Penn Entertainment captured the gaming world with an epic partnership with ESPN to create ESPN Bet. The deal is indicated to be a 10-year period for 2 billion dollars, 1.5 billion in cash. Penn sold its share of Barstool Sports back to primary owner Dave Portnoy for 1 dollar. Penn CEO Jay Snowden is looking to grow the market share and the collaboration with Barstool Sports did not give indications of doing so. Barstool Sports has a current market share of 4 to 5 percent. The projection with ESPN Bet is to reach 20% of the market with an agreement to dissolve the partnership if certain levels are not achieved after 3 years.
Business insiders have weighed in on the merger and given the following opinions. Yahoo Finance cited the deal as a blockbuster. But MarketWatch quoted Wells Fargo Analyst Daniel Politzer, who stated, ”it is premature to conclude this is a game changer."
Prior mergers of gaming and media companies have not produced the anticipated results. Over the past year, FOX Bet and Maxim Bet have curtailed operations. Neither of those companies, however, had the brand recognition of ESPN. In the days after the merger between Penn and the worldwide leader, a survey conducted by Odds Assist indicated that 54% of the respondents indicated they would play on the ESPN Bet app when it becomes available. Over a third of that 54% anticipate using ESPN Bet as their primary sports wagering app.
ESPN is reaping immediate dividends because they have created a new revenue source to combat losses due to streaming and cord cutting services. Penn is using this partnership as a growth engine. The challenge will be to cannibalize some of the market currently held by Caesars, DraftKings, FanDuel & BetMGM. The addition of Fanatics will also add another competitor to the sports betting landscape. ESPN Bet is scheduled to debut in November. ESPN is owned by Disney and Disney is currently trading at $89.02. Penn is trading at $23.52.
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