The 10-year licensing agreement for Penn Entertainment to use the ESPN Bet branding for its sportsbook will end on Dec. 1.
Disney and Penn mutually agreed to end the agreement, which had an out after the first three years if its sports betting market share was not where the two expected it to be. Penn was on the hook for $150 million in cash payments each year.
“When we first announced our partnership with ESPN, both sides made it clear that we expected to compete for a podium position in the space,” said Penn CEO Jay Snowden. “Although we made significant progress in improving our product offering and building a cohesive ecosystem with ESPN, we have mutually and amicably agreed to wind down our collaboration. We plan to refocus our digital strategy on our growing iCasino business, while continuing to capitalize on our omnichannel advantage as the nation’s leading regional retail casino operator.”
This is the second failed sports betting brand for Penn, which jumped more than 10% in pre-market trading just minutes after 7 a.m. Eastern when this news and its third quarter earnings report were released. That rally was short lived, though, as Penn eventually closed Thursday down 10.4% to $14.65 on more than three times its average volume.
Disney partners with DraftKings
ESPN did not wait long to announce its new marketing agreement with DraftKings, sending the release out an hour after Penn announced ESPN Bet was done. Bloomberg reported in October 2022 that the two sides had agreed to a betting partnership.
“Our betting approach has focused on offering an integrated experience within our products,” said ESPN Chairman Jimmy Pitaro. “Working with DraftKings, a leader in the space, will allow us to build upon that foundation, continue to super-serve passionate sports fans and grow our ESPN direct-to-consumer business. We are excited about this new collaboration with DraftKings.”
DraftKings will now power the betting tab within the ESPN app and will offer special promotions to customers of ESPN’s new direct-to-consumer product, ESPN Unlimited.
“ESPN’s unmatched visibility across the world of sports make this collaboration a natural fit,” said DraftKings CEO Jason Robins. “As an innovative leader in digital sports entertainment, DraftKings is uniquely positioned to integrate our technology and products with ESPN’s iconic brand and storytelling power. Together, we’re delivering a seamless, engaging, and responsible experience that elevates how fans connect with live sports.”
Both wanted more from partnership
Pitaro praised the “unique offering” the two companies produced.
“Together, ESPN and PENN created a truly unique offering with unparalleled integrations across our various media assets,” Pitaro said. “ESPN drove over 2.9 million new users into the PENN ecosystem, with a strong uptick in first time bettors this fall.
The two sides clearly expected more out of the agreement, made clear by its presentation detailing the deal in August 2023. Snowden said both Penn and Disney would be “excited” about the partnership around 10% market share and detailed the financial impacts of up to 20% share.
Results from state revenue reports with some states reporting September data show ESPN Bet’s handle share is 2.8% with a 2.6% revenue share year-to-date. That is down from this time last year where ESPN Bet shares stood at 3.3% for handle and 2.5% for revenue with both Fanatics and bet365 performing better than ESPN Bet this year.
Detailing the digital breakup
Penn’s 8-K filing on the deal gives more details on how the end of the relationship between Disney and Penn will shake out.
Penn needs to stop using the ESPN Brand by Dec. 15, which can be extended if necessary. Penn will pay ESPN $38.1 million in the fourth quarter and will pay an additional $5 million for traditional media marketing to support theScore Bet and/or its Hollywood branded online casino.
Disney cannot license the ESPN Bet brand or launch the its own sportsbook wth the brand for 15 months after Dec. 1.
Disney will keep its vested warrants giving it the right to buy nearly 8 million PENN shares at a weighted strike price of $28.95. All unvested warrants will be forfeited.
theScore Bet returns to replace ESPN Bet
Penn will lean on its previously shuttered US brand, theScore Bet, for its betting brand.
“Looking ahead, we plan to rebrand our [online sports betting] offering in the U.S. to theScore Bet, with a target date of December 1, 2025 to coincide with the expected launch of sports betting in Missouri, subject to regulatory approvals,” Snowden said. “We currently operate theScore Bet brand in Ontario, and our OSB product across both the U.S. and Canada will now leverage connectivity with the theScore media app, which has approximately 4 million monthly active users across North America.
“Our OSB offerings will continue to provide a top of funnel cross-sell opportunity for our Hollywood-branded iCasino, which will remain integrated into our OSB product offering in states where legal, in addition to serving as a standalone iCasino app.”
