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After years of speculation about whether ESPN would ever launch a sportsbook to capitalize on the boom in online gambling, the Disney-owned sports broadcaster announced a $2 billion deal with Penn Entertainment to launch ESPN Bet this autumn. As part of the deal, ESPN will sever existing marketing ties with DraftKings and Caesars Entertainment, while Penn has fully divested from its previous sportsbook partner Barstool, likely resulting in an -$850 million loss. The large expenditures on Penn’s side speak to the magnitude of what the casino operator believes ESPN branding will add to its offerings.

Sports betting is now legal and operational in 34 state markets (and DC), which has helped firms like DraftKings finally reach profitability after years of sustaining losses from massive marketing costs and fierce competition. Wagering on athletic events generated over $7 billion in revenue last year and, with the NFL season now right around the corner, sportsbooks are gearing up for what could be a record-breaking fourth quarter.

Related ETF: Roundhill Sports Betting & iGaming ETF (BETZ)

In a groundbreaking 10-year deal worth up to $2 billion, ESPN will launch a sports betting operation with casino-owner Penn Entertainment The sportsbook will be launched under a joint venture called ESPN Bet, with Penn paying ESPN an average of $150 million per year for its brand, promotional services and other rights. The agreement also entitles ESPN to tie up as much as $500 million in stock warrants over the next decade, equivalent to approximately 31.8 million common shares of Penn Entertainment. ESPN Bet is planned to launch this fall in the 16 states where Penn has already acquired sports betting licenses.

Though the Penn deal will mean a phaseout of ESPN’s existing marketing deals with DraftKings and Caesars, it does not prohibit ESPN from selling advertising opportunities to competitors, which has become a huge line of business across sports media. According to research from ad tech firm Disqo, the projected ad spend for US sports wagering in 2023 is $2 billion. With NFL football about to initiate its 2023-2024 season, the bulk of this ad spend is expected to be doled out over the next several months. Football season is seen as the most fertile ground for sports betting in the US. The American Gaming Association estimates that the number of betters utilizing retail sportsbooks is expected to rise by 21% this year, closing in on 7 million users.

The ESPN-Penn deal concludes a long period of speculation about whether the worldwide leader in sports would ever formally partner with a sportsbook. The Walt Disney Company is the majority owner of ESPN and, due to the brand’s family friendly image, a formal entry into sports betting was seen as controversial by…

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