For the past two years, one of the sports betting industry’s most intriguing questions has been which operator ESPN would partner with should it elect to launch a branded sportsbook. On Tuesday, we got the answer: PENN Entertainment, which will rebrand its Barstool Sportsbook as ESPN BET this fall in the 16 U.S. states where it is operational.
The announcement comes after ESPN reportedly held talks with Caesars and DraftKings, the latter of which was thought to be on the brink of striking a deal in October 2022. The following month, however, ESPN Chairman Jimmy Pitaro said an agreement with a sportsbook operator was “not imminent.”
Now the deal is done, with PENN emerging as the successful suitor.
“Our primary focus is always to serve sports fans and we know they want both betting content and the ability to place bets with less friction from within our products,” Pitaro said in a press release issued by ESPN on Tuesday. “The strategy here is simple: to give fans what they’ve been requesting and expecting from ESPN. PENN Entertainment is the perfect partner to build an unmatched user experience for sports betting with ESPN BET.”
“This agreement with ESPN and collaboration on ESPN BET allows us to take another step forward as an industry leader,” said PENN CEO Jay Snowden. “Together, we can utilize each other’s strengths to create the type of experience that existing and new bettors will expect from both companies, and we can’t wait to get started.”
Portnoy buys back Barstool brand
According to the press release, ESPN BET will become ESPN’s exclusive sportsbook, and PENN Entertainment will receive odds attribution, promotional services, traditional media and content integrations, and access to ESPN talent.
In a separate Tuesday release, PENN noted that it had sold 100% of its Barstool stock to founder Dave Portnoy in exchange for “certain non-compete and other restrictive covenants.” PENN also has the right to receive half of the gross proceeds received by Portnoy “in any subsequent sale or other monetization event of Barstool.”
The announcement ends the unusual relationship between PENN and Portnoy’s more controversial Barstool Sports media company, which PENN had acquired in phases starting in February 2020 at a valuation of $450 million. Snowden had repeatedly expressed support for Barstool and Portnoy as an effective way to brand and market its sportsbook for younger customers without spending the same millions on advertising as competing sportsbooks do.
Furthermore, PENN’s release disclosed that it has secured exclusive rights to the ESPN BET trademark for online sports betting in the U.S. for an initial 10-year term, which may be extended for an additional 10 years upon mutual agreement.
Among other financial terms detailed in PENN’s release was that the operator has “agreed to make $1.5 billion in cash payments to ESPN paid over the initial 10-year term and grant ESPN 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.”
PENN executives will discuss the ESPN transaction on a Wednesday morning conference call, in addition to the company’s second-quarter results.