DraftKings Looks a Little Woozy After Penn’s ESPN Bet Deal

Photo by Baishampayan Ghose under CC BY-SA 2.0

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The biggest name in sports broadcasting may just become the biggest name in sports betting.

ESPN announced a new sportsbook partnership with Penn Entertainment late Tuesday, and the immediate losers were shareholders of competitor DraftKings, which saw its share price drop nearly 11% by the close of Wednesday’s market.

Never Tell Me the Odds

The wide world of sports betting has been going gangbusters. You can’t watch a game or a fight without being bombarded by ads featuring celebrities like Jamie Foxx, J.B. Smoove, or Kevin Hart shouting at you about parlays, dogs, and big payouts. Last year, the US commercial sports betting industry generated $7.5 billion in revenue — a staggering 73% increase from a year earlier — according to the American Gaming Association.

It’s frankly a little odd it took ESPN this long to hop on the money train. On Tuesday, the network said it would team up with Penn in a 10-year deal to rebrand the gaming firm’s sportsbook to ESPN Bet:

  • Penn is paying $2 billion in cash and stock warrants over the next decade to essentially use ESPN’s name. And while Penn is sitting pretty — its stock rose 9.1% on Wednesday — DraftKings is in a rough spot.
  • ESPN, a division of Disney, already has a non-exclusive marketing deal with DraftKings, in which it also owns a stake of less than 5%. But the Penn deal could mean ESPN eventually cuts ties with DraftKings, MoffettNathanson analyst Robert Fishman said in a note to clients Wednesday.

Betting on a Future: Disney has been running a magic deficit lately. Even returning CEO Bob Iger hasn’t yet fully revived the company after a series of poor box office performances, dwindling amusement park sales, and millions of subscribers leaving the Disney+ streaming service. Gambling may not be what Uncle Walt had in mind when he created his family-friendly kingdom, but it might be one of many concessions the House of Mouse needs to make to pull itself out of the briar patch.