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, $1.5 billion in cash.
Penn CEO Jay Snowden is looking to grow market share and the collaboration with Barstool Sports was falling short of expectations, with a current market share of 4-5%. As a result, Penn recently sold its share of Barstool Sports back to primary owner Dave Portnoy for $1.
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 three years. ESPN Bet is scheduled to go live this November.
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. However, neither FOX nor Maxim had the brand recognition of ESPN.
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 and BetMGM.
ESPN is owned by one of the world’s leading diversified family entertainment and media enterprises, The Walt Disney Company.