. But soon, and for the next decade, this is how it will look for ESPN.
