ESPN Reportedly Want $4 Billion For Gambling Partnership- Settled For $2 Billion
ESPN shocked the sports gambling industry last week when it announced it had reached a $2 billion deal with Penn Entertainment to create ESPN BET- a new online sportsbook.
The deal marked ESPN’s first real foray in the gambling sphere and produced a lot of cash to salve the network’s transition from linear cable to a streaming-first business.
Iger and Pitaro Praise PENN
When the deal was announced, ESPN chairman Jimmy Pitaro was effusive in his praise of PENN Entertainment.
“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 Jimmy Pitaro, Chairman, of ESPN. “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.”
The next day, Bob Iger also touted the PENN partnership.
“We’ve been in discussion with a number of entities for a fairly long period of time … Penn stepped up in an aggressive way and made an offer to us better than any of the competitors by far.”
PENN Wasn’t ESPN’s First Choice
As it turns out, PENN was far from ESPN’s first choice for a gambling partner.
Per a report from FrontOfficeSports.com, ESPN was initially hoping to partner with the likes of FanDuel or DrafKings when it came to their sports gambling debut.
Reportedly, the network was looking to make a 10 year deal that was worth in the vicinity of $4 billion dollars
In the end however, neither sportsbook was willing to meet ESPN’s demands, and that is when PENN entered the pictures.
ESPN Settled, PENN Went All In
PENN and ESPN eventually agreed to a 10-year $2 billion agreement, “about 50% less” than ESPN had initially been ambitiously asking for.
While ESPN will get an influx of cash, and perhaps draw a younger audience to the brand, the gamble for PENN is much larger.
In order to strike the ESPN deal, PENN had to divest itself from Barstool Sports, a company which it recently completed a $500 million purchase of.
Barstool is now back in the hands of its founder Dave Portnoy who got his company back for $1. PENN would, however, reportedly get back 50% from an additional sale of Barstool. For his part, Portnoy says he has no plans of ever selling again.
The goal for PENN, is all about market share. The PENN operated Barstool Sportsbook was only able to secure a 2% market share in the sports gambling world. Penn National hopes to take that 2% and turn it into 20% with the power of ESPN’s name recognition.
Whether the deal is advantageous for both parties remains to be seen. What is clear however, is that Disney settled for less than they initially hoped or, and PENN is now all in on ESPN.
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