In his capacity as a Columnist for California Sports Lawyer®, Founder Jeremy Evans has written a column about PENN Entertainment's $3.5 billion dollar investment in ESPN to launch ESPN Bet, a sports betting application by Thanksgiving 2023.
You can read the full column below.
It is a business marriage that seems perfect. A match made in Heaven. ESPN has the distribution, on-air talent, and financial resources of parent company Disney to combine with the sports betting prowess, data, and insight of PENN Entertainment (i.e., former owner of Barstool Sports, which was sold back to Dave Portnoy in exchange for profits down the road). The sports betting app will be branded as ESPN Bet.
It is common knowledge that ESPN was seeking financial investment and even looked to sports franchises and streamers like Amazon for investment for a stake in the company. Since Bob Iger returned as the CEO of Disney in November 2022, he has been on a mission to find ways to cut costs and grow business and revenue. One thought was that ESPN and ABC would be sold off to the highest bidder(s). That opportunity did not materialize, at least in public. The deal with PENN is an excellent partnership for Iger and Disney and should be applauded.
In total, ESPN will receive $3.5 billion dollars from PENN as an investment in the sports betting app, for the marketing budget, and to support the joint venture. PENN, once through Barstool Sports, has a cult following that is beloved by many. With Barstool not a part of the deal with ESPN, some of that engagement will be lost. However, to combine PENN’s knowledge and experience with sports betting with an established blue blood like ESPN in sports television, radio, film, and entertainment is a brilliant move that may save ESPN from the public’s move to streaming content on other platforms not named ESPN. The ESPN Bet app will be launched by Thanksgiving 2023 during a popular time of the sports calendar with the National Basketball Association, National Football League, National Hockey League, Premier League, and other national and international sports leagues in play. PENN will seemingly benefit tremendously from the deal because it will now have access to ESPN's customers.
An ESPN Bet app will need to take lessons learned from the FOX Bet app that was recently shutdown permanently on July 31, 2023. It is of note that FOX Bet’s sports betting licenses were acquired by Flutter Entertainment, the parent of FanDuel. FOX Bet was not positioned correctly to succeed, for one, because it was in transition having sold all of its entertainment assets to Disney. FOX also launched the betting product without a strategic partner like PENN, which ESPN is doing with the launch of ESPN Bet. The ESPN-PENN deal is better served as a joint venture between two companies who need each other to grow (or survive in ESPN’s case). Again, ESPN has the name brand, distribution, and talent, while PENN has the sports betting experience and engagement. The two together should do well.
Iger’s business strategy through his C-suite deputies at ESPN seems to be get younger, more vibrant, and interesting. The hire of Pat McAfee follows in this thinking to bring younger, vibrant, and interesting, and may we say sometimes controversial-funny talent to ESPN. Amazon is also taking a page in the Iger sports business strategy by hiring popular former ESPN talent to promote its sports streaming, writing, and podcasts.
With the college sports conference realignment, there will be increased betting opportunities for leading games between the best college football and basketball programs. The ESPN-PENN deal also raises concerns about how ESPN will work with college programs when it has a major investment in a sports betting application, which increases the chance for the appearance of impropriety and college athletics. Will ESPN continue to pursue live sports rights, or will its on-air talent and programming shift to sports betting? Maybe both insofar as it is conceivable.
About Jeremy M. Evans:
Jeremy M. Evans is the Chief Entrepreneur Officer, Founder & Managing Attorney at California Sports Lawyer®, representing entertainment, media, and sports clients in contractual, intellectual property, and dealmaking matters. Evans is an award-winning attorney and industry leader based in Los Angeles and Newport Beach, California. He can be reached at Jeremy@CSLlegal.com. www.CSLlegal.com.
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