ESPN jumps into sports betting with $1.5 billion deal

You know the sports media giant ESPN. Now get ready for ESPN Bet, a rebranding of an existing sports betting app owned by Penn Entertainment that paid $1.5 billion for the exclusive rights to the ESPN name, plus other considerations.

The deal, announced Tuesday, could plunge Walt Disney Co.-owned ESPN into uncharted waters. Disney fiercely maintains its family-friendly image not typically associated with the world of sports gambling.

Penn will operate ESPN Bet, which ESPN has agreed to promote on online and broadcast platforms to create “maximum fan awareness” of the app. The companies said ESPN Bet will also have unspecified “access” to ESPN capabilities.

Penn’s rights to the ESPN brand will initially be valid for ten years and may be extended for another ten years by mutual agreement. In addition to the $1.5 billion licensing deal payable over ten years, Penn will give ESPN approximately $500 million worth of rights to buy the stake in Penn.

“Penn Entertainment is an excellent partner with ESPN Bet to create a unique user experience for sports betting,” ESPN President Jimmy Pitaro said in a statement.

Disney has grappled with adult entertainment in the past. Until about 15 years ago, Walt Disney World park in Orlando, Florida had a late-night security area known as Pleasure Island, a reference to the 1940 movie “Pinocchio” whose characters visit an evil haven by that name. Pleasure Island had bars, music venues, and nightclubs, as well as restaurants, shopping, and the countdown to “New Year’s Eve,” complete with fireworks every night.

As attendance dwindled, Disney closed its Pleasure Island nightclubs in 2008 and redeveloped the site as a restaurant and shopping precinct now known as The Landing in Disney Springs.

ESPN added that it will use its platform to “educate sports fans about responsible gaming” – for example, by continuing to protect the sports betting industry with “journalistic integrity”, creating an in-house “responsible gaming” committee and developing marketing guidelines to “protect fans”.

Penn also announced that it has sold Barstool Sports, a disrespectful sports media site, back to its founder, Dave Portnoy. Penn acquired a 36% stake in Barstool Sports for approximately $163 million in February 2020 and purchased the remainder of the company for approximately $388 million in February 2023. Neither Penn nor Portnoy disclosed the terms of the divestment agreement.

In a video posted on Twitter, Portnoy Spreading excitement about the site’s re-independence. The regulated gambling industry was “probably not the best place for Barstool Sports and the type of content we do,” he said.

Portnoy added that he would “never” sell the company. As part of the divestment agreement, Penn would receive 50% of the gross proceeds from any future sale or “monetization” of Barstool.