The sports betting sector was rocked when PENN Entertainment PENN said Tuesday it's partnering with The Walt Disney Company DIS to launch an ESPN Bet-branded sportsbook in the fall.
Both companies shared details on the partnership with their quarterly reports week. Here’s a look at new details from Disney on the deal.
What Happened: Penn Entertainment announced it will enter into an exclusive U.S. online sports betting agreement with ESPN. The sports betting and casino company will license the rights to the ESPN Bet trademark for 10 years and a potential extension.
Under the terms of the deal, Penn Entertainment will rebrand its Barstool Sportsbook to ESPN Bet in the fall. Penn Entertainment also sold 100% of Barstool Sports back to its founder Dave Portnoy with certain non-compete and other clauses.
While ESPN has been rumored to be entering sports betting for a number of years, the news still shocked the sector given the partnership with Penn and the divestiture of Barstool Sports.
Penn will pay ESPN $1.5 billion over the initial 10 years and also pay Disney warrants and performance-based warrants.
“The licensing deal will offer a compelling new experience for sports fans that will enhance consumer engagement,” Disney CEO Bob Iger said Wednesday of the deal.
“We’re excited to offer this to the many fans who have long been asking for it.”
Iger also confirmed that Disney is looking for additional partnerships for ESPN that can help with “distribution, technology, marketing and content opportunities.”
While there has been market chatter about a potential spinoff or divestiture of ESPN, Iger’s comments are suggestive of Disney keeping the brand alongside partners and wishing to “retain control of ESPN.”
“We’ve received notable interest from many different entities, and we look forward to sharing more details at a later date when we are further along in this process.”
Iger was asked about the timing of the partnership with Penn Entertainment during the company’s conference call.
“We’ve been in discussion with a number of entities over a fairly long period of time. It’s something that we’ve wanted to accomplish, obviously, because we believe there’s an opportunity here to significantly grow engagement with ESPN consumers, particularly young consumers.”
While several companies were interested in partnering with Disney on ESPN Bet, Iger shared what led to Penn winning out.
“Why Penn? Because Penn stepped up in a very aggressive way and made an offer to us that was better than any of the competitive offers by far. And we like the fact that Penn is going to use this as a growth engine for their business.”
Iger said Disney trusts that both companies will grow their businesses through the partnership.
Related Link: Disney Q3 Earnings Highlights: Revenue Miss, EPS Beat, 105.7 Million Disney+ Subscribers And More
Why It’s Important: The comments from Iger come as analysts size up the Disney-Penn Entertainment partnership.
The deal could be “just a taste of what could come” for the media giant, according to Rosenblatt analyst Barton Crockett.
Crockett, who has a Buy rating and a price target of $102 on Disney, said the company’s sports betting entry could help spur growth for the House of Mouse.
“Disney’s deal to enter sports betting via a deal with Penn Entertainment, which will pay $1.5B in fees over 10 years, is interesting mainly as a way to spruce up ESPN betting capabilities, which appeals to a younger generation.”
Penn Entertainment CEO Jay Snowden shared his new comments on the deal during an appearance on “Mad Money” Wednesday.
“I think it’s become very apparent over the course of the last year, year-and-a-half, that … Dave Portnoy is the only natural owner for Barstool Sports long-term,” Snowden told Jim Cramer, responding to questions of why the acquisition of Barstool Sports did not find success.
“It was a win for Penn, as we move forward with a very exciting partnership. It was a win for ESPN because they have been really focused on finding a partner that has great products, great people and is willing to work with them on ESPN Bet.”
DIS, PENN Price Action: Disney shares are up 4.6% to $91.52 on Thursday versus a 52-week trading range of $84.08 to $126.40.
Penn shares are down 4.5% to $25.88 on Thursday versus a 52-week trading range of $22.96 to $39.35.
Read Next: Dave Portnoy Welcomes Back Full Ownership Of Barstool Sports, Calls Penn, ESPN Deal Win-Win
Photo via Shutterstock.
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