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Monday, December 11, 2023

ESPN launching sportsbook in fall: What this means for the media giant, Barstool Sports and bettors

By Nando Di Fino, Richard Deitsch and Jon Greenberg

ESPN is launching ESPN BET, a branded sportsbook for bettors in the United States, the company announced Tuesday. Here’s what you need to know:

  • ESPN is partnering with PENN Entertainment, which will rebrand its current sportsbook, effective this fall.
  • As part of the deal, PENN Entertainment sold Barstool Sports back to founder Dave Portnoy.
  • ESPN BET will be available in the 16 legalized betting states where PENN Entertainment is licensed.

What they’re saying

“Our primary focus is always to serve sports fans and we know they want both betting content and the ability to place bets with less friction from within our products,” ESPN chairman Jimmy Pitaro said in a statement. “The strategy here is simple: to give fans what they’ve been requesting and expecting from ESPN. PENN Entertainment is the perfect partner to build an unmatched user experience for sports betting with ESPN BET.”

Jay Snowden, PENN CEO and president, called the agreement “transformative.”

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

The Athletic’s instant analysis:

What this means for ESPN

This has a billion layers to slowly and carefully peel away. Will this go the way of the recently-shuttered FOX Bet?

They had a massive audience and it didn’t stick. ESPN doesn’t have the greatest history with branded products (the ESPN phone comes to mind), and there are going to be all kinds of cries about where the network’s true intentions lie when they report on something — or every time they offer odds on air and direct people to ESPN Bet (as the Senior Managing Editor of Betting here and someone who reads every comment, trust me. ESPN will get our nasty comments x 1000).

It will be very hard – even if ESPN does everything right – to avoid slings and arrows about not enticing people to bet, staying impartial, etc. – even though ESPN has been in a partnership with Caesars already. But it hasn’t been outright branded.

That all being said, this should make a lot of money for ESPN and be great for PENN, especially with Fanatics about to enter a very crowded marketplace. If they can withstand the vitriol, they have a very large audience (this is radio, TV, online, maybe even hitting some mainstream stuff — hosts of Dancing With the Stars tweeting for people to go to ESPN Bet could be a very real thing) that could stay within the universe and easily do their betting in the ESPN world.

Think of all the fantasy players who just get their advice from ESPN. Or the people who just click on Beat the Streak because it’s there.

This is a very big deal, and it’s smart of ESPN to launch ESPN Bet with an established book that is already operating. I don’t know how this will turn out but by hunch is that the volume alone makes it a success. — Di Fino

How surprising is this move by ESPN?

ESPN has been very clear for a number of years about entering the sports gambling space. The question was always at what level and in what form. In an interview with The Athletic last year, ESPN Chairman Jimmy Pitaro was clear that something was coming and it would ultimately be significant.

“The question for us is, what’s next here? Is there a next frontier?” Pitaro said. “Here’s what I will tell you: We think that this is a growth opportunity for us. We think we can potentially be doing more. I have talked a little bit about this, not a ton, but what I’ll tell you is we have done the research and it wasn’t too long ago where folks were really concerned about what us being more aggressive in this space would mean for our brands.

“The research has come back and said it’s somewhat neutral in the Disney brand. It’s not going to help. It’s not going to hurt. But on the ESPN brand, it’s not just OK, it’s important. It’s something we need to be doing. It’s something that our fans are expecting from us. So it’s not a ‘nice to have,’ it’s pretty much at this point a must-have. That means we need to be serving the sports fan with what they’re expecting and taking the friction out of the process. In terms of what that means for us and what’s the next step, I can’t tell you. I will tell you that we have opportunities to partner with different folks and be a bit more aggressive in the space. But we’re just not there yet. We are being very thoughtful here. We have to get this right.”

The answer has now come with ESPN’s massive agreement with PENN Entertainment and while this may be an immediate surprise, keep in mind the macro factors. ESPN has been hemorrhaging households in a cord-cutting and cord-never universe, Disney chairman Bob Iger recently put into the market via CNBC that the company’s linear TV assets (ABC) “may not be core” to its business, and ESPN just went through yet another round of painful layoffs.

In that universe, PENN just agreed to pay ESPN $2 billion over the initial 10-year term ($500 million of this, via the press release, are in warrants that will vest over the term “in exchange for media, marketing services, brand and other rights provided by ESPN.”

This is a massive annual cash infusion for Disney/ESPN and all the various questions that will come up — how much will talent be involved in the gambling space, will it change ESPN’s reporting on gambling issues — are surpassed by the core reason for this – money, and lots of it. — Deitsch

Many questions still remain

I have a college friend who got divorced recently and his new girlfriend is completely different than his ex-wife. A real 180. But he’s happier than ever.

With that in mind, PENN Entertainment has divorced Barstool Sports and immediately married ESPN.

PENN’s divorce agreement, er, news release, stated it sold Barstool back to Portnoy “in exchange for certain non-compete and other restrictive covenants” — and paid an enormous dowry to ESPN, $1.5 billion over 10 years, plus $500 million in stock warrants.

Barstool’s rise to the mainstream was financed by two deals: the Chernin Media Group bought 51 percent in 2016 and PENN bought in just before the pandemic in 2020, before buying the rest of Barstool in October 2022.

The idea was that Barstool’s devoted fans would use Barstool Sportsbook, and as they say, everyone would fly to the moon or whatever.

But regulatory issues abounded, the stock slumped, Barstool-related controversies (mostly stemming from Portnoy) popped up, and PENN, which already trails FanDuel and DraftKings and will soon have to compete with Fanatics, decided to level up by partnering with ESPN. As popular as Barstool’s brand is with its fans, it also has significant detractors. ESPN, despite its issues, is a much safer partner.

So get ready for ESPN Bet and an influx of gambling advertising on ESPN properties.

Here are some questions I have:

Will ESPN invest back into radio and podcasts as a vehicle for gambling advertising? ESPN has been backing out of the sports radio game, cutting their big national shows and selling or leasing their O&O stations to partner Good Karma Brands.

Who will be the faces of ESPN Bet? They’re going to have to invest in gambling entertainment on a more meaningful level. And they really should silo their newsbreakers away from this operation. (That won’t be easy.)

Which sportsbook company will Barstool’s gambling-focused personalities partner with in the future? They have a dedicated audience of gamblers, if not one as large as ESPN. Their most popular employee is a gambling, uh, aficionado, Dan “Barstool Big Cat” Katz.

He led the recent content exodus from New York to Chicago and Tuesday, made his regular appearance on ESPN 1000 (now a GKB station) and revealed that they have non-compete clauses, though he didn’t specify for how long. One thing I respect about Katz is he doesn’t pretend to be a good gambler, as so many touts do. He makes it fun. It was his “Can’t Lose Parlay” (an obvious joke) that Massachusetts regulators investigated.

How annoying will ESPN be with this gambling stuff? I’m more than comfortable with the idea and practice of sports gambling. What I hate is the flood of advertising and the phoniness of some of the content, especially before, during and after games. Will gambling turn off what remains of ESPN’s dedicated audience? It’s going to be messy, that’s for sure, but it should be good business for everyone involved. — Greenberg

(Photo: Kevin Abele / Icon Sportswire via Getty Images)

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