ESPN is getting into sports betting with Penn Entertainment

Penn will make cash payments totaling $1.5 billion over the 10-year term and grant ESPN $500 million of warrants to purchase Penn shares. ESPN will have the right to designate one, non-voting board observer at Penn. The casino company can extend the term for another 10 years by mutual agreement. Penn said the deal could generate between $500 million and $1 billion in annual earnings before interest, taxes, depreciation and amortization.

ESPN already has ties to sports gambling, though it has steered clear of taking actual bets. It has betting-related shows and marketing deals where links to sportsbooks are integrated into ESPN’s website. Disney also acquired a stake in DraftKings as part of its acquisition of Fox’s entertainment assets in 2019.

But for the past two years, ESPN has been exploring a more expansive sports betting deal, holding talks with several major sportsbooks. Sports gambling companies have invested heavily in marketing their own brands and some were reluctant to give that up to take the ESPN name. Barstool’s sportsbook, however, has captured relatively small market share compared with the industry giants, FanDuel and DraftKings. 

ESPN has been trying to strike a delicate balance. It’s trying to generate new sources of revenue as customers cancel traditional cable-TV service. And it’s wanted to capitalize on the growing interest in sports betting as more states have legalized it. ESPN needed to proceed cautiously because a perception that it has become deeply involved in gambling could undermine the family-friendly image cultivated by Disney.