After years of speculation, ESPN has officially entered the sports betting arena via Penn Entertainment – and will be looking to emulate FanDuel and DraftKings with a fantasy-first model.

Key highlights

– ESPN and Penn Entertainment combine for 10-year agreement.

– Barstool Sports sold back to Dave Portnoy but with certain non-compete clauses in place, as well as 50% of proceeds from any future sale.

– ESPN and Penn looking to emulate FanDuel and DraftKings by utilizing ESPN’s US fantasy sports database.

– A week after Flutter closed Fox Bet – and following Fanatics’ acquisition of PointsBet USA – online sports betting landscape is changing fast.

Penn Entertainment and ESPN have entered into a ‘long-term, exclusive strategic alliance’ for online sports betting.

US sports media giant ESPN has long been linked with an official entrance into the sports betting arena, having both dabbled with betting content and included betting odds in its broadcasts over the years.

Now, it has definitively made its move in partnership with operator Penn. The news comes weeks after Fanatics purchased PointsBet’s US operations, as the US online sports betting landscape starts to transform at pace.

Interestingly, Fanatics’ model will be based on utilizing its huge database of sports merchandise customers – and attempting to convert them into sports bettors.

ESPN Bet will follow a similar route, attempting to convert its US fantasy sports database into a legion of sports bettors. That is, of course, a tried and tested model proven by market leaders FanDuel and DraftKings.

Arguably, though, ESPN Bet and Penn can tap into a resource no one else can match – one of the most popular sports television channels in North America.

The inevitability of convergence

Sports betting and sports media are converging – there are no two ways about it. While Flutter has closed Fox Bet, and the likes of Fubo Sports and MaximBet did not quite master the mix of betting and media, all eyes will be on ESPN Bet – which has a far stronger foundation to work from.

There had previously been rumors of DraftKings partnering with ESPN, especially as ESPN owner Disney holds a small stake in DraftKings.

Penn, however, is the operator ESPN has chosen to move forward with – and it has doubled down on its commitment to ESPN by selling all of its Barstool Sports shares back to Founder Dave Portnoy.

A slide from the Penn - ESPN joint presentation emphasizes ESPN's fantasy database.

The terms of the deal

What was previously the online Barstool Sportsbook will now be rebranded to ESPN Bet in the ‘fall of 2023,’ with the agreement as a whole signed for an initial 10-year term.

ESPN Bet will be operated by Penn Interactive and ‘benefit from deep integration and exclusive promotional services.’

As part of the deal, Penn has agreed to make $1.5bn in cash payments to ESPN, granting it approximately $500m in warrants to purchase approximately 31.8 million Penn common shares. ESPN could receive bonus warrants upon meeting certain ‘market share performance thresholds.’

The agreement also features a new Hollywood-branded iCasino product, while Penn expects $500m-$1bn in annual long-term adjusted EBITDA potential for its interactive division – as part of the deal.

Bye-bye Barstool

In what could be described as a shrewd move, Penn has inserted certain non-compete agreements into its sale of Barstool back to Portnoy, as well as the right to receive 50% of the gross proceeds in any subsequent sale of Barstool.

In a statement, Penn President and CEO Jay Snowden thanked Portnoy, Barstool CEO Erika Ayers and media personality Dan Katz for their efforts in developing Barstool during the brand’s time with Penn.

Yet, given past controversies involving Portnoy, it was telling that Snowden added, "The divestiture allows Barstool to return to its roots of providing unique and authentic content to its loyal audience without the restrictions associated with a publicly traded, licensed gaming company."

What they said

On ESPN Bet more broadly, Snowden commented, “This transformative, exclusive agreement with ESPN marks another major milestone in Penn’s evolution from a pure-play US regional gaming operator to a North American entertainment leader.

“ESPN Bet will be deeply integrated with ESPN’s broad editorial, content, digital and linear product, and sports programming ecosystem. ESPN Bet will also benefit from Penn’s operational experience, extensive market access and proprietary technology platform, which successfully debuted in the US this July.”

Jimmy Pitaro, ESPN Chairman, added, “After meeting with Jay and the Penn team, it was clear they were the right long-term strategic partner to build ESPN Bet into a leading US 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.”

Gambling Insider’s upcoming Sports Betting Focus magazine will explore the very topic of sports betting and media convergence in its cover feature. The magazine will be available online and in print at G2E Las Vegas in October.

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