Disney Wants To Jump Into Sports Betting, But Who Would It Partner With?
Betting a side or a total may no longer get you side-eye from Mickey Mouse or Donald Duck.
And there may even be a sportsbook wearing mouse ears soon enough.
Although Disney’s ESPN media properties have discussed and embraced sports betting for some time, what is different now, based on a Nov. 10 earnings call, is the parent company has come to the conclusion that fully opening the door to sports betting is in its best interest and will not harm its brand.
“We have done substantial research in terms of the impact to, not only the ESPN brand, but the Disney brand in terms of consumers’ changing perceptions of the acceptability of gambling,” Disney CEO Bob Chapek said on the earnings call, in response to a question from Bank of America’s Jessica Reif Ehrlich about sports gambling. “And what we’re finding is that there is a very significant installation. Gambling does not have the cachet now that it had, say, 10 or 20 years ago. … It actually strengthens the brand of ESPN, when you have a betting component, and it has no impact on the Disney brand.
“Therefore, to go after that demographic opportunity plus the, of course, not insignificant revenue implications — that is something that we’re keenly interested in and are pursuing aggressively.”
Reif Ehrlich did not respond to multiple requests for comment, but the remarks from Chapek resulted in swirls of speculation among media and financial analysts that continue.
Embracing sports betting a total change
Disney’s public statement of interest and intent in sports betting runs counter to its actions in recent years, and its positioning as a family-friendly, anti-gaming entity. In 2018, Disney donated $5 million to Voters In Charge, a nonprofit group that pushed for a Florida constitutional amendment that gave voters the exclusive right to decide whether to authorize casino gaming measures statewide. The referendum, Amendment 3, passed by an overwhelming margin.
Supporting the measure was Disney’s way of trying to reduce competition for the tourist’s wallet by making it tougher for the state to approve any measure on gambling expansion. Since then, the landscape in Florida has changed. Last spring, the Seminole Tribe, which has long offered casino gaming on tribal lands, agreed to a compact with the state that allows for statewide mobile wagering. The tribe launched its Hard Rock digital platform Nov. 1, but it is currently facing a legal challenge.
It has been assumed and reported that ESPN has been considering entering the sports gambling space, but comments to the affirmative on an earnings call take it to the next level. ESPN already has deals with Caesars and DraftKings for link integration and displayed odds for sports betting and fantasy sports.
“It’s reinforcing that it’s not some rumor,” Will Hershey, CEO of Roundhill Investments, told Sports Handle. “That they’re closely looking at getting involved in sports betting, for investors, still takes some getting used to. You don’t think of Disney and gambling.”
Envisioning an ESPN sportsbook partnership
In August, the Wall Street Journal reported Disney was in conversations with both Caesars and DraftKings for a brand-licensing deal between ESPN and the sportsbook companies, but that plan hasn’t been fully embraced by the investment side of the sports betting industry and other sources. The potential deals were reported to be worth in the neighborhood of $3 billion.
“That amount, for a branding deal, didn’t make a ton of sense,” Hershey said. “From a branding perspective, those who can afford Disney don’t need ESPN. Caesars and DraftKings already have established brands. And those who need Disney can’t afford them.”
Hershey isn’t alone. One sports betting industry analyst told Sports Handle that ESPN licensing its name to Caesars or DraftKings “never made an iota of sense,” and that the “licensing angle was wild and completely outlandish.”
While DraftKings typically does not comment on deal speculation, an unexpected media leak forced the company to disclose a proposed acquisition of Entain in September. Behind the scenes, there are indications DraftKings might have shot down rumors surrounding its interest in ESPN right away.
“[DraftKings] management was quick to deny the speculation [about the ESPN licensing deal],” said Chad Beynon, a gaming analyst with Macquarie. “During the last few years, DraftKings’ brand has landed well with sports-first bettors. Moreover, their customer acquisition formula has resulted in a top-three U.S. brand.”
Disney and ESPN splitting up?
If an ESPN name-licensing deal is not a possibility, analysts believe that an acquisition would be the best play for Disney to get into the space, in the mold of NBC’s deal with PointsBet.
“The meatiest part of this is the potential to do an acquisition, and I hate to throw that out there, because it’s super speculative,” Hershey said. “With the roadmap of NBC, ESPN can make an initial investment and retain optionality.”
NBC secured 4.99% equity in PointsBet in August 2020. A year earlier, FOX Sports received a 4.99% equity stake in The Stars Group in exchange for an investment of $236 million. If a media company purchases a minority stake in a sportsbook under 5%, the company can maintain a passive investment in the sportsbook operator without applying for a sports betting license.
Another option for Disney is spinning off ESPN, though that is not as easily done as said. ESPN is currently tied to a number of long-term agreements with leagues and conferences that will require the network to keep live sports programming on linear TV rather than move it to ESPN+. But Disney could retain its position as a “family-friendly entertainment conglomerate” while allowing ESPN to pivot into sports betting. In addition, ESPN is potentially an attractive asset to companies like Amazon or WarnerMedia, as both look to add live sports.
Yet another possibility could be Fanatics, which is attempting to make inroads into sports betting. The company joined six sports betting operators in backing a California ballot proposal for statewide mobile wagering, and it also bid on a chance to get into wagering in New York. While Fanatics was not among the winning New York bids, the company could acquire one of the smaller operators that was awarded access in New York, and following that, make another deal with ESPN that ultimately results in New York market access for all.
“[Disney’s move into sports betting] would have to be on the [mergers and acquisitions] side, otherwise it doesn’t make sense for an operator,” said an industry analyst. “To an ESPN or a Fanatics — the other 800-pound gorilla in the room — I find it hard to see the long-game appeal without equity.”
Betting a side or a total may no longer get you side-eye from Mickey Mouse or Donald Duck. And there may even be a sportsbook wearing mouse ears soon enough. Although Disney’s ESPN media properties have discussed and embraced sports betting for some time, what is different now, based on a Nov. 10 earnings call,…