ESPN is getting into the sports gambling business, striking a deal with entertainment and casino company Penn Entertainment to form ESPN Bet.
ESPN Bet will launch in the 16 states that have legalized betting and where Penn already operates. Penn will rebrand its sports book and relaunch under the new name, and will include a new site and mobile app.
“The strategy here is simple: to give fans what they’ve been requesting and expecting from ESPN,” ESPN Chairman Jimmy Pitaro said in a statement.
This marks a big step for the one of the most storied names in sports and blurs the line for a company that now has to juggle broadcasting and reporting on sports while hosting a sports book for online gambling.
It also comes shortly after Fox shuttered its own gambling business, Fox Bet, at the end of July. Fox Corp. CEO Lachlan Murdoch admitted on a call on Tuesday that the company couldn’t take much market share away from DraftKings and FanDuel, which are the two dominant player in online sports gambling.
ESPN is hoping to have more success with Penn, which has a track record in the business. Under the deal, Penn will get promotion via integration with ESPN’s products, media, content and talent.
“Together, we can utilize each other’s strengths to create the type of experience that existing and new bettors will expect from both companies, and we can’t wait to get started,” Penn CEO Jay Snowden said in the statement.
Under the deal, Penn will pay $1.5 billion in cash to ESPN’s parent Disney over the course of 10 years. In additional, ESPN will get $500 million worth of warrants that allow for the purchase of 31.8 million Penn shares. If the partnership hits certain benchmarks, ESPN could be eligible for an additional 6.4 million shares.
The partnership will last for 10 years, with an option to extend for another decade.
Penn Entertainment will also divest Barstool Sports to founder David Portnoy.
ESPN had spent the last few years ramping up coverage of sports-betting content, from digital programming to radio segments and editorial coverage.
ESPN said it would continue to use its platform to educate sports fans on responsible gambling, and develop a committee to further examine the issue.
While this is a lucrative deal for Disney, the media giant is reportedly still considering spinning off ESPN into its own company.