Sports center at ESPN headquarters.
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disneyESPN is launching a betting sportsbook, bringing its sports entertainment division deep into the world of betting.
US gambling company pen entertainment said it is partner with Partnering with ESPN to rebrand the sportsbook and relaunch it as ESPN Bet. This is the first time ESPN’s brand has appeared on a sports betting platform.
ESPN Bet will take over Penn’s Barstool Sportsbook and become an exclusive operator of ESPN. It will launch in 16 states where gambling is legal this fall.
ESPN has been looking for a partner in the sports betting business for some time. Last fall, former Disney CEO Bob Chapek said ESPN itself would never place bets, but would like to partner with gambling companies.
The deal will give ESPN a new revenue stream as cord cutting weighs heavily on its traditional TV business. Meanwhile, the deal would give Disney a boost in cash as it has suffered losses in its streaming division, and will likely acquire Comcast’s Hulu stake early next year.
Disney CEO Bob Iger also recently told CNBC that the company is looking for strategic partners and is willing to take some of the strain off its cable network.
the transaction is announced on Tuesdaywill give Penn exclusive rights to the ESPN Bet trademark in the United States for 10 years, which could be extended for another 10 years if the two sides reach an agreement.
As part of the deal, Penn will pay ESPN $1.5 billion in cash over 10 years. The agreement also provides ESPN with approximately $500 million of stock acquisition rights to purchase approximately 31.8 million shares of Penn common stock that will vest over the same period.
ESPN also has the option of appointing one non-voting board observer to Penn’s board or appointing board members after three years, subject to certain regulatory approvals and minimum ownership standards. .
Penn plans to sell his stake in Barstool Sports to founder David Portnoy.Pen became the sole owner of the bar stool in February when the company completed its acquisition of Barstool for $388 million.
Under the latest agreement, Penn will be entitled to 50% of the total proceeds received by Portnoy on future bar stool sales or other monetization.
Shares of Penn rose about 20% in after-hours trading on Tuesday, with Disney’s slightly higher. Disney and Penn both announce earnings on Wednesday.
Penn said in a release on Tuesday that the deal will add an estimated $500 million to $1 billion in annual long-term adjusted revenue potential in the Interactive segment.
Penn reported in February that its sports betting business was profitable in the last three months of its fiscal year, becoming the first U.S. sports betting company to achieve profitability in the same period. Businesses typically spend more on marketing and promotions during the football season, making it harder for sportsbooks to turn a profit in the third and fourth quarters.
At the time, Penn attributed its profitability to its marketing approach and cross-platform promotions from Barstool.
— CNBC’s Alex Sherman contributed to this report.
Correction: Penn Entertainment reported in February that its sports betting business turned profitable in the final three months of the fiscal year. Earlier versions listed the month incorrectly.
