Penn Entertainment is teaming up with Disney's ESPN to give its sportsbook a makeover and a fresh start with its new name: ESPN Bet. ESPN has looked into deepening its engagement with the sports-betting world in recent times, and Penn is using the Barstool Sportsbook as the foundation for this transformation, while dropping its stock in Barstool Sports.
Disney's ESPN is taking a deeper dive into the wagering sector by launching their own sportsbook, called ESPN Bet. This will mark the first time a betting platform is under the ESPN brand. The sports entertainment unit has been looking to partner up with a gambling company for some time. They finally settled with U.S. gambling company Penn Entertainment, who will rebrand and relaunch their sportsbook. It's expected to be up and running in all sixteen states that have legalized betting this fall.
The move gives ESPN another form of revenue as they experience drops in their traditional TV business, as well as provides Disney the opportunity to bring in cash against their streaming unit's losses and eventually acquire Comcast's hold in Hulu in early 2021.
The agreement states that Penn will have the exclusive right to the ESPN Bet trademark in the U.S. over the next ten years, for which they will pay ESPN $1.5 billion; they have also been granted $500 million of warrants to buy Penn's common shares. ESPN can choose to designate a nonvoting member of the board of observers, in three years having the option to choose a voting member subject to certain regulations. Penn is ceding its stock in Barstool Sports to its founder, David Portnoy. Penn will have half of the proceeds he makes from any future sale or monetization of Barstool.
Penn disclosed this deal can potentially bring in an extra $500 million to $1 billion annually in its interactive segment. They revealed in February that their sports-betting business was profitable in the last three months of the fiscal year, making them the first U.S. company to do so for the period.
Penn's stock experienced a 20% raise in after-hours trading and Disney's was slightly up as well. Both companies will release their earnings on Wednesday. CNBC's Alex Sherman has contributed to this report.
Correction: Penn Entertainment reported in February that their sports-betting business turned a profit in the final three months of the fiscal year. An earlier version misstated the month.
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