Disney’s ESPN announced a surprising new long-term strategic alliance with PENN Entertainment.
The Barstool Sportsbook section at the Hollywood Casino Morgantown owned by Penn National Gaming Inc. a surprising new long-term strategic alliance with PENN Entertainment for online sports betting .
It’s a big bet by ESPN—both in terms of who it chose as its sportsbook partner and the length and amount of the agreement. Disney chose to launch its new ESPN Bet exclusively for a ten-year initial term, with an option to extend for ten more years upon agreement on both sides. PENN expects to rebrand its Barstool Sportsbook as ESPN Bet in 16 states, with an expected launch in the fall this year, in time for the NFL’s new season.
According to a report this morning from research firm MoffettNathanson, PENN agreed to pay ESPN $1.5 billion over the first ten-year period plus grant the company roughly $500 million of warrants to purchase 31.8 million PENN common shares with vesting over the length of the deal. ESPN will provide the exclusive rights to ESPN Bet along with media, marketing services and other rights. The report states, “If ESPN Bet exceeds 20% OSB market share thresholds, additional performance grants up to 6.
The PENN/ESPN partnership also raises the question of whether Disney will hold on to its stake of less than 5% in DraftKings or look to unwind its position. Big picture, this is likely the first step for Disney to reposition ESPN through new partnerships and even a potential new strategic equity partner that might help ESPN with distribution and content as well as capital to de-risk the asset for the company.
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