ESPN Launching Sportsbook This Fall

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ESPN announced on Tuesday that ESPN BET will be live and taking wagers in the United States this fall.

This is a rebranding of PENN Entertainment’s sportsbook in a partnership that will net ESPN $1.5 billion over 10 years, as well as give the entertainment and sports media brand $500 million of warrants to purchase 31.8 million common shares of PENN. And depending on how well ESPN BET does, there might be bonuses to ESPN on top of that.

One interesting part of this new partnership is that PENN Entertainment sold Barstool Sports back to its founder, Dave Portnoy. The sportsbook goes to ESPN, but the rest of Barstool returns to its origins. However, if Portnoy sells Barstool again, PENN Entertainment will receive 50% of the gross proceeds.

This decision by ESPN comes in the middle of a major reorganization that has led to layoffs and the possibility of a partial sale.

“Our primary focus is always to serve sports fans, and we know they want both betting content and the ability to place bets with less friction from within our products,” said ESPN chairman Jimmy Pitaro. “The strategy here is simple: to give fans what they’ve been requesting and expecting from ESPN.”

The immediate reaction to Penn Entertainment’s move away from the Barstool brand and toward ESPN was a 20% rise in shares in after-hours trading.

Announcement Comes in Wake of FOX Bet’s Demise

ESPN is one of the most recognizable sports brands in the United States, but that doesn’t mean that success as a sportsbook is guaranteed. FanDuel and DraftKings control more than 70% of the sports betting market, and even a well-known brand like FOX Sports just ended its own sports betting venture.

FOX Bet began in 2019, and offered both a free-to-play game, as well as a sportsbook available in legal sports betting markets. But it will be completely closed by August 31.

ESPN has had some problems with branded ventures in the past, like ESPN Zone, its series of sports bars that began operation in 1998. The final ESPN Zone, at Downtown Disney in Anaheim, California, closed in 2018.

ESPN The Magazine had a similar lifespan, first going to print in 1998, and issuing its final magazine in 2019.

But with ABC and Disney in its promotional corner, and the upward trajectory of sports betting, an ESPN- branded sportsbook that includes access to all of its digital content is likely to make money for everyone involved.

Potential Conflict of Interest

It was just in June that we saw the potential conflict of interest that ESPN must try to avoid. That’s when Shams Charania, who hosts a show on FanDuel TV, sent out a tweet ahead of the NBA Draft that shifted the odds on FanDuel.

ESPN will combine its programming and digital news content with its sports betting content, and naturally they will try to drive traffic to everything they offer. But it’s a tightrope to walk between driving viewers to their sportsbook and influencing what bets those viewers actually place.

In the case of Charania, FanDuel said that it remains very separate from the news he breaks, and the movement in the odds was about what bets were being placed, and not what was said on Twitter. And that is probably true.

But what is said on Twitter can influence what bettors do, which then can change the odds. And what is said by sports journalists on ESPN can have an even bigger influence. That’s an influence that sports bettors need to be aware of in the 16 states that ESPN BET will make its initial opening.

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