Disney in my book
In my book “The Rules of Super Growth Stocks Investing“:
- Sections 2-3, pages 111-113
Disney ESPN enters sports betting
Partnership with PENN Entertainment
The way Disney’s ESPN enters the sports game is to find PENN Entertainment (ticker: PENN) as the operator. Disney’s ESPN itself does not have access to operational details. PENN Entertainment is an American gambling professional company engaged in casinos, horse racing, sports betting, and online gaming.
PENN Entertainment’s stock rose sharply 9.1% on next day after the news of the partnership was announced. The company previously signed an exclusive deal with ESPN and sold its Barstool assets in an industry-shocking deal.
Main content of the contract
As part of the strategic partnership, PENN will pay ESPN $1.5 billion over 10 years, and the company will rename PENN’s original Barstool Sportsbook business to ESPN Bet during the upcoming 2023 NFL season, and receive a ten-year exclusive trademark.
What does ESPN get?
ESPN will receive $1.5 billion in cash over the initial term for marketing and branding, $500 million in warrants with a strike price of $26 or more per PENN share, and bonus warrants (if a certain market share).
What does PENN get?
In the case of PENN, it has access to ESPN’s more than 105 million monthly unique digital visitors, 370 million viewers on social platforms, 25 million ESPN+ subscribers, and fantasy databases. Penn management said the company expects to generate adjusted long-term value of $500 million to $1 billion.
Meanwhile, the financial terms of the sale of the Barstool media assets to Dave Portnoy were not disclosed, although part of the arrangement is said to include a non-compete and an agreement to equally distribute proceeds from future sales of the business.
Why ESPN?
ESPN is the media leader in sports, but he noted that Caesars Entertainment (ticker: CZR ) and DraftKings have had varying degrees of success in their marketing partnerships with ESPN, while Bally’s (ticker: BALY ), Fox Bet (ticker: FOX) and PointsBet-NBC and other media partnerships have yet to be established.
Schedule
ESPN BET will launch this fall during the hottest part of the college and pro football season. The launch will be closely watched as the battle for market share continues as sports betting operators eye profitability. Investors will also be watching for other partnership announcements or acquisitions that might be included.
Industry opinion
Positive side
PENN has a constructive risk-reward rationale for joining the deal due to ESPN’s massive sports content subscriber database, but he’s also increasingly convinced that DraftKings (ticker: DKNG ) and FanDuel (ticker: PDYPY ) are creating product and technology hurdles Making changes in market share more and more difficult. The deal is considered likely to be a drag on PENN’s earnings for at least 12-24 months.
Negative side
At least initially, ESPN Bet will be a worse product than what’s on the market now, since it’ll simply be a redesign of Barstool Sportsbook when it launches this fall. A big reason why Barstool has not been successful is that the main products of the other market leaders in the market, namely FanDuel and DraftKings, are far superior to users. Penn still has a lot of work to do on the product front to catch up to the market leaders.
Developing technology is another major part of the business model, but it may take a while to catch up to the competition, especially with the launch so close.
Competitors
Main competitors
ESPN BET has two main competitors as below:
- DraftKings (ticker: DKNG)
- FanDuel/Flutter Entertainment (ticker: PDYPY)
FanDuel and DraftKings dominate the sports betting space, with a combined roughly two-thirds market share. Barstool Sportsbook had only about 3 percent market share prior to the acquisition, so Penn is betting big that ESPN’s brand equity will cannibalize the market leader and make them the third-largest player in the market.
Gambling Related Stocks
The following are the gamble-related companies listed on the US stock market so far, as well as the US stock code:
- Caesars Entertainment (ticker: CZR)
- Wynn Resorts (ticker: WYNN)
- MGM Resorts (ticker: MGM)
- Entain (ticker: GMVHF)
- GAN (ticker: GAN)
- fuboTV (ticker: FUBO)
- Churchill Downs (ticker: CHDN)
- International Game Technology (ticker: IGT)
- Skillz (ticker: SKLZ)
- Bally’s (ticker: BALY)
- Golden Matrix Group (ticker: GMGI)
- Bragg Gaming Group (ticker: BRAG)
- Elys Game Technology (ticker: ELYS)
- Paysafe (ticker: PSFE)
- Playtech (ticker: PYTCF)
- Esports Entertainment (ticker: GMBL)
- Sportradar (ticker: SRAD)
- Genius Sports (ticker: GENI)
- Gambling.com (ticker: GAMB)
- Boyd Gaming (ticker: BYD)
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