Disney Partners with Penn Entertainment on Sports Betting
Introduction
It seems like an unlikely combination, but the world of Mickey Mouse is colliding with Sin City. The Walt Disney Co. has recently announced a partnership with Penn Entertainment, a US regional casino chain, to venture into the world of sports betting. This unexpected collaboration has raised eyebrows and garnered attention from industry observers.
The Background
Previously, Disney had been cautious about associating itself with the gambling industry due to concerns related to potential gambling addiction and the stigma surrounding it. However, with the promise of new revenue streams, Disney’s CEO Bob Iger has decided to change the company’s stance.
This strategic move comes at a time when Disney’s traditional revenue streams, such as broadcast and pay-TV networks, are earning less due to the rise of cord-cutting and the significant investments in the company’s streaming services. The House of Mouse’s shares have declined by more than half since their peak in 2021, reflecting the challenges the company faces in adapting to the changing media landscape.
The Partnership
Under the agreement, Penn Entertainment will pay Disney a whopping $1.5 billion over the next decade to gain access to its betting app inside ESPN content. In addition to this financial benefit, Disney will also receive guarantees on Penn’s shares. If the new “ESPN Bet” meets certain market share targets, Disney will be entitled to one-fifth of Penn’s shares, further solidifying the partnership between the two companies.
While this collaboration may seem unconventional, both Disney and Penn Entertainment are hopeful that it will be a game changer. Penn’s shares have already seen a positive impact, with an increase of over a third after the announcement of the partnership. This surge in confidence implies a market capitalization of $4 billion for Penn Entertainment.
By aligning with ESPN, Penn Entertainment aims to tap into the vast audience of sports fans who consume sports content on the popular network. This move could potentially lead to a significant increase in Penn Entertainment’s earnings before interest, taxes, depreciation, and amortization (EBITDA), with the company projecting a potential $1.5 billion in incremental annual EBITDA. This far exceeds the initial estimate of $2 billion for this year.
The Challenges
While the financial prospects of sports betting may seem promising, there are several challenges that both Disney and Penn Entertainment must overcome. The sports betting industry has seen heavy losses due to the substantial investments required in marketing and technology to acquire customers. Reports suggest that the industry has suffered losses in the billions.
In Penn Entertainment’s case, the acquisition of Barstool, a media group specializing in sports betting, came with a hefty price tag of $550 million. Additionally, there are associated capital and operating costs that must be considered. As part of the new arrangement with Disney, Penn Entertainment will return Barstool to its founder, Dave Portnoy, for free. While this decision may seem financially unfavorable, Penn Entertainment believes that the institutional knowledge gained from Barstool will prove invaluable in their partnership with Disney.
Expanding Opportunities
The partnership between Disney and Penn Entertainment has the potential to pave the way for further opportunities in the sports betting industry. As legal betting on games becomes available in more US states, the market is set to expand further. With its extensive audience reach and brand recognition, Disney can position itself as a key player in this evolving industry.
Furthermore, this collaboration opens up possibilities for other media companies to explore partnerships with gambling entities. The success of Disney and Penn Entertainment’s venture could encourage other industry participants to consider similar alliances, leading to a significant transformation of the sports betting landscape.
In Summary
The partnership between Disney and Penn Entertainment marks a significant shift in the former’s stance on sports betting. This unexpected collaboration opens up new revenue streams for Disney and taps into the lucrative world of sports betting for Penn Entertainment. While there are challenges and risks associated with this venture, including the potential for gambling addiction and heavy investments, both Disney and Penn Entertainment are optimistic about the opportunities it presents.
The world of Mickey Mouse merging with the excitement of sports betting may seem like an unlikely pairing, but it is a testament to the ever-evolving nature of the entertainment industry. As the sports betting landscape continues to evolve and expand, it will be interesting to see the impact of this partnership and how it shapes the future of both Disney and Penn Entertainment.
If you’re a subscriber and would like to receive alerts when Lex’s articles are posted, simply click the “Add to myFT” button at the top of this page, above the title.
—————————————————-
| Article | Link |
|---|---|
| UK Artful Impressions | Premiere Etsy Store |
| Sponsored Content | View |
| 90’s Rock Band Review | View |
| Ted Lasso’s MacBook Guide | View |
| Nature’s Secret to More Energy | View |
| Ancient Recipe for Weight Loss | View |
| MacBook Air i3 vs i5 | View |
| You Need a VPN in 2023 – Liberty Shield | View |
Receive free updates from Walt Disney Co.
we will send you a myFT Daily Recap email rounding up the latest walt disney co news every morning.
Mickey Mouse Meets Sin City sounds like a bad elevator speech for a movie. But it is true. Family Disney will work with Penn Entertainment on sports betting. Late on Tuesday, the US regional casino chain ended its partnership with media group Barstool Sports to work with Disney’s ESPN.
Disney He had long been careful to mar his healthy record with the stigma of the game. That’s understandable given the potential for gambling addiction, as opposition to the UK industry shows. Legal betting on games is now available in 34 US states.
But the promise of a new source of revenue has led Disney boss Bob Iger to change his stance. The House of Mouse’s shares have more than halved since the 2021 peak. Disney’s streaming spending has skyrocketed, while its broadcast and pay-TV networks earn less in the era of the cord cut.
Penn’s stock price has followed a similar path, peaking at $130 in 2021, just after partnering with Barstool. But its shares are trading again near pre-pandemic levels in the low $20s. Part of the problem has been controversial Barstool founder Dave Portnoy, perceived as an irresponsible gambling promoter.
Disney and Penn hope this agreement is a game changer. In exchange for gaining access to his betting app inside ESPN content, Penn will pay Disney $1.5 billion over the next decade. In addition, Disney will obtain guarantees on Penn’s shares. If the new “ESPN Bet” meets certain market share targets, Disney receives one-fifth of Penn’s shares.
Penn’s shares were up just over a third Tuesday night in aftermarket trading, implying a market capitalization of $4 billion. Including his heavy debt and lease load, his enterprise value is $15 billion. This alliance with ESPN could eventually mean $1.5 billion in incremental annual Ebitda, Penn thinks. It had projected just $2 billion of ebitda this year for its existing business.
However, the financial reality of sports betting is bleaker. Heavy investment in marketing and technology to acquire customers has led the industry to losses in the billions. In fact, Penn spent a total of $550 million to buy Barstool, never mind the associated capital and operating costs.
In effect, Penn will return the Barstool to Portnoy for free. Still, any institutional knowledge he gained clearly appealed to Disney. Penn knew when he would fold and plan the next hand. Disney’s reputational bet has just begun.
If you’re a subscriber and would like to receive alerts when Lex’s articles are posted, simply click the “Add to myFT” button at the top of this page, above the title.
—————————————————-