SportsCenter at ESPN Headquarters.
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Disney‘s ESPN is launching a betting sportsbook, putting the sports entertainment unit deeper into the wagering world.
U.S. gambling company Penn Entertainment said it’s partnering with ESPN to rebrand and relaunch its sportsbook as ESPN Bet. It’s the primary time ESPN’s brand will likely be on a sports-betting platform.
ESPN Bet will take over Penn’s Barstool Sportsbook and turn into ESPN’s exclusive operation. It’ll launch this fall within the 16 legalized betting states.
ESPN had been on the lookout for a partner within the sports-betting business for sometime. Last fall, former Disney CEO Bob Chapek said that while ESPN won’t ever take bets itself, it desired to partner with a gambling company.
The deal gives ESPN one other revenue stream as cord-cutting weighs on the normal TV business. Meanwhile, the deal allows Disney to shore up money because it loses money on its streaming unit and is probably going to amass Comcast’s stake in Hulu early next 12 months.
Disney CEO Bob Iger also recently signaled on CNBC that the corporate is on the lookout for a strategic partner and is open to offloading its cable TV networks.
The deal, announced Tuesday, gives Penn the exclusive right to the ESPN Bet trademark within the U.S. for 10 years, which could also be prolonged one other 10 years if the 2 come to a mutual agreement.
As a part of the deal, Penn can pay ESPN $1.5 billion in money over the 10-year period. The agreement also grants ESPN about $500 million of warrants to purchase roughly 31.8 million Penn common shares that can vest over the identical period.
ESPN may even have the choice to designate one nonvoting board observer to Penn’s board, or after three years, designate a board member subject to certain regulatory approvals and a minimum ownership threshold.
Penn will likely be divesting its stock in Barstool Sports to founder David Portnoy. Penn became sole owner of Barstool in February when the corporate accomplished its acquisition of Barstool for $388 million.
Through the newest agreement, Penn can have the best to 50% of the gross proceeds that Portnoy receives in any future sale or other monetization of Barstool.
Penn’s stock was up roughly 20% in after-hours trading Tuesday, while Disney was barely up. Disney and Penn each report earnings on Wednesday.
Penn said in Tuesday’s release the deal will add an estimated $500 million to $1 billion in annual long-term adjusted earnings potential in its interactive segment.
In February, Penn reported that its sports-betting business turned a profit in the ultimate three months of the fiscal 12 months, the primary U.S. sports gambling company to achieve this during that period. Typically it’s harder for a sportsbook to post a profit through the third and fourth quarters because firms spend more on marketing and promotions through the football season.
On the time, Penn had attributed the profitability to its marketing approach and counting on cross-platform promotion from Barstool.
— CNBC’s Alex Sherman contributed to this report.
Correction: Penn Entertainment reported in February that its sports-betting business turned a profit in the ultimate three months of the fiscal 12 months. An earlier version misstated the month.
