Penn Entertainment Drops Barstool for ESPN In Landmark Sports Betting Deal – The Average Joe

    Penn Entertainment Drops Barstool for ESPN In Landmark Sports Betting Deal

    Victor Lei — Head of Research

    August 9, 2023

    August 9, 2023

    ESPN is officially getting into the sports betting game — in partnership with Penn Entertainment (NASDAQ:PENN) — who just landed what may be the most important sports betting deal in history.

    How important is ESPN in sports betting? Enough to send competitor DraftKings (NASDAQ:DKNG) down over 10% and Penn up nearly 9% yesterday.

    It’s been a long-anticipated move by ESPN — the largest US sports media brand — as ESPN’s majority owner Disney had been hesitant about entering sports betting for years. Under the agreement:

    • Penn will pay $1.5B to ESPN over ten years.
    • Penn will rebrand its Barstool Sportsbook to ESPN Bet.
    • ESPN will promote the app across its platforms and talent.

    Penn will also sell 100% of Barstool back to its founder Dave Portnoy — who sold Barstool to Penn starting in 2020 over two transactions — and is repurchasing it for what could be pennies on the dollar.

    The fallout between Barstool and Penn

    Penn, founded as a racetrack and casino operator, had banked on the Barstool brand to break into online sports betting.

    • In 2020, Penn began acquiring Barstool, hoping to leverage its brand to compete against dominant industry giants DraftKings and FanDuel.
    • But three years later, the Barstool Sportsbook app had failed to meet expectations — and Barstool’s lawless way of operating may have led to them being denied state gambling licenses, per Portnoy.

    Investors have criticized money-burning sports betting apps for their massive losses — after years of pumping billions into lavish campaigns to acquire a single user for thousands of dollars.

    With the ESPN partnership, Penn will gain access to hundreds of millions of people — but it still needs a lot of work to get rid of its “second/third-tier sportsbook” image given by media analyst Rich Greenfield.

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