Disney ultimately opted to move further into sports betting to appeal to younger 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 agreement, 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 guarantees to be made over the term.
On Disney’s earnings call Wednesday, Iger said he believes the partnership can grow the businesses of ESPN and Penn.
“We have been in discussions with various entities for quite a long period of time. It’s something we’ve wanted to achieve, obviously, because we think there’s an opportunity here to significantly increase engagement with ESPN consumers, particularly young consumers,” Iger said.
“And Penn. Why penny? Because Penn stepped up very aggressively and made us an offer that was much better than any of the competition’s offers. And we like the fact that Penn will use this as a growth engine for his business. And that we really believe and are confident in his ability to, in this partnership, grow his business very well, while we grow ours,” he continued.
ESPN Bet is scheduled 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 November 2022, ESPN president Jimmy Pitaro had hinted that the sports network was looking to further advance sports betting and had “talked to all the usual suspects”. He added that ESPN did not want to set odds and receive money for itself, but would be more interested in a partnership.
At the time, the suspected partner was DraftKings, in which Disney already had a stake. However, Disney sold its roughly 5 percent stake in Draftkings last quarter, earning a $90 million profit.
Meanwhile, Disney CEO Bob Iger said the company is in talks with “potential strategic partners” about ESPN helping 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 attractive.”
“Our DTC ambitions also extend to our sports business. Bringing our flagship ESPN channels directly to the consumer is not a question of if, but when. And the team is hard at work looking at all components of this decision, including price and timing,” Iger said on the earnings call on Thursday.
In terms of partnerships, Iger said the company is looking “expansively” and is “extremely encouraged” by the interest so far. And that partners can be in content, or distribution and marketing support, or both.