ESPN, PENN Join Forces; Barstool Sports Released
Penn Entertainment and ESPN are teaming up, reaching a $2 billion deal in August. The 10-year agreement gives Penn exclusive rights to the ESPN brand for online sports betting in the U.S. As part of the deal, Penn’s Barstool Sportsbook will become ESPN Bet beginning this fall.
“This transformative, exclusive agreement with ESPN marks another major milestone in Penn’s evolution from a pure-play U.S. regional gaming operator to a North American entertainment leader,” Penn CEO and President Jay Snowden said. “ESPN Bet will be deeply integrated with ESPN’s broad editorial, content, digital and linear product, and sports programming ecosystem. ESPN Bet will also benefit from Penn’s operational experience, extensive market access and proprietary technology platform, which successfully debuted in the U.S. this July.”
ESPN Bet will also feature ongoing collaboration with and access to ESPN talent. Under terms of the agreement, Penn will make $1.5 billion in cash payments to ESPN over the initial 10-year term. ESPN also receives warrants to purchase 31.8 million shares of common stock. Depending on ESPN Bet performance thresholds, ESPN could receive bonus warrants toward an additional 6.4 million shares, all worth an additional $500 million.
Another key part of the deal sees Penn sell Barstool Sports back to founder Dave Portnoy. Penn acquired a minority stake in Barstool in 2020 and purchased the remainder earlier this year for $606 million. Some in the industry see the ESPN move as a last-ditch effort to harness sports betting market share. Some analysts argue that ESPN in particular may have missed the boat as the industry begins to cool a bit.
“Betting operators have struggled to keep pace with market leaders FanDuel and DraftKings, which have controlled about 70% of the market,” the Wall Street Journal reports.
Barstool apparently accounted for only around 2% of the market, according to reports. Simply linking Penn to ESPN may not be the solution to gaining market share. That brand, owned by Disney, has dealt with challenges of its own in recent years. Cord cutting has reduced ESPN’s coverage significantly over the last decade.
That means major reductions in carriage deal payments per subscriber for ESPN. The network has gone from 100 million household subscribers in 2011 to 74 million today, according to Forbes. The ESPN+ streaming service hasn’t produced enough subscribers to offset those losses. Disney lost $659 million on streaming in the first quarter and $1.1 billion in the fourth quarter of 2022.
