Penn enters $2B agreement with ESPN, will rebrand sportsbook as ESPN Bet starting this fall

ESPN announced Tuesday it has signed a long-term exclusive agreement with Penn Entertainment, licensing its brand for sports betting. Under the terms of the agreement, Penn will have the 10-year right to use the ESPN Bet name in the US. The deal deepens the media giant's, part of Disney, ties with the gambling industry.

As per the announcement, Penn will rebrand its Barstool sportsbook with ESPN starting this fall. However, the company will continue to operate as theScore Bet in Canada. The rebranding includes the mobile app, website, and mobile website.

Penn will pay $1.5 billion in cash to ESPN over the initial ten-year term and grant ESPN approximately $500 million of warrants to purchase approximately 31.8 million PENN common shares. Additionally, ESPN will have the right to designate one, non-voting board observer at Penn.

The casino company can extend the term for another 10 years by mutual agreement. Penn said the deal could generate between $500 million and $1 billion in annual earnings before interest, taxes, depreciation, and amortization. Penn shares jumped 13% in premarket trading in New York on Wednesday.

Penn also said it’s selling all of its Barstool Sports subsidiary to David Portnoy, who founded the sports and pop culture media company, in exchange for non-compete and other agreements, reports Bloomberg.

Jimmy Pitaro

Jimmy Pitaro, Chairman of ESPN, said: "After meeting with Jay [Snowden] and the Penn team, it was clear that they were the right long-term strategic partner to build ESPN Bet into a leading U.S. sports betting platform."

"We are confident that the combination of our unparalleled audience along with Penn's operational expertise and state-of-the-art technology provides us with a tremendous opportunity to serve the ever-growing number of consumers interested in betting," he added.

Jay Snowden

For his part, Jay Snowden, Chief Executive Officer and President of Penn, commented: "Our agreement with ESPN will provide us access to the largest ecosystem in sports, with 105 million+ monthly unique digital visitors, an audience of more than 370 million across social platforms, 25 million ESPN+ subscribers, and the nation's #1 fantasy database.

"Penn's ability to leverage the leading sports media brands in both the U.S. and Canada with ESPN and theScore, combined with our newly launched sports betting app, will allow us to significantly expand our digital footprint and catapult ESPN Bet into a strong podium position in this space," he concluded.

ESPN already has ties to sports gambling, though it has steered clear of taking actual bets. It has betting-related shows and marketing deals where links to sportsbooks are integrated into ESPN’s website. Disney also acquired a stake in DraftKings as part of its acquisition of Fox’s entertainment assets in 2019.

But for the past two years, ESPN has been exploring a more expansive sports betting deal, holding talks with several major sportsbooks. Sports gambling companies have invested heavily in marketing their own brands and some were reluctant to give that up to take the ESPN name. Barstool Sportsbook, however, has captured a relatively small market share compared with the industry giants FanDuel and DraftKings.

ESPN has been trying to strike a delicate balance. It’s trying to generate new sources of revenue as customers cancel traditional cable-TV services. And it’s wanted to capitalize on the growing interest in sports betting as more states have legalized it. However, it sought to proceed cautiously because of a perception that becoming deeply involved in gambling could undermine the family-friendly image cultivated by parent company Disney.

Starting in 2020, Penn bought Barstool in two transactions totaling more than $550 million, part of the growing convergence of sports, media, and gambling. The casino operator launched sportsbooks under the Barstool brand name and said it helped the company reach a younger audience.