I think Disney’s decision to attach the ESPN brand to an online sports betting site underscores how mainstream sports gambling has become in the US.
The strategic alliance that Penn Entertainment and ESPN announced on Tuesday makes sense for both companies, according to a former Disney executive and a gaming industry analyst, both of whom also agreed that the success of ESPN Bet ultimately hinges on the value of the ESPN brand.
Penn and ESPN have agreed to a ten-year, $1.5 billion partnership where the operator will rebrand its Barstool Sportsbook as ESPN Bet Sportsbook. While no official launch date has been announced, the rebrand is expected to happen sometime this fall.
In an exclusive, the former Disney executive suggested to US Gaming Review that any association between sports betting and ESPN would have been considered scandalous just a few short years ago.
“I think Disney’s decision to attach the ESPN brand to an online sports betting site underscores how mainstream sports gambling has become in the US,” the executive, who asked to remain anonymous, said Wednesday.
“A decade ago, this move by Disney would have been unthinkable, and it still would never have happened today if the company had any concern the ESPN brand would be damaged.”
The executive added that “with cable viewership and revenues falling, the smart play by Disney is to find new ways to maximize value from the ESPN brand, especially if they plan on spinning ESPN off or selling a stake in the network.”
Last September, the same executive said in a separate exclusive on US Gaming Review that he believed ESPN would pursue opportunities in sports betting without negatively affecting the family-friendly reputation of its parent, Disney.
How It Differs From the Fanatics-PointsBet Deal
With increased state legalization, [including possible legalization in Texas and California], this deal could give Penn potential for an outsized reach in those new states with a sports brand that matters.
Susquehanna analyst Joe Stauff said the last disruption in the US sports betting space — which occurred in June, when PointsBet shareholders agreed to sell its US assets to Fanatics for $225 million — would ultimately pale in comparison to the Penn-ESPN deal announced Tuesday.
“Penn’s path is different than Fanatics’,” Stauff said in a separate interview Wednesday. “Penn has a lot more assets to offer and sustain an online gambling offering — tech stack, market access, gambling know-how — although the value of its 'brand’ was the limiting factor. So, they replaced it [with ESPN Bet].
“Fanatics, on the other hand, has a quality brand, 'Fanatics,’ but it has nothing else. ESPN was, and is, only offering a 'brand,’ so it was a good fit for Penn.”
Stauff predicted in September that Disney would be more interested in forming a partnership with an existing sportsbook rather than trying to develop its own.
In a note to clients on Tuesday, Susquehanna said Penn’s pivot to ESPN would provide it with “a much wider customer acquisition funnel, something that Penn likely needed as the addressable online sports betting market [OSB] for sub-scale operators [like Barstool] is now only 24% of its current market size as of Q2 2023 — considering the dominance of FanDuel and DraftKings,” which the firm pegged at having about a 76% combined market share in the US.
“With increased state legalization, [including possible legalization in Texas and California], this deal could give Penn potential for an outsized reach in those new states with a sports brand that matters.”
Susquehanna said, “[there are] a lot of mechanics yet to understand, but to us, this move makes sense.” But the firm added that “all sub-scale OSB operators,” which it said included BetMGM, Caesars Sportsbook, Bet365, Rush Street Interactive (RSI), and PointsBet/Fanatics, “are likely to be negatively affected” by the partnership between Penn and ESPN.
The agreement calls for Barstool Sportsbook to be rebranded as ESPN Bet sometime this fall. Barstool is currently live in 16 states — Arizona, Colorado, Illinois, Indiana, Iowa, Louisiana, Kansas, Maryland, Massachusetts, Michigan, New Jersey, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia.
In four online casino states — Michigan, New Jersey, Pennsylvania, and West Virginia — Barstool Casino will be replaced by Hollywood Casino, which will be fully integrated with ESPN Bet.
