ESPN Enters Sports Gambling with Casino Company for $2 Billion

ESPN Bet is operated by Penn Entertainment, which announced the sale of the platform's previous brand, Barstool Sports, to its founders.

A view of the ESPN studios from behind the host's desk.

Under the 10-year deal, Penn Entertainment will pay ESPN $1.5 billion in cash and a $500 million option to purchase stock.

ESPN announced on August 7 that it has signed a 10-year deal with casino company Penn Entertainment to create an online sports betting brand called ESPN Bet.

Highly recommended Reading: Penn will operate the online sportsbook and pay ESPN $1.5 billion in cash for use of the ESPN name, marketing, "access to ESPN talent," and other promotional tools, a news release said. Penn will also give ESPN an option to purchase $500 million in Penn stock, the news release said.

ESPN Chairman Jimmy Pitaro said in the news release that he believes the combination of ESPN's strong brand and Penn's technology and sportsbook operations experience provides a "great opportunity to serve a growing number of consumers interested in betting."

Penn CEO Jay Snowden called the acquisition "transformational" and said it will help Penn continue to evolve into "the entertainment leader in North America."

Penn and ESPN declined to comment further on the deal and said more information would be released during Penn's quarterly earnings call with onlinecasinospixel.com.

As part of the deal, Penn will sell its sports media company, Barstool Sports, to founder David Portnoy. Penn bought full control of the company from Portnoy this year after acquiring a partial stake in 2020. The Barstool Sportsbook brand was also the name of Penn's online sportsbook, which struggled to compete with rivals such as DraftKings and FanDuel; ESPN Bet will replace that brand name.

In a short Twitter video, Portnoy celebrated regaining control of Barstool, which he founded in 2003.

"For us, for Barstool, for the first time in forever, we don't have to monitor what we say, how we speak, what we do," he said. 'We're back on the pirate ship.

Portnoy said that both he and Penn underestimated "how hard it is for myself and Barstool to run a business in a regulated world." Portnoy referred to the challenges caused by gambling regulators and news stories about him by The New York Times, Business Insider, and others detailing allegations of misogynistic behavior and sexual misconduct.

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ESPN and Penn join forces in the world of sports gambling, which is exploding in popularity. Five years after the Supreme Court overturned a law that banned legalized sports gambling in most states, more than half have legalized it, and Americans have legally bet more than $220 billion on sports since 2018.

Advertising and paid sponsorships encouraging betting on sports games have permeated broadcasts, including ESPN, which has long considered the best way to participate in this bonanza and had already signed two smaller deals with Caesars Entertainment and DraftKings.

Disney-owned ESPN is synonymous with sports entertainment for many. But while the company is still profitable, costs are skyrocketing, and as it tries to adapt to the streaming era, cable cord-cutting has hurt its bottom line.ESPN fired a prominent broadcaster in June, and Disney Chief Executive Robert A. Iger, said he was considering selling a minority stake in the company. Darren Heitner, an attorney and founder of the sports law firm Heitner Legal, said the expensive partnership was risky given Penn's valuation of only about $3.8 billion. But the Barstool brand didn't seem to have the upward effect on Penn's sports betting site that he had hoped for, and it makes sense to pivot to a bigger brand like ESPN, he said.

For Pennsylvania, this is a second try," he said. ESPN's reach is much greater than Barstool's, and the brand equity built up over decades can only help Penn."

The deal allows ESPN to follow Disney's family-friendly brand and rake in big gambling-related bucks without becoming a sportsbook itself. The deal should satisfy Disney shareholders, especially given the many questions surrounding whether ESPN should remain a powerful vehicle for the overall Disney brand or be divested," Heitner said.

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