Disney ultimately chose to move further into sports betting to engage with young consumers, CEO Bob Iger said Wednesday. And why Penn Entertainment? They had the best offer.
On Tuesday, Disney announced a $2 billion deal with casino owner Penn Entertainment to launch ESPN Bet, an online sports betting brand. Under the terms of the deal, Penn will have the rights to the ESPN brand (for betting purposes) for 10 years and an option to extend for another 10 years, if both parties agree.
Penn will pay ESPN $1.5 billion in cash over the 10-year term, as well as $500 million in warrants that will vest over the term.
On the Disney earnings call Wednesday, Iger said he believes the partnership can grow both the ESPN and Penn businesses.
“We’ve been in discussions with a number of entities over a fairly long period of time. It’s something that we’ve wanted to accomplish, obviously, because we believe there’s an opportunity here to significantly grow engagement with ESPN consumers, particularly young consumers,” Iger said.
“And Penn. Why Penn? Because Penn stepped up in a very aggressive way and made an offer to us that was better than any of the competitive offers by far. And we liked the fact that Penn is going to use this as a growth engine for their business. And that we actually believe and trust in their ability to, in this partnership, grow their business nicely, while we grow ours,” he continued.
ESPN Bet is planned to launch this fall in the 16 states where Penn has sports betting licenses. This replaces Penn’s Barstool Sportsbook. As part of the deal, Penn sold Barstool back to founder Dave Portnoy, who paid just $1.
In Nov. 2022, ESPN chairman Jimmy Pitaro had hinted that the sports network was looking to move further in sports betting and had “had conversations with all the usual suspects.” He added that ESPN did not want to set odds and take money itself, but would be more interested in a partnership.
At the time, the suspected partner was DraftKings, which Disney already had a stake in. However, Disney sold its roughly 5 percent stake in Draftkings last quarter, taking a $90 million gain.
Meanwhile, Disney CEO Bob Iger has said the company is holding discussions with “potential strategic partners” for ESPN to help the cable network move to a direct-to-consumer model. Pitaro later confirmed this, saying that ESPN was interested in 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 said on the earnings call Thursday.
In terms of partnerships, Iger said the company is looking “expansively” and is “extremely encouraged” by the interest so far. And that the partners may be in either content, or distribution and marketing support, or both.