ESPN Strikes $2 Billion Sports-Betting Deal With Penn Entertainment

ESPN agreed to a $2 billion deal to allow its brand to be used in Penn Entertainment’s online sportsbook, a strategic turn for both companies as they try to tap into the sports-betting sector’s growth.

Penn Entertainment, whose shares surged more than 20% after hours on news of the pact, said its Barstool Sportsbook app would be rebranded as ESPN Bet this fall as part of the 10-year agreement. In addition to $1.5 billion in cash over the term of the agreement, ESPN will receive warrants worth about $500 million to purchase shares in Penn.

The move marks a sharp pivot for Penn, which has struggled to secure market share in the competitive U.S. sports-gambling industry. The company also said it has sold its ownership of Barstool Sports to Barstool founder David Portnoy in exchange for 50% of the proceeds on any future sale of the media brand. Penn acquired Barstool through a pair of transactions valued at a combined $550 million.

Portnoy, whose company has drawn scrutiny from regulators, said that the companies underestimated how tough it would be for Barstool to operate in the regulated gambling industry.

He said he plans to never sell the company again. “For the first time in forever, we don’t have to watch what we say, how we talk, what we do,” Portnoy said in a video on X, formerly known as Twitter. “It’s back to the pirate ship.”

The ESPN Bet app will be promoted on the broadcaster’s platforms and will have access to ESPN programming and talent.

ESPN struck marketing deals in 2020 with sports-betting companies Caesars and DraftKings, including linking to the gambling sites from ESPN’s digital platforms. Caesars also provided odds for ESPN. ESPN is expected to phase out those two deals, according to a person familiar with the situation.

ESPN has been exploring ways to deepen its presence in sports betting over the past few years. The company has resisted offering its own sportsbook, mindful that Disney, its parent company, has a brand closely associated with family-friendly entertainment.

For Disney Chief Executive Robert Iger, the deal resolves a significant question for ESPN as he tries to find a strategic investor for the sports-media company. ESPN has had discussions with various pro sports leagues and explored tie-ups that could bring in capital and help with its transition to a streaming-driven business model.

Sports betting has rapidly expanded across the U.S. over the past five years, generating $7.5 billion in revenue last year. Sports wagering has been legalized in 38 states and the District of Columbia.

Betting operators have struggled to keep pace with market leaders FanDuel and DraftKings, which have controlled about 70% of the market. Barstool’s market share hovered around 2% earlier this year, according to estimates by industry consultants Eilers & Krejcik Gaming.

Penn has a long history of operating bricks-and-mortar casinos, with 43 properties in 20 states. It reported $6.4 billion in revenue last year, including $663 million from its online casino and sports-wagering business.

Portnoy founded Barstool in 2003 as a gambling newspaper in Boston, expanding into online content, podcasts and videos that target a younger audience. Penn planned to use the Barstool brand to acquire bettors from the Barstool audience, a strategy Penn said would be a lower-cost alternative to expensive marketing campaigns used by bigger competitors.

Last month, Fox said it would wind down its sports-betting app Fox Bet after it failed to grow in the crowded industry. Still, legacy casino operators continue to invest in their digital operations. Sports-merchandise company Fanatics this year launched a sports-betting business, and has agreed to buy the U.S. assets of betting firm

Write to Katherine Sayre at [email protected]