ESPN launches sportsbook in partnership with Penn Entertainment

Disney‘s
ESPN
is
launching
a
betting
sportsbook,
putting
the
sports
entertainment
unit
deeper
into
the
wagering
world.

U.S.
gambling
company


Penn
Entertainment
said
it
is

partnering
with
ESPN
to
rebrand
and
relaunch
its
sportsbook
as
ESPN
Bet.
It’s
the
first
time
ESPN’s
brand
will
be
on
a
sports-betting
platform.

ESPN
Bet
will
take
over
Penn’s
Barstool
Sportsbook
and
become
ESPN’s
exclusive
operation.
It
will
launch
this
fall
in
the
16
legalized
betting
states.

ESPN
had
been
looking
for
a
partner
in
the
sports-betting
business
for
sometime.
Last
fall,
former
Disney
CEO
Bob
Chapek

said
that
while
ESPN
will
never
take
bets
itself,
it
wanted
to
partner
with
a
gambling
company.

The
deal
gives
ESPN
another
revenue
stream
as
cord-cutting
weighs
on
the
traditional
TV
business.
Meanwhile,
the
deal
allows
Disney
to
shore
up
cash
as
it
loses
money
on
its
streaming
unit
and
is
likely
to

acquire
Comcast’s
stake
in
Hulu
early
next
year.

Disney
CEO
Bob
Iger
also
recently

signaled
on
CNBC
that
the
company
is
looking
for
a
strategic
partner
and
is
open
to
offloading
its
cable
TV
networks.

The
deal,

announced
Tuesday,
gives
Penn
the
exclusive
right
to
the
ESPN
Bet
trademark
in
the
U.S.
for
10
years,
which
may
be
extended
another
10
years
if
the
two
come
to
a
mutual
agreement.

As
part
of
the
deal,
Penn
will
pay
ESPN
$1.5
billion
in
cash
over
the
10-year
period.
The
agreement
also
grants
ESPN
about
$500
million
of
warrants
to
buy
approximately
31.8
million
Penn
common
shares
that
will
vest
over
the
same
period.

ESPN
will
also
have
the
option
to
designate
one
nonvoting
board
observer
to
Penn’s
board,
or
after
three
years,
designate
a
board
member
subject
to
certain
regulatory
approvals
and
a
minimum
ownership
threshold.

Penn
will
be
divesting
its
stock
in
Barstool
Sports
to
founder
David
Portnoy.
Penn
became
sole
owner
of
Barstool

in
February
when
the
company
completed
its
acquisition
of
Barstool
for
$388
million.

Through
the
latest
agreement,
Penn
will
have
the
right
to
50%
of
the
gross
proceeds
that
Portnoy
receives
in
any
future
sale
or
other
monetization
of
Barstool.

Penn’s
stock
was
up
roughly
20%
in
after-hours
trading
Tuesday,
while
Disney
was
slightly
up.
Disney
and
Penn
both
report
earnings
on
Wednesday.

Penn
said
in
Tuesday’s
release
the
deal
will
add
an
estimated
$500
million
to
$1
billion
in
annual
long-term
adjusted
earnings
potential
in
its
interactive
segment.

In
February,
Penn
reported
that
its
sports-betting
business

turned
a
profit
in
the
final
three
months
of
the
fiscal
year,
the
first
U.S.
sports
gambling
company
to
do
so
during
that
period.
Typically
it’s
harder
for
a
sportsbook
to
post
a
profit
during
the
third
and
fourth
quarters
because
companies
spend
more
on
marketing
and
promotions
during
the
football
season.

At
the
time,
Penn
had
attributed
the
profitability
to
its
marketing
approach
and
relying
on
cross-platform
promotion
from
Barstool.

—
CNBC’s
Alex
Sherman
contributed
to
this
report.

Correction:
Penn
Entertainment
reported
in
February
that
its
sports-betting
business
turned
a
profit
in
the
final
three
months
of
the
fiscal
year.
An
earlier
version
misstated
the
month.