Two summers ago, ESPN appeared poised to shake up the sports betting landscape when reports surfaced that the Worldwide Leader In Sports sought up to $3 billion from a commercial partner for exclusivity to its sports wagering brand.

Since then, the sports world has changed dramatically. Last year, leading sports betting stocks plunged, in line with a broad market correction, as U.S. inflation hit its highest levels in two decades. At Disney, former CEO Bob Iger returned to his old position at the request of the board following the dismissal of Bob Chapek, his hand-picked successor. Around the same time, DraftKings reportedly came close to inking a deal for ESPN’s sportsbook brand, only to see negotiations collapse at the 11th hour.

On Tuesday, ESPN resurfaced in the conversation, forging a transformative online sports betting agreement with PENN Entertainment. Under the exclusive deal, PENN’s online Barstool Sportsbook will be rebranded as ESPN BET. PENN has agreed to make $1.5 billion in cash payments to ESPN over the initial 10-year term and will grant ESPN $500 million in warrants to purchase approximately 31.8 million PENN common shares. Shares in PENN surged on news of the deal, jumping 23% in the after-hours session.

Now, the heavy lifting begins for ESPN. As the U.S. legal sports betting market trends toward consolidation, ESPN BET will attempt to shave market share from industry heavyweights FanDuel, DraftKings, and BetMGM.

“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,” said ESPN Chairman Jimmy Pitaro in a statement. “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.”

Attaining market share

Though ESPN announced that the launch will occur sometime this fall, PENN Entertainment CEO Jay Snowden provided more specificity on the company’s second-quarter earnings call on Wednesday.

The parties are targeting a November launch, likely around Thanksgiving, according to Snowden. That would place the debut at one of the busiest segments of the sports calendar and would allow ESPN BET to launch comfortably ahead of the Super Bowl, the College Football Playoff National Championship, and March Madness.

Sign Up For The Sports Handle Newsletter!

The agreement with ESPN provides PENN with access to 105 million-plus monthly unique digital visitors, an audience of more than 370 million across social platforms, and 25 million ESPN+ subscribers, according to the companies. Snowden also believes that ESPN BET will benefit from PENN’s proprietary, in-house technology stack that debuted in the U.S. last month.

While a successful partnership with ESPN will result in a massive “value creation for PENN shares,” anything short of expectations will leave the company with a capital outlay over the next decade, JMP Securities analyst Jordan Bender wrote in a research note.

Despite the high cost of capital, there are early indications that ESPN will bolster customer acquisition for PENN Entertainment. According to an online survey commissioned by Odds Assist, 54% of existing sports bettors plan to sign up for ESPN BET, while 38% are unsure. Only 8% of respondents dismissed the possibility of signing up for the app entirely. The survey run by online polling platform Pollfish on Tuesday evening received a total of 1,000 respondents from the U.S. aged 25 and over.

Other key findings from the survey:

  • Of those who said they plan to use ESPN BET, 33% said they anticipate primarily using ESPN BET and 48% predicted they will use it about the same as their other sportsbooks. Just 3% said they will only use ESPN BET, 5% predicted they will use it less than their other sportsbooks, and 11% said it depends on how competitive the odds are.
  • Due to its association with ESPN, 63% of respondents said they will trust ESPN BET more than other options, while only 4% said they will trust it less.
  • A whopping 46% of sports bettors predict that ESPN BET will become the nation’s most popular sportsbook within the next 3 years.

One provision in the agreement gives analysts pause. Following the end of the third year of the partnership, both parties have the right to terminate the agreement if ESPN BET’s online sports betting market share falls below a certain threshold. While Snowden did not disclose the exact percentage, he indicated that PENN is targeting a figure around 20% of the national market by 2027.

Several analysts pressed Snowden on whether the targets are attainable for the new sports betting venture.

“We’re not doing this deal to be 4 percent or 5 percent market-share players,” said Snowden on the earnings call. “That’s not going to be acceptable for us. That’s not going to be acceptable for ESPN.”

Among a cohort of eight select states, PENN maintains a market share for online sports betting handle in the range between 2% and 5%, according to data compiled by Sports Handle.

While FanDuel still commands a dominant market share in the U.S., its lead over DraftKings has shrunk. During the second quarter, FanDuel had a U.S. market share of 47%, Flutter announced Wednesday, down from 51% in the year-ago quarter. Last week, DraftKings noted that its online sports betting market share rose to 35% nationwide. Fueled by an expansive database comprised initially of daily fantasy sports customers, the two companies currently enjoy a stranglehold on the market.

Through the partnership with ESPN, PENN will gain access to the nation’s largest fantasy sports database, Snowden said.

Failed media deals

The transaction also comes against the backdrop of a series of unsuccessful media partnerships in the sports betting space. In June, PointsBet shareholders overwhelmingly approved Fanatics’ acquisition of the company’s U.S. assets for $225 million. The deal is viewed as a bargain relative to PointsBet’s market capitalization in 2021, when the company traded around A$13 a share.

When PointsBet signed a $500 million partnership with NBCUniversal a year earlier, most U.S. sportsbooks saw the NBC assets as a “real gem,” said Sam Swanell, managing director and group CEO of PointsBet Holding Limited, at June’s shareholder meeting. In retrospect, the NBC deal was not enough for PointsBet to “bridge the gap” for the scale it sought, according to Swanell.

Last week, Flutter and Fox Corp. announced plans to wind down FOX Bet, officially pulling the plug on an operator that failed to attain double-digit market share. If Fox Corp. rejoins an intensely competitive field, it will either need to do so on its own or find a new sportsbook partner.

Bally’s Corp., another prominent media company, also lags in market share — failing so far to deliver on Chairman Soo Kim’s vision of creating a next-generation 3.0 version of sports betting. Media companies venturing into new sports betting waters have often underestimated the powerful rip currents of the industry, according to Jeffrey Kamys, chief investment strategist for the Inherent Wealth Fund’s iBET Sports Betting & Gaming ETF. 

“Media companies don’t realize the incredibly complex technology that is involved in the sports betting industry. They often envision it as a guy in a backroom with a visor, but the technology commitments alone are more than these companies are used to dealing with,” Kamys told Sports Handle.

While other networks have failed in the past, Snowden is confident that ESPN BET will succeed in developing a robust customer base through a recognizable media brand.

“I love addressing it because there’s really no comparison to ESPN in the world,” Snowden said. “It’s apples to eggplants. People go to ESPN to consume sports content, every day, all day, scores, stats, stories. … We’re gonna be able to retain people because they love the brand.”

Upon meeting certain U.S. online sports betting market share performance thresholds, ESPN could receive bonus warrants to purchase an additional 6.4 million PENN common shares.

The stipulation makes the bonus warrants attractive, in Snowden’s estimation. If ESPN BET attains a market share of 20%-plus, it makes the warrants “much more valuable,” he explained, providing an incentive to the network to invest into the sportsbook platform.

An ESPN spin-off from Disney?

Ahead of Tuesday’s announcement, Disney disclosed last month that it may entertain offers from potential buyers for ESPN, as the company pursues an overhaul of its core operations. Disney has even held preliminary talks to find a new strategic partner for ESPN, CNBC reported.

While Disney has yet to announce whether ESPN will launch a standalone streaming service, the New York Post reported that such a launch may not occur until 2025, at the earliest. Conversely, if Disney decides to spin off ESPN, tech heavyweights such as Apple, Amazon, and Google have been mentioned as potential suitors.

The exclusive sports betting partnership with PENN will have no impact on ESPN’s involvement in finding a strategic partner, an ESPN spokesman told Sports Handle.

ESPN has experimented with a second-screen, gambling-focused broadcast in the past, most notably during its Monday Night Football season debut in 2021. At the time, Lee Fitting, senior vice president of production at ESPN, noted that sports bettors remained a “fairly niche audience” for game broadcasts. There is an appetite for further betting-focused telecasts, according to an industry source, but the league would have to be on board with it. For now, it is unclear whether ESPN will pursue a 24/7 betting network similar to FanDuel TV.

Though ESPN remains a “one-of-a-kind asset,” it has arguably lost “some of its luster” due to the high percentage of bettors who have “developed entrenched behavioral patterns” with the industry’s top sportsbooks, said Lloyd Danzig, managing partner of Sharp Alpha Advisors.   

Another immediate question about the partnership is whether ESPN’s entry into the sports betting space will come at the detriment of others who have invested hundreds of millions in growing their digital arms. Asked when ESPN’s marketing partnerships with DraftKings and Caesars Sportsbook will lapse, a source told Sports Handle there will be a “winding down period” as ESPN BET moves closer to its fall launch.

Another nascent operator, Fanatics Sportsbook, plans to expand into several new states by the heart of football season. Fanatics CEO Michael Rubin has said his sights are set on his sportsbook becoming the world’s largest within the next 10 years.

“The formal entrance of ESPN into the world of sports betting may present challenges for competitors seeking to minimize customer acquisition costs, but should provide a substantially net positive impact on the industry as a whole,” Danzig told Sports Handle.

Chris Altruda contributed to this report.

Source link

Previous post bet365 Bonus Code SHNEWS Yields $200 With First Wager on Wednesday MLB, Any Event
Next post English Premier League Preview: Can Anyone Stop Manchester City?
Social profiles