ESPN enters US online sports betting with Penn Entertainment9th August 2023 6:47 am GMT
Penn Entertainment has agreed a 10-year deal to use the ESPN Bet trademark for online sports betting in the United States.
The strategic alliance between Penn Entertainment and ESPN will see Penn’s Barstool Sportsbook rebranded as ESPN Bet in the US in the Fall of 2023, with Penn paying ESPN $1.5 billion in cash over the initial ten-year term of the deal for the use of the mark.
ESPN will also gain approximately $500 million of warrants to purchase approximately 31.8 million Penn common shares that will vest ratably over 10 years, in exchange for media, marketing services, brand and other rights provided by ESPN.
“This transformative, exclusive agreement with ESPN marks another major milestone in Penn’s evolution from a pure-play U.S. regional gaming operator to a North American entertainment leader,” said Jay Snowden, CEO and president of Penn Entertainment.
“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 U.S. this July.”
As a part of the transaction, Penn has sold Barstool Sportsbook back to its founder, David Portnoy, in exchange for certain non-compete and other restrictive covenants, and the right to 50 per cent of the gross proceeds received by Portnoy in any subsequent sale or monetization event of Barstool.
“In connection with the transaction, we are selling Barstool back to founder David Portnoy. Barstool has been a great partner and we are thankful to Dave Portnoy, Erika Ayers, Dan Katz and their team for helping to rapidly scale our digital footprint across 16 jurisdictions in the U.S. and introducing their audience to our retail and digital products. 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,” Snowden added.
The ESPN deal gives Penn access to 105 million+ monthly unique digital visitors to ESPN and 25 million ESPN+ subscribers, as well as an audience of more than 370 million across social platforms.
Penn will continue to operate its ScoreBet brand in Canada.
Jimmy Pitaro, chairman of ESPN, commented: “After meeting with Jay and the Penn team, it was clear that they were the right long-term strategic partner to build ESPN Bet into a leading U.S. 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.”
The transaction is expected to provide an estimated $500 million to $1.0 billion+ of annual long-term Adjusted EBITDA potential to Penn's Interactive segment.
Shares in Penn Entertainment Inc. (NASDAQ:PENN) gained almost 30 per cent on the news in after-hours trading Tuesday before pulling back to 12.96 per cent higher at $28.06 per share at the time of writing.