Disney made the strategic decision to venture further into the world of sports betting in order to engage with young consumers, according to CEO Bob Iger. The choice to partner with Penn Entertainment was driven by their exceptional offer and the potential for mutual growth in both companies.
In a $2 billion deal announced on Tuesday, Disney revealed its collaboration with casino owner Penn Entertainment to launch ESPN Bet, an online sports betting brand. As part of the agreement, Penn will hold the rights to the ESPN brand for betting purposes for a decade, with the option to extend for another 10 years if both parties agree.
Over the 10-year term, Penn will pay ESPN $1.5 billion in cash, as well as $500 million in warrants that will vest throughout the period. Iger expressed his belief that the partnership has the potential to expand both ESPN and Penn’s businesses.
Having engaged in discussions with various entities for a considerable period of time, Iger emphasized Disney’s intent to enhance engagement with ESPN consumers, particularly the younger demographic. Penn’s aggressive offer surpassed the competition, leading to Disney’s decision to partner with them. Disney also appreciated Penn’s intention to utilize this partnership as a growth engine for their business, inspiring trust in their ability to achieve growth alongside Disney.
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ESPN Bet is set to launch in the fall, initially operating in the 16 states where Penn possesses sports betting licenses. This platform will replace Penn’s Barstool Sportsbook, which was sold back to its founder, Dave Portnoy, for just $1 as part of the deal.
ESPN Chairman Jimmy Pitaro had previously hinted at the network’s interest in expanding further into sports betting, emphasizing a preference for partnerships rather than taking money itself. Discussions had already taken place with prospective partners, including DraftKings, in which Disney held a stake. However, Disney sold its stake in DraftKings last quarter, generating a $90 million gain.
Meanwhile, Iger has revealed that Disney is in talks with potential strategic partners for ESPN as the company aims to transition the cable network to a direct-to-consumer model. Pitaro has confirmed this direction, highlighting the search for partners who can make the flagship product more compelling.
“Our DTC ambitions also extend to our sports business. Taking our ESPN flagship channels direct to consumer is not a matter of if, but when. And the team is hard at work, looking at all components of this decision, including pricing and timing,” Iger stated during an earnings call.
When it comes to partnerships, Disney is approaching the search expansively and has been encouraged by the level of interest received thus far. These partnerships may involve content, distribution, marketing support, or a combination of these elements.
Overall, Disney’s move into sports betting through its partnership with Penn Entertainment demonstrates the company’s commitment to engaging with younger consumers and exploring new avenues for growth. As the launch of ESPN Bet approaches, both Disney and Penn are poised to capitalize on the opportunities that the sports betting market presents.
