There is something strange about a partnership between the Walt Disney Company and a gambling company. Despite being legal in most states, there is still that we look at as shady with gambling. But this isn’t “I know a guy.” It’s heavily regulated and done entirely from your phone. Even so, it doesn’t necessarily fit with the image that Disney has cultivated across generations.
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But now, Disney has announced that ESPN is partnering with PENN Entertainment to create ESPN Bet, which will have sports gambling in the 16 states when PENN is licensed. This announcement may surprise many outside observers, but there was too much money to be had by Disney to stay away from sports gambling, especially when they have access to all sports leagues and the talent and reach of ESPN.
But as analysts look deeper into the deal, many realize that Disney settled for less and took less money to partner with “a second/third-tier sportsbook.”
When former Disney CEO Bob Chapek first floated the idea of Disney getting into sports gambling, reports said he was looking for $3 billion from a company willing to enter into a partnership with ESPN. Disney’s deal with PENN is only $2 billion, and only $1.5 billion is in cash.
Analysts also wonder why the Worldwide Leader in Sports partnered with a lower-tier sports gambling website. Penn is also not licensed to operate in any state where the Walt Disney Company is present. PENN is not licensed in Connecticut, which is home to EPSN, or New York, which offers the biggest audience for sports gambling. Sports gambling is illegal in California, and Florida’s sports gambling bill is tied up in court.
Analyst at Lightshed Richard Greenfield told Barons:
All the major sportsbooks appear to have passed, with only PENN willing to cut ESPN a large, albeit far less than originally desired, annual licensing check for the ESPN brand. Everything about Disney is premium quality. PENN is not a market leader in sports betting and nobody believes their technology is good enough to compete with the industry leaders.
Most Wall Street investors see this as a stunt to boost revenue just before the third quarter earnings report, which Disney CEO Bob Iger delivered today. However, sports betting is big business, and ESPN has the sports fans, sports leagues, and advertising to make millions on gambling.
The only question remains: can their new partner meet the demand, or will the Disney brand take another hit?
We will continue to update this story at Disney Fanatic.
