ESPN, The Worldwide Leader In Bets | Sports Betting News | LSR Podcast 202
ESPN ended years of speculation about its sports betting future by announcing a partnership with PENN Entertainment for ESPN BET. The deal not only brings the global media brand into the US sports betting market, but it also ends the run of Barstool Sportsbook as well. Enjoy a full episode of talk about the future of ESPN BET.
Matt Brown (00:06):
Hello, and welcome to episode number 202 of the LSR Podcast. My name is Matt Brown, joined each and every week by the brightest minds in all of the gaming industry. With me, your friend and mine, Dustin Gouker. Find him over on the Twitter machine @DustinGouker. Adam Candee is here this week as well. You can find him on the Twitter machine @AdamCandee. That’s two E’s, no Y. Hate yourself, you can follow me @MattBrownM2. Everything we do here on this podcast is absolutely free. So if you’re on the video side, subscribe to the channel. Do appreciate that. And on the audio side, little five-star review, maybe some kind words will help us climb those charts out there. So I’m going to turn it over to the experts here in just a second. I want to give a little opening spiel.
Anyone that’s been listening to this podcast knows I’ve been in some form of the gambling industry pretty much my entire life, and there are these moments that stand out to me when I look at kind of the Mount Rushmore of events when it comes down the pike from all things gambling, right? It was the Moneymaker effect, is like the first one that really stands out to me where you have a guy that turned $40 into millions of dollars because he won a $40 satellite on online poker that started the internet poker boom. Got a whole bunch of people into gaming and gambling that never had done so before. Then Black Friday, of course, with the internet, where everything gets shut down. That was a big moment in time for me. With all of that, the staying up to the wee hours of the morning for the New York DFS vote is a thing that could have crushed the entire industry.
One of the things that really stands out to me, the failed merger between DraftKings and FanDuel, which they were trying to become one company, which is so crazy right now that that didn’t happen, really stands out to me. And of course, PASPA getting repealed. Now, Dustin, you were there for a lot of that. Adam, you were there for a lot of that, as well. Guys, I don’t know if what came down yesterday will actually be in the same breath as all of those things that we know were kind of monumental things that happened somewhere along the way with the gambling space. But again, we might be looking back on this in five, six, 10 years or something, and maybe this news that we get coming out of a 10-figure deal between Penn National and ESPN might actually be on that list as well.
Partnership with PENN Entertainment for ESPN BET
Dustin Gouker (02:16):
Who’s going first? Me? I’ll go first. It could be. It could be a blip on the radar, too. I know we’re here for the hot takes. I’ll have some hot takes, but as I sit here, I don’t think this is a transformational moment for the industry. We almost have less than a day of space from it. It’s a big deal. Absolutely. There’s a lot of money changing hands. Is this a transformational moment that will change how sports betting is consumed? Change the sports betting industry? I guess I’m a seller on that part. There’s a world, or somewhere in the multiverse where yes, ESPN gets involved and this is a big deal, but my initial take is this is not the biggest deal in the world. And maybe I’m deflating the rest of the podcast, but there’s a lot to break down in this. I don’t think ESPN and Penn Entertainment come in here and start running US sports betting. I think that’s my takeaway, the very top level takeaway of all this.
Matt Brown (03:16):
Adam, when it first came down, of course we’ll get into the nuts and bolts of everything that went down here, but just when you saw the news come across your initial take was?
Adam Candee (03:27):
It’s about time, was my initial take in the first place for ESPN because it took more than five years for them to get involved in any sort of meaningful way. They’ve had partnerships before, but nothing on this level where they’re saying, this is our sportsbook. So now, yeah, I look and say, ESPN is involved, it’s about time. I look and say this is a branding deal. This is not a sportsbook deal, right? You can call it ESPN Bet all you want. It’s sticking the ESPN logo onto the side of whatever Penn is developing.
And my third thought, and we’ll dig way more into this one, is you waited five years for this? This is the deal you ultimately went with for deciding to get in, going with tech that no one has ever seen before with a company that has done exactly 0.0 things right in five years of legal sports betting in the United States? I have many, many questions, but I will give you my one hot take. This won’t be anywhere near the Mount Rushmore or even the Mount Rushmore that is built below the Mount Rushmore of things that have happened in the legal sports betting industry. Is it huge news that ESPN is really, truly getting in? Yes. Is this going to transform the US sports betting industry? I would take a big bet on no.
Matt Brown (04:48):
It really depends. And I mean, I think … listen, we don’t know. I mean, this is all 24 hours new to us, whatever. My take is this. I’m actually holding off on the hot take side of it until I see just exactly how into bed ESPN is going to get with all this and how much ESPN is actually going to do. Because I think that there is a world in which if they really get into this and go at it full bore, listen, no one has more sports rights than ESPN. Nobody has more ways to reach potential people than ESPN does, period, end of story, that cannot be argued. And so now, are we going to be seeing things put into broadcast when you go to ESPN+? Is there going to be other things? That we don’t know.
And so with that, it’s hard for me to kind of give the hot take on all that right now because I think that this can kind of go as far as ESPN is willing to kind of push it. But again, they don’t have to, right? It seems as if this is more of like a, “Hey, we want your name, we want your licensing. It’s not even an exclusive deal. You’re still able to take advertising from other sportsbooks throughout the course of your commercial inventory and stuff like that.” So it really comes down to that, Dustin. I mean, I know you guys tend to be on the other side of this. I’m kind of more in the middle with it all. But let’s go to the actual story itself and then we’ll kind of get to the takes on this. But it comes down yesterday, 10-year deal, $1.5 billion. ESPN has an option to buy $500 million worth of equity into Penn National.
Ends the run of Barstool Sportsbook
Dustin Gouker (06:30):
Yeah. And Barstool … by the way, this is like a footnote, I guess. Barstool Sportsbook, out. Barstool now owned by-
Adam Candee (06:37):
That’s no footnote to me.
Dustin Gouker (06:38):
Barstool, they were part of the transaction. And Adam, tell me if we’ve confirmed this, Dave Portnoy bought Barstool back for zero American dollars or we’re not sure?
Adam Candee (06:47):
It is not confirmed. This is not confirmed. No, this is absolutely not confirmed information.
Dustin Gouker (06:52):
Anyway. I guess it’s not a footnote, but Barstool Sportsbook is basically shuttered now, and we’re now … Penn Entertainment is going with the ESPN Bet brand, and Barstool is going to be its own media empire. Again, not involved directly in the regulated sports betting industry anymore. Yeah, going back to what your thoughts there, Matt, I think that there is a lot of devil in the details that we should wait for, but at the same time, ESPN, like you said, is not necessarily incentivized to do what you said, to push it into all of their content, all of their integration, their league deals, all of that.
Maybe that’s been negotiated in, it’s baked into the price, but they get the $150 million to license their brand, $150 million a year to license the brand no matter what. So I have the same question, and I think there’s a huge space. The ceiling is clearly higher than Barstool Sportsbook was. I think that’s the absolute basis of it. I mean, sorry, the floor of it is better than Barstool Sportsbook. What’s the ceiling? Again, I don’t think the ceiling is competing with DraftKings and FanDuel. Maybe, again, they’ve put out this morning on their earnings call, they want to have 20% of the market share. That’s a lot. I don’t think just slapping an ESPN logo on the sportsbook gets you to 20%. It is in that integration and how deep ESPN is into promoting that sportsbook, because yeah, for me, if I’m ESPN, I take the money, I do whatever, I do the bare minimum, but their core business is driving eyeballs and going from there. So I don’t know, I’ve talked a lot. Let Adam give his 2 cents on all of it, as well.
Matt Brown (08:38):
Yeah, Adam, just again, it’s 10 years, $1.5 billion, could be another $500 million if ESPN decides to buy equity into Penn National. But the other part of this story is the fact that Penn has separated itself from the Barstool brand and is no longer under the umbrella.
Adam Candee (08:58):
Barstool Sportsbook is dead, and it will be dead, and the industry is so much better off for that in the long run. Barstool Sportsbook was the most existential threat to regulated sports betting in the United States. It was the company most likely to draw attention from state and federal regulators. It was the company that was most likely to create a problem that was going to be solved by legislation that does not really help anyone in the long run. And that’s a combination of its, let’s just say attitude toward being regulated, and also its brand awareness, which is pretty big, right? A lot of people know what Barstool Sportsbook is, they know what Barstool Sports is, and they know who Dave Portnoy is. And so the fact that Barstool Sportsbook is out of the industry is a good thing for everyone in terms of what it means for regulation.
And look, Jay Snowden, the CEO of Penn who defended and defended and defended everything that Barstool did for the entirety of the three years that these companies were in bed together, gave a very different quote in the press release that announced this deal, talking about how Barstool can go back to making the kind of content that it likes to make, without the burden of being in a regulated environment. Well, that’s Penn saying, “We were done with you and you were done with us, and let’s just all move on from this.”
And so no matter what the price is that Penn sold Barstool back to Dave Portnoy for, what this says to me is Penn had to get out of this one way or the other. They had, in the markets they serve, 3% share. Barstool had a 3% share in the markets they serve. If you pull it out to the national stage, they had a 1% share.
And so look, people have said to me, “Well, what do you think 10% for ESPN, 12% for ESPN? This ridiculous, insane, ludicrous 20% number that Jay Snowden threw out there on the earnings call today?” No. If they can take that 3%, and by next year, considering they’re not launching this thing until November, in the middle of football season, which is its own question that needs to be answered, but considering that we’re not going to see this until November, if at the end of 2024 they have say 6% share, maybe even 7% share, that’s a massive victory because the question that you’re asking, Matt, and I’m going to throw this back to you because you’re the more bullish of us, what is in the ESPN database that Penn can access that other sportsbooks have not been able to access? Or what can they do using the size of the microphone they have and all of the rights deals they have to push people who might already have chosen a sportsbook that they like to give ESPN Bet a try?
And what’s the product going to have to look like in order to keep them there? Because that’s the biggest concern I have about this entire deal, is that they’re going to go on to a sportsbook platform that never has been tested that we have no idea if it’s any good, and the only bones of it we know are from theScore, a company that doesn’t even operate in the US anymore. So that’s my case on it, but I know you have thoughts on ESPN and their ability to push their way in.
Matt Brown (12:23):
Yeah. Just one other footnote just about the Barstool side of things. Listen, if we remember, and this actually, I hadn’t seen a lot of people talking about this, the deal was never going to get done with Disney so long as Barstool was still under the Penn umbrella, ’cause if you remember, ESPN and Barstool had a little dance there for a little bit, and that show that they put on lasted all of two weeks before ESPN decided, “Oh no, this is not for us, and this is no way in hell we’re ever doing …” And so I haven’t seen a lot of people talking about that, but ESPN had already had their kind of Barstool moment and all of that, and figured out real quick that this is not anything that we want to be associated with. So again, this deal was never happening so long as Barstool was still under the Penn umbrella.
So they moved them out and move on. Anyone that’s listening to this podcast knows, we haven’t always been the kindest to Barstool. And listen, here’s the deal. I will say this completely, not my cup of tea, is other people’s cup of tea. They do have a rabid fan base, they have a lot of people that follow that stuff. There are a lot of people who love all of the characters and stuff over there, whatever. I have not probably said one positive thing about Dave Portnoy on this podcast since we’ve been doing it.
What I will say is this, and this might be the only positive thing I’ll ever say about it, he at least was very honest yesterday in his little video that he put out. He’s like, “You know what? We’re probably not cut out for this whole regulated market thing and stuff. We’re probably better over here just in the shadows and doing the stuff that we do.” And I was kind of like, “You know what? I’ll at least give you props for that. You understand, ‘You know what? We gave this a whirl. This ain’t for us. This just ain’t for me.’” And that was probably the only time I’ve ever watched a Portnoy video and gone, “OK, well, at least he understands that.” Right? I mean, that was something that he put out there.
But to answer your question, Adam, so the one thing that ESPN has over everybody else in this space, and again, this all just depends on how deep they want to go in with it, is they do have this broadcast network that they own, right? It is not having to buy time, buy sponsorships, buy whatever on another network where every other book has to go in that direction. So they do have the benefit of multiple channels. They’ve already tried these kinds of companion broadcasts and things before. Do they go deeper into that? Do they try to do that? Do they try to make the online experience more of a second screen experience? Can you stream a game live and get the betting version on ESPN+ and does that drive any sort of customers or something? Do you have guys who are giving commentary on the game that is more betting-slanted as opposed to just your traditional play-by-play?
There are all different things that are going on there, but again, all of this is just me speculating. I don’t know. I don’t know if they’re going to do any of that as part of this deal. Did they get any sort of stuff with any of the talent, right? Are we going to see Stephen A. Smith talking about ESPN Bet? Are we going to see Scott Van Pelt, some of the biggest names in the business talking about ESPN Bet and things like that, that can sway people out there?
And so it’s all so up in the air right now, and I think of the bull case for what could possibly happen. But then the bear case could be like, what some of the takes are coming out is like, “Hey, this is nothing more than slap a sticker on the side of a car. And it’s just that’s what it is.” And if that’s the case, then yeah, I mean, I don’t see them making any sort of real dent in this market at all, right? Because at the end of the day, you are coming in at a disadvantage. These guys have a massive headstart on you. Their product currently is better than yours and likely will be better than yours for the foreseeable future.
So, really the only thing you have in your pocket is super big stars that are on TV every single day that can reach a whole bunch of people, if that’s part of the deal. You do have broadcast rights to basically every single major sport there is on the face of the planet. How deep do you want to go into that? How much are you going to integrate that either into traditional broadcast or creating separate programming for that for either second string experience or if they want to put it on traditional ESPN news has the betting version of game X, Y, Z or something, then they could go that direction.
So I think there’s a whole bunch of stuff that, kind of like you said, Dustin, it’s like the floor is raised no matter what because it’s ESPN over Barstool. The ceiling I think if they really go just absolutely wild, could be interesting, but if they have no incentive to do that, then this could just be another ho-hum, incredible amount of money is changing hands here, but nothing really is moving in the landscape of things.
Dustin Gouker (16:54):
I mean, that’s why I’m holding off on the hot takes, because I think there’s so much space there, right? There’s so much space between slapping the bumper sticker on there and how much we’re going to see this on ESPN, like commercial volume on Monday night football, whatever. That is it. There are huge rages of outcomes and how much ESPN is pushing traffic there, and until we see the rubber meet the road, it’s hard to say. I will say that I’m kind of shocked that this isn’t happening until November, especially the product itself is not changing, right? We’re just rebranding it. It’s like some JPEGs, some color changes. I am not a developer, but it’s not that fricking hard to change and you knew that was just coming. It’s not like you weren’t already working on this probably. So it makes me feel like the product itself is not ready for the load test of NFL week one, which if you launched ESPN Bet into that, and the product fails, then you’ve just probably wasted a lot of money.
I don’t know, but that’s bad. Also, just a very small part of this in the background of the larger gaming ecosystem is that the casino and sports betting apps are now separate and that’s a loss. That’s not a great outcome for anyone. It’s going to be ESPN Bet and then apparently Hollywood Casino, their regional casino brand, it was Barstool Casino in a lot of places. So now we’re going to have separate apps with yes, there’s going to be a cross-sell, but that’s hard. Somebody who is on ESPN Bet, do they really want to go to Hollywood Casino and start betting on online gambling. I don’t know.
And that’s again the part in the background. DraftKings and FanDuel are also doing very well in the online casino segment. So I don’t know, this is rough. It’s all the way around rough on that front for me. Again, missing the start of NFL season with the relaunch seems like very much a missed opportunity. And you’re like, the spin was, “Oh, November, nobody’s going to be talking about… we missed some of the buzz, but we’re the only thing going on.” I’m like, that’s not really how this works, but to each their own.
Adam Candee (19:03):
OK, so let’s go through a few points of what we just discussed here. I want to go back to the idea of ESPN’s microphone and its reach, and I want to throw two words at you: FOX Bet, because we’ve seen this before. We’ve seen a network have the kind of reach that ESPN does. Fox had the NFL, and I don’t care how badly Flutter choked out the Fox brand over the legal fight that they were having. And trust me, they did. Flutter, absolutely suppressed Fox and made sure that FanDuel was the truly successful brand under their portfolio. They got into the huge fight over how much FOX Bet would be able to buy in and ultimately this past month, they decided to wind down FOX Bet. But that’s where my skepticism comes in from the idea of can you just use the size of the pulpit you have, to be able to bring people in.
OK, so now let’s go to the idea of product. First of all, you can talk all you want about what’s going on at the beginning of football season and maybe there’s going to be more room for us in November. Fanatics is launching too, aren’t they? Fanatics is just about to start and they’re going to be ready for the start of NFL season, and I would bet dollars to donuts that with the people that Fanatics has involved, that fanatics is going to have a better product than what Barstool has. They’ve got Matt King running the ship, who helped build what FanDuel is today. They’ve had time in the background to go work on this product for basically years and try to get it to where they want and they’re going to be ready for the start of NFL season.
And how Penn is not, is a mystery to me because what have we been hearing on earnings calls from Jay Snowden? They’ve talked about the fact that the tech is complete, that they were ready to move Barstool onto the new tech. That basically they had already made the beginnings of this move to get Barstool on the new tech. So if you need an extra two months, the most crucial two months in all of customer acquisition in sports betting, what are you doing? That part does not make any sense to me either. And the biggest, “what are you doing?” is what Dustin mentioned when it comes to iCasino. Anyone who watches this space knows the value of iCasino, not only right now, but looking forward. There are only so many states left to legalize sports betting, but when it comes to online casino, everyone is making this push right now. DraftKings, FanDuel, et cetera, BetMGM, these companies have hundreds of games in their online casino portfolio already that they can sell directly across to.
So no, I don’t think ESPN Bet and Hollywood Casino are a good match at all because no one knows what Hollywood Casino is, and Hollywood as a brand has nothing beyond a regional reach. So to me, that’s the biggest head-scratcher in this entire deal is how you could commit $2 billion to your online presence and get a grand total of zero iGaming value out.
Dustin Gouker (22:11):
People could laugh at me about an ESPN casino is a dumb idea, but that’s good. I think that’s a pretty freaking good idea if I was doing online casino. That being said, obviously one, we have the problem in the background of like, OK, Disney owns them, how comfortable they are. Probably sports betting as we know, is kind of, this is culturally acceptable. Going into casino gaming is a whole ’nother ball of wax. And the fact that I guess that would’ve added maybe not zeros to the deal, but lots of more money that they would have to use to license ESPN as a casino. So whether it was comfort or money… but that’s the part in the background that’s not going to drive headlines. But I think it’s a very bad outcome that Penn is basically putting all of this money into sports betting and casinos over here on the side that’s going to get kind of short shrift.
Matt Brown (23:05):
Adam, we don’t know for sure, but sometime in November as I look and see the Monday Night Football game between the Eagles and the Chiefs, and I see that that is also on A, B, C as well as ESPN and whatever, I’m going to go out on a limb and say Week 11 is whenever we’re going to see ESPN Bet. That’s just my guess, but Eagles, Chiefs, yeah, that seems like a pretty good time if you’re going to be coming out of the gate here.
Adam Candee (23:33):
I think. So it’s a great time in terms of exposure. You only have one legal market there between the two teams, but hey, don’t let that stop you. Just go ahead and push it out there when you have the most eyeballs humanly possible to get your brand out there and expose. Go for it.
Matt Brown (23:49):
Yeah, I’m looking here… a bit of a pushback. I don’t think we can really equate FOX Bet and ESPN and Fox and ESPN. I mean the window of football on a Sunday for Fox, yes, it’s big, but it’s like one day a week and it’s for a few hours having three 24/7 networks that are always going, that can always be funneling things that are also across multiple different sports and all different interests of basically every single sports fan you could possibly imagine because they do have the rights now at this point to every single major sport that is going on out there.
So I mean, I get what you’re saying, but I don’t think it’s really equal, really at all, Fox from a sports standpoint. I think if you ask the typical American, and you just said the word Fox, do you associate Fox with sports or news? I think they would say news as opposed to sports. It’s where ESPN is like synonymous with sports and has the 24/7 reach on three different channels that are in 90 million households. So I think there is at least a pretty big difference in the two.
Adam Candee (24:46):
I would agree in the vein of that you can’t just say it’s apples to apples, but I think when you talk about where’s the range of outcomes, it’s absolutely a reasonable point to bring up because we’re talking about FOX Bet being entirely gone, not just, “Hey, it didn’t do as well as we thought”, entirely gone and now ESPN, a brand that we’ve looked at and said, “They could be the gorilla in the room to really bully everybody around”, I do think it’s reasonable to look and say, “OK, well you do have Fox Sports, you do have FS One. They have college rights. They do have reach. Not nearly on the order of what ESPN does, but I think that begins to ask the question of what does success look like for ESPN, right?
I don’t think the range of outcomes includes ESPN flopping so badly that it gets out of the sports betting game, but I think to put a 20% market share number out there, if you’re Jay Snowden, I mean you might as well just be walking yourself off the plank as CEO of Penn Entertainment if you’re going to put a 20% market share number out there, because maybe, and I will say with the smallest of percentages at the end of a 10-year deal, maybe you might be able to talk about 20%, but no time before that.
Matt Brown (26:00):
Yeah, that seems a bit aggressive. I think that official term there might be a little aggressive of a figure. Yeah, just a little bit aggressive. All right, so Dustin, before we put a bow on all this, let us talk about now, basically what is the kind of order of we see a success story and the order of what we see as a kind of a flop story here? I think we kind of got to the flop story part of it, which would just basically be, this is nothing more than a branding deal, might as well be a billboard. And if that’s the case, then so be it. I find that hard to believe.
I mean, listen, I know Penn has not given us a ton of things to think that they are being sharp in all of this, but I cannot imagine paying $150 million a year for nothing. But like we were telling you, just basically just slapping a sticker on something. Maybe they did, and if they did, then that is obviously what the floor of this deal is, and that is certainly the bear case for all of this. But in your opinion, what’s kind of the bull, what’s kind of the rosy outlook of all this? What do you see if you see when November rolls around, and we’re talking about this, obviously by the time Super Bowl comes around in February, what would be like, oh, OK, they’re doing this and that’s pretty cool and this is working and I think that this might resonate. What do you see as kind of a rosy outlook?
Dustin Gouker (27:18):
I mean, yeah, there’s certainly rosy outlooks. I think the 20% is what gets me, is that’s the measure of success. I mean, we also heard Barstool was going to be number one in sports betting, obviously laughable in retrospect, and even in real time, I think that was laughable. But like Adam said, in the next couple of years, if you get to double your market share, you’re competing with MGM and Caesars, that’s not bad. And I mean, the bottom line is you have to make this deal make financial sense, it has to be revenue EBITDA positive, at some point. You’re spending $150 million. If you’re not getting that increased brand exposure revenue in the door, then you’ve just wasted money, I guess.
But again, we’re not going to grow with Barstool. So they’re selling growth. Whether you buy that growth or not is in the eye of the beholder, but it doesn’t have to be 20% to be a success. I think it has to be revenue positive. And again, there’s so much… if ESPN Sportsbook just starts becoming part of how we talk about sports betting via ESPN channels and personalities and things like that, Pat McAfee, who knows? That’s-
Matt Brown (28:26):
True, I forgot about McAfee.
Dustin Gouker (28:28):
There’s value in just being part … DraftKings and FanDuel are just part of our conversation. Even Jamie Fox, MGM, they’re part of the conversation. And if ESPN and Penn achieve that, then I’d say that’s a success, too. But there’s a lot to be done to make that happen. So again, it’s not flip the switch. I’ll also say, a final note for me. This is a win for ESPN. They just get paid money to exist, basically. People are saying it’s a Hail Mary for ESPN. I’m like, I mean, yes, ESPN probably left some value on the table by being late. They probably didn’t have a whole lot of people bidding on this, but they still get $150 million just to license out their name. That’s pretty good. I mean, it doesn’t move the needle in the larger Disney ecosystem. It’s pocket change, I guess, in that stance. But for ESPN, which has been out losing homes through traditional cable, it’s a win. Let’s get a lot of money. What’s not to like?
I don’t get the, “ESPN’s desperate.” Sure. Guess they’re a little desperate, I’d say, just in general, but they get a lot of money to license their brand. That’s pretty good. And let’s make it sure we’re separating them from a lot of the other things. People are dumping on Sports Illustrated and others, they’re building sportsbooks based on the brand. Again, sports Illustrated wasn’t getting a huge check to license their brand, I don’t think. That was just a partnership to try to make things work. And all these other brands are talking about Fubo, Maxim, whatever. These are orders of magnitude smaller in reach and brand awareness than ESPN is. So I really liked the deal from ESPN standpoint. By waiting so long, they probably didn’t maximize it, but what’s not to like with basically free money for them.
Matt Brown (30:11):
Yeah, Adam, that’s kind of where I was going. I’ve seen some of those takes too, where it’s kind of like, “Oh” … Dude, $150 million covers all of your talent and all of your … I mean, you have now some of this financial drain where you’ve had to do some layoffs and things like that. I mean, now that covers every single one of your talent for every … Anyway, it’s a win for ESPN any way you look at it. So we know where you stand, where you think that this isn’t going to be some sort of seismic shift in deal, but what would surprise you? What would get you to go, “Oh, OK, maybe this is a little bit different than I thought.”
Adam Candee (30:43):
Well, to put a bow on what you guys were just talking about before getting to that point, the part I said about ESPN earlier in which I said, are you really choosing a brand with unproven tech and so on, so on, so on, you’re right, the flip side to all of it is Disney is in a tough financial situation, so they would have you think, based on the layoffs at ESPN and so on, and it would not surprise me at all if Bob Iger, the new CEO of Disney came in and said, “Hey, why have you been waiting so long to take this check? Take the damn check, because you’re going to get $150 million per year for 10 years, 1.5 billion in cash. You’re going to get 500 million in stock.” And then based on performance incentives, they actually can go and get another 20% in stock.
So this deal could top $2 billion in value. And obviously if they’re at the point where they want to exercise those options on the extra stock, then this has worked out well for Penn in the long run, ‘cause that means the Penn stock is worth a lot more too. So that’s really where the bull case comes in here to what would surprise me, what would go well, what would surprise me is if the product is really, really good and everyone comes out and says, “Oh, OK, they realized we have a good product and Barstool was what was going to hold us back from being able to maximize the value of that product, and we needed ESPN’s name to be able to do that.”
That would be very interesting because the line that Penn has put out there for a while is that the product is what was holding it back. Not that it was the Barstool brand, well, turns out might end up being both depending on how this works out. So if the product truly comes out there and is something that competes on the level with FanDuel and DraftKings who have been refining their products for years and years and years and years and spending billions of dollars, not only on that and the brand awareness of their product, then I would say, “OK, you know what? Maybe ESPN has a chance to be a serious player in this.”
Matt Brown (32:49):
Yeah, I kind of hate that we’re sitting here in the beginning of August and I have to say, I’m going to reserve any and all judgments and my opinions won’t come until November when this actually launches. But it’s like, I honestly think I cannot give a fair assessment of where this is going to be until I see just how involved ESPN is actually going to be in the deal, right? I mean, I truly believe there is value still in the ESPN brand and I honestly think that having all of those rights to every single sport there is on the face of the planet is a pretty big deal. Having the streaming capabilities that they have with ESPN+ is a pretty big deal. I mean, creating ancillary shows and programmings and broadcasts and things and all of that.
Again, that’s all me. If I was running things that’s pie in the sky, that’s where maybe I would be going with that direction specifically if I had thoughts of that I was going to buy into Penn, where I would actually be starting to get a piece of things that were going on and certainly the better things do, the more money that we were going to make. But again, maybe that’s not what they’re doing. Maybe it is just take the check, cover the expenses of a bunch of different stuff that’s going on at ESPN every year and you move on. And so I hate that I have to go, “I’ll check back with you in the middle of December with my real take on this, but that’s kind of where I sit right now.”
Adam Candee (34:04):
Well, Matt, let me add something to the top of that and say, if you’re not willing to give your opinion now, totally understandable. Where do you see the range of outcomes? Set the top and the bottom. When you say, all right, let’s see how hard ESPN pushes in and let’s say ESPN goes all in on this, then what do you think that top end outcome is?
Matt Brown (34:24):
Adam Candee (34:24):
Because you and I both just said 20% is probably a little aggressive.
Matt Brown (34:28):
Yeah. Third. Third behind DraftKings and FanDuel. I think the bull outcome here for this is third place and consensus third place across the industry. When you look, we would almost be talking about it as a big three. It would still always be the big two, but ESPN would at least be… ESPN Bet I should say, would at least be in the conversation when we’re kind of talking about all that. I think that’s the bull case. I do not see them surpassing DraftKings. They’re just way too far behind. And again, the time that it’s taken them to ramp up, it’s FanDuel and DraftKings getting better. The ramp up for them is, while they’re honing their product, it’s like not having to actually get going there.
So I think third is the bull case and the bear case is like, hey, they’re still looking up at Caesar’s and MGM, and maybe Bet365 and maybe Fanatics. Who knows whenever that all gets done. And I think that that’s also within the range of outcomes too, specifically, if this isn’t really a full-fledged kind of buy-in on the ESPN side, right? I mean, if you’re not getting ancillary, if you’re not getting second screen experiences, if you’re not getting integration into products, if you’re not getting any sort of anything with the talent at all, I don’t really know what you bought. I mean, you could have just bought commercials, you could have just bought commercials on the station.
Dustin Gouker (35:45):
And third place is a nice business. Let’s be clear about that. If they got to that spot, I think I’d be, maybe this is a pretty good deal. Again, the financials behind it are important, but yeah, you could have just spent on advertising. If you’re not getting this deep integration with ESPN, and again, there are so many ways you can leverage this. The website and integration on the live game action, following a game on game day, there’s so much you could do. Is any of that going to happen? We sit here, we don’t know. And the same reason. The hot takes come in looking back, I think, which is, you can look back on a deck from Penn back when they bought Barstool and they had this little arrow like, “Oh, we’re going to compete with DraftKings versus FanDuel.” Guess what? You didn’t. Now you’re doing the same thing. “Oh, we’re going to compete with DraftKings versus FanDuel. Are we supposed to believe you this time? Maybe, maybe not.
Matt Brown (36:38):
Adam. It’s all said and done. Yeah. Yeah. Go ahead, Adam.
Adam Candee (36:39):
No, I want to build off what Dustin was saying there and the idea, and what you were saying as well, the idea of third. OK, so let’s run down what it would take to be third, because right now we’re looking at MGM and Caesars really being in that area. OK. Caesars just had its first EBITDA positive quarter, as did DraftKings, as did MGM. But Bill Hornbuckle, the CEO of MGM, just came out and said, “We know we need to be better at this. We know we can do more.” They just bought Angstrom to try to build up their in-play with Entain. So you’ve got MGM in there. Now, Caesars has talked about pulling back its marketing spend. I don’t know that Caesars really cares about being third. It doesn’t seem from their actions, like they care about third being the biggest goal that they have, but we just mentioned Bet365. Bet365 is already number three in Ohio.
They decided to make an impact in a big state right from the starting line. Well, guess what? They did. And here they are and they have billions of dollars behind them, which let me do my math, is exactly how much Fanatics has behind it as well. And Michael Rubin seems perfectly willing to throw his billions at this as well. So it is a battle royale when we start talking about the battle for third. Frankly, it’s more interesting, I think from a content perspective than DraftKings versus FanDuel because you have five companies I think, who are going to make a legitimate claim toward that third place.
Matt Brown (38:06):
Yeah, it’s interesting. And it’s three companies in which we’ll have kind of different approaches with it, right? Because you have bet365 leaning on product, you have Fanatics which are going to lean on database and also rewards programs like we were talking about a couple of podcasts ago where that’s kind of a thing they’re going to lean on. And then ESPN leaning on legacy branding and what they’ve got going on for the last 30 years as far as being the worldwide leader in sports. So it’s also… that is an interesting aspect as well, right? I mean it’s three different approaches to get to that number three spot along the way.
Guys, there are multiple stories over on legalsportsreport.com. So go over there, read them. Adam, I can only assume you guys will continue adding to these and there will be more information in probably reaching out to all kinds of people to get stuff in there as well. I hope I’m not overstepping, but I can only assume.
Adam Candee (38:53):
Well, let me just say, we’re strongly considering it, but we have a big piece on why Fubo didn’t work out. No, I’m kidding. We’re definitely covering it. He’s like, what happened to MaximBet, is where he is at right now with all that.
Matt Brown (39:10):
But guys, again, go over there, take in the articles again, follow LegalSportsReport on Twitter. If you don’t already do that, you can follow Dustin, myself and Adam as well. And certainly anything that we get going, we’ll continue to pump that out as well. Everything you do absolutely free. So we do appreciate the follows and the subscribes and the ratings and all the things like that. It certainly does help a ton. And if you have any questions or anything that you… or ideas you want to float, hit us up. We’ll talk about it on the next podcast. We’ll bring that stuff up. So go ahead and do that as well. And I will grill these two guys on what they think on your question. For Adam, for Dustin, I’m Matt. Talk to you guys next week.