I am unclear on something about this deal. I believe it was said that the value was $1.5 billion over ten years. Is that all the money ESPN/Disney will collect, or will there be additional monies paid in the form of a royalty on all bets made? I assume PENN takes care of all the betting mechanisms and ESPN just sends people to the app, in addition to allowing the name to be used and for agreeing to run free promo ads on the ESPN/E+? Thank you in advance…
No, that’s pretty much it. ESPN/Disney gets $1.5B per year, Penn National gets to use the brand exclusively for betting. In that $1.5B is “media time” on ESPN, “free plugs”? No, although there are sure to be some/many in the round table programs and perhaps even during games. They will need to be somewhat careful, however, Caesar’s and DraftKings are two of their biggest sponsors, and they don’t want to chase them away either.
ESPN also gets a $500m option on Penn stock, exercisable I don’t know when but presumably anytime over the life of the contract, 10 years. Disney wanted double the $10B, but the first ones they approached (Caesar’s & DraftKing) passed, they’re already the big dog. Penn has about a 2% share of that market and needs something to grow. (Barstool wasn’t it, and they’ve been cut loose.) Disney will profit if ESPN gets more dollars to replace the carriage fees being clipped by cord cutters, and if they build the ESPN Bet into a big brand - and if more states legalize it (only about half now do).
Personally I see this as an opening move into spinning off ESPN into its own company, perhaps with some minority Disney ownership, perhaps not. It doesn’t really fit well with the rest of the company: movies, theme parks, cruise ships, toys & games, etc. It landed with Disney by accident when they acquired ABC (Cap Cities) and they considered spinning it off then but kept it around as it was growing. Now streaming is killing the cable, and Iger is looking for an off ramp, at least that’s my belief. Best to pump it up and then divest than try to sell it when it’s weak.
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Thanks for the reply.
I appreciate the additional color on this. In particular, had no idea about the option; it wouldn’t have occurred to me, but now that you say it, this may indeed be the first step into spinning the company.
I hope this does well for DIS, and I am looking at PENN as well, now.