Sports Betting Partnership Between Penn Entertainment and ESPN Presents Potential Cost Savings
Date: August 14, 2023, 04:00h
Last Updated: August 14, 2023, 12:58h
Penn Entertainment’s groundbreaking 10-year, $1.5 billion sports betting partnership with ESPN is expected to deliver significant benefits for both companies, including substantial cost savings.
The recently announced deal between Penn and ESPN will lead to the termination of similar agreements with Caesars Entertainment and DraftKings, potentially resulting in significant financial savings for both Caesars and DraftKings.
In September 2020, the exact details of the contracts and financial terms were not disclosed. However, speculation suggests that ESPN was earning approximately $75 million per year from these deals. With Penn’s $150 million annual payment over 10 years for the use of the ESPN Bet brand, the loss of Caesars and DraftKings partnerships will help offset the expenses.
It is worth noting that Walt Disney, the parent company of ESPN, recently sold its remaining equity interest in DraftKings for approximately $90 million. This transaction could be related to the new agreement between Penn and ESPN.
Potential Benefits for Caesars
Reports suggest that the financial terms of the Caesars/ESPN deal are even larger than the network’s partnership with DraftKings.
Caesars, a major player in the gaming industry, has been exploring opportunities to reduce debt and save capital. Rumors indicate that the casino operator intends to end its contract with ESPN to achieve these goals.
Given Caesars’ physical presence, it is speculated that the financial arrangement between Caesars and ESPN is larger compared to that of DraftKings. Notably, the Daily Wager betting show began broadcasting from inside a studio at LINQ Hotel on the Las Vegas Strip, which is controlled by Caesars.
The presence of the show at the LINQ and how it will be handled in light of the new agreement remains unclear. However, it is worth mentioning that DraftKings-owned VSiN broadcasts shows from Circa Las Vegas, a competitor in the online sports wagering business.
Potential Benefits for DraftKings
While Caesars may benefit more in terms of financial savings, DraftKings is not left behind.
DraftKings, a prominent online sportsbook giant and iGaming operator, recently achieved its first profitable quarter. With the capital saved from the end of the ESPN partnership, the company has the opportunity to deploy it efficiently, potentially delivering benefits to shareholders.
DraftKings has not publicized its plans for the saved capital yet. However, a share repurchase program, which is rare among emerging growth companies, could please investors, especially considering recent insider selling. According to recent filings with the Securities and Exchange Commission (SEC), four DraftKings insiders, including the three co-founders, sold a combined $22 million worth of the company’s shares.