When ESPN and PENN Entertainment inked a 10-year deal to launch an online sportsbook, it cemented the start of a strategic partnership to make a collective impact in the sports betting space. Since the U.S. Supreme Court granted states regulatory power over sports betting in 2018 as part of a seminal decision that rendered the Professional and Amateur Sports Protection Act unconstitutional, the eminence and extent of sportsbooks in the United States has precipitously expanded. According to the American Gaming Association, sportsbooks generated $7.5 billion in revenue last year. The practice is now legal in more than half of the United States.
ESPN BET, which officially launches today, is being operated by PENN Entertainment. It is now live in 17 states across the country. An ostensible challenge in this endeavor, however, lies in being able to captivate users who are already betting on other platforms and reaching new customers, all while trying to remain an unbiased, objective source of sports news and information. As part of this effort, ESPN has reportedly issued a sports betting policy that provides restrictions and/or limitations on its employees as appropriate. Data from PENN Entertainment emphasizes that 92% of current bettors are likely to use ESPN BET, while 65% of potential bettors are thought to be willing to participate in the service.
“As you think about it from the PENN perspective, there’s only one Worldwide Leader in Sports,” said Jay Snowden, chief executive officer and president of PENN Entertainment. “And so this was an opportunity of a century to be able to do this with ESPN.”
Snowden described meeting with ESPN Chairman Jimmy Pitaro and sharing a vision to forge ahead with the project. Prior to their conversation, Snowden had heard that ESPN was interested in the sports betting space; however, he had never heard it directly from the company.
Within the 90-minute meeting, Pitaro outlined how the sports fan has to navigate between different platforms and brands in order to receive sports coverage and place a bet on games. Streamlining the process, he surmised, was a critical venture for ESPN to engage in so it could continue to appeal to its consumers.
“It was very clear to Jimmy,” Snowden said. “This isn’t something ESPN wants to do; this is something ESPN has to do because sports fans are demanding it.”
Towards the end of the meeting, Snowden began to feel that he was able to finish Pitaro’s sentences, indicating that they were on the same page. Pitaro then conversed with Aaron LaBerge, chief technology officer at ESPN, and spent time with the PENN Interactive team. After he completed this process, he shared feedback with Snowden and gave the green light to go forward with developing the platform, which involved reaching a buyout agreement with Barstool Sports.
The deal is reportedly worth a total of $1.5 billion, and it grants PENN Entertainment media, marketing services, branding and additional rights from ESPN. As part of the contract, there is $500 million in warrants given to ESPN immediately, along with additional performance warrants throughout the term. These are pursuant to the platform attaining a market share of at least 20%, which is set at a strike price of $28.95, and has total performance incentives that are worth an estimated $159 million. Overall, PENN Entertainment believes this agreement will have a retail cross-sell upside landing between $500 million and $1 billion.
In looking for a partner, The Walt Disney Company considered a range of options and decided to trust PENN Entertainment as the operator. After all, PENN Entertainment has previous experience launching a sportsbook with both Barstool Sports and theScore in Ontario. The company has a similar vision of both platforms as ESPN BET is in its formative days on the market, which features betting exclusives, ESPN-themed promotions and same-game parlays.
“[PENN Entertainment has] done this before,” articulated Mike Morrison, ESPN vice president of sports betting and fantasy,” and I think it’s important to say that in this market – the ecosystem between the sports betting app and the media platform – the digital platform being aimed to find that high level of connectivity doesn’t exist anywhere in the market today.”
During the company’s third quarter earnings call, chief executive officer Bob Iger stated that PENN Entertainment was aggressive in its offer and made their interest clear. ESPN continues to be a profitable sector of The Walt Disney Company, with a 16% rise in domestic operating income ($987 million) and 1% bump in domestic revenue ($3.45 billion). The partnership was announced in the early weeks of the fourth quarter, and both brands have worked to ensure the platform was ready to be unveiled on Tuesday morning. It is estimated to reach 200 million fans and will implement a proprietary in-house tech stack from PENN Entertainment, along with branding and creative services from ESPN.
“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 statement when the partnership was announced. “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.”
ESPN BET is now the exclusive odds provider for ESPN and will be featured throughout the network’s programming, including within its new morning lineup featuring Get Up, First Take and The Pat McAfee Show. In addition to these integrations, the network rebranded its ESPN2 studio program with an affinity towards sports betting to ESPN BET Live, which features experts Joe Fortenbaugh, Erin Dolan and Steve Coughlin.
The revamped show made its debut on Friday from Bristol, CT and will continue to present new episodes Saturday through Wednesday each week. As part of the brand refresh post-Daily Wager, the program is adopting the ESPN BET color palette with the distinctive mint color meant to convey a welcoming, inclusive, unexpected and fun sentiment. On-air personalities, by virtue of discussion, will look to drive consumers to engage with the content and become accustomed to the vernacular, even if it means that the viewer is not going to place a wager.
“The key for those who are new to this is to remember that this is like learning a foreign language,” Fortenbaugh said. “It can be intimidating at first, but once you learn the language you can then understand the conversation. And once you understand the conversation, you can then level up and start to learn about how the market works. From there, you’re off and running.”
In order for the partnership to be a success, it is critical to create a seamless experience for consumers that renders it facile to toggle between the betting interface and the traditional ESPN platform. Morrison underscored the inherent value within storytelling in imploring consumers to foster more of an interest regarding sports betting and interacting with the content across the network’s ecosystem. ESPN BET will ultimately serve as not only an outlet for sports fans to place bets, but also an outlet through which storylines can be extrapolated, thereby granting users the ability to contextualize and become more informed.
Fortenbaugh outlined such a scenario that could take place on either ESPN BET Live or his ESPN Radio program, Carlin vs. Joe, which includes co-host Chris Carlin. When discussing if someone would rather have the Kansas City Chiefs and Cincinnati Bengals or the field in the AFC, a means to advance that conversation would pertain to displaying a proposition bet using odds from ESPN BET. If the consumers are intrigued by what they see, they may be more apt to place a bet with the sportsbook.
“The most important thing in this regard is that ESPN BET offers a lot of markets so we have more options for conversation and, thus, more options for bets we can make,” Fortenbaugh said. “In early conversations with our partners, it sounds like this won’t be an issue in the slightest. The menu is stacked.”
“You’ll begin to see a deeper lean-in editorially to betting in particular – what it means in terms of the game that’s about to happen; what it meant in terms of the game that happened earlier,” Morrison added. “You’ll see presence across a number of different areas both in pregame shows and signature shows, such as SportsCenter.”
Leading up to the brand’s launch, ESPN began airing a promotional spot with SportsCenter anchor Scott Van Pelt. Now that the platform is available within 17 states, a new spot titled “Garbage Time” has been unveiled that also features Van Pelt, along with “You Had to Be There” with SportsCenter anchor Elle Duncan. In addition, the vertical is holding the ESPN Headquarters Sweepstakes, which gives fans an opportunity for a chance to win an exclusive trip to the network’s headquarters in Bristol, CT.
The brand affinity of ESPN is part of the reason PENN Entertainment was interested in actualizing this business venture. At and around launch, Snowden knows that there will be plenty of paid and earned media for the sportsbook, which is expected to help expand interest and drive new user enrollment. Furthermore, the property will equip intellectual property assets from both Disney and ESPN that will facilitate capabilities that several other competitors do not have the ability to effectuate in the same manner.
“The things that we can do to create best-in-class experiences for people – destinations around big events, around the Super Bowl; the World Series; NBA Finals; March Madness Bracketology – the things that we can offer along with just betting on sports, but we have land-based casino destinations; Disney’s got all of these great destinations, so those are the differentiators,” Snowden said. “You think about the other major players in sports betting, and they really can’t offer an all-inclusive experience.”
Some competitors and consumers have labeled the ESPN BET launch as an event with the potential of creating a high level of disruption within the marketplace. For Snowden though, he is more focused on how to maximize the partnership with ESPN and collaborate on different facets of the product. When he visits the headquarters in Bristol, he gets the impression that ESPN does not just view this initiative as just another project; rather, it is being treated with a palpable level of importance and care.
“Jimmy has said it a bunch that we don’t really launch ESPN-branded products with partners,” Snowden explained, “and when we do anything at ESPN, we do it to be best-in-class and we share that. There’s a tremendous amount of pride on both sides.”
The sports media business continues to move at a rapid pace concomitant with technological innovation and changes in consumption trends. In bringing this idea to reality in less than a year’s time, both companies have had to make informed decisions with a sense of confidence and remain ready to adapt should circumstances dictate as such.
“You’re making decisions because you have extremely capable, thoughtful people on the team, and you can’t wait until you have 95% or 98% complete information or you just get passed by,” Snowden said. “You’ve got to be able to operate fast, pivot, and if you make mistakes, make them fast and move on to the next thing.”
While ESPN has showcased betting content in the past, it has never been involved with the creation and expansion of a new sportsbook from the ground up. Tuesday marks the start of a new way of continuing to serve the sports fan anytime, anywhere, and both ESPN and PENN Entertainment are committed to working together to grow the platform, and make an impact.
“Our ability to collaborate and work together and be aligned on a vision has been so important to this process,” Morrison said, “and [it] gives us so much optimism about what’s ahead.”
Derek Futterman is an associate editor and sports media reporter for Barrett Media. Additionally, he has worked in a broad array of roles in multimedia production – including on live game broadcasts and audiovisual platforms – and in digital content development and management. He previously interned for Paramount within Showtime Networks, wrote for the Long Island Herald and served as lead sports producer at NY2C. To get in touch, email Derek@BarrettMedia.com or find him on X @derekfutterman.
