Penn to Paper: ESPN BETs Big!

On August 8, 2023, ESPN rolled the dice and announced a new licensing agreement with Penn Entertainment. As part of the agreement, Penn will rebrand their existing sportsbook from Barstool Sportsbook to ESPN BET.  Under the terms of the deal Penn will pay ESPN $1.5 billion over 10 years, but the new pact comes with real risk for the Worldwide Leader.  Unlike Barstool Sports, a significant attribute of ESPN’s brand is trustworthy reporting.  If the company’s credibility comes into question, it could undermine both their new venture and a core component of their current business model. 

ESPN’s move into gambling is not the first high profile example of the conflicts of interest that develop when the worlds of sports reporting and sports betting collide.  A couple of months ago, The Athletic’s Shams Charania found himself at the center of a gambling controversy surrounding the NBA Draft.  Shams is an NBA Insider who is often breaks many of the association’s biggest stories.  He also happens to be a paid FanDuel Partner and co-host of “Run It Back” on FanDuel TV.  FanDuel, like rival DraftKings, was built on fantasy sports, but became a major player in the online sportsbook space once sports betting legalization began to take hold in the United States during 2018. 

On June 22, 2023, a little less than eight hours before the NBA draft, Charania reported that Scoot Henderson was “gaining serious momentum at No. 2 with the Charlotte Hornets…”.  As outlined by Sports Illustrated, prior to the report, FanDuel had Brandon Miller at -650 odds and Henderson at +400 odds to be the second player off the board.  After the report, the odds flipped dramatically, making Henderson a -700 favorite and Miller a +400 underdog.  Ultimately, Charania’s reporting failed to align with the outcome of the draft. Miller went #2 to the Hornets and Scoot landed in Portland as the #3 pick. 

Shams’ reporting was very likely legitimate.  It’s not uncommon for there to be internal debate within a team’s front office right up to the deadline to make a decision; however, the potential opportunity to manipulate the betting public so that FanDuel could rack up substantial profits is obvious.  What if Charania had intentionally crafted a false report on the momentum behind Henderson to drive large amounts of losing bets on the number two pick?  That’s not an accusation, it’s a statement to highlight the real issue…The fact that the relationship between the two parties forces us to ASK the question. 

In the aftermath of the NBA Draft controversy, FanDuel claimed that the company, “is not privy to any news that Shams breaks on his platforms”.  Still, the questions were raised, and Shams’ reputation and character were called into question.  These are the treacherous, shark infested waters that ESPN has elected to wade into…

Every Adam Schefter or Adrian Wojnarowski tweet, that potentially influences movement of a point spread or money line, will now come under intense scrutiny.  The truly unfortunate part is that Schefter and Wojnarowski didn’t sign up for this.  ESPN has put them in an impossible position by adding an entirely new dynamic to their jobs.  Yes, their reporting could always move betting lines, but their employer was not previously in a position to benefit from those results. Prior to pursuing this opportunity, executives at ESPN and Disney undoubtedly discussed the public perception of venturing into sports betting and must have asked each other…Is this REALLY WORTH IT???  I believe IT IS!!!

Over the last decade, ESPN’s business has been shifting more and more towards becoming strictly a live rights company.  Studio shows like its flagship program, SportsCenter, just don’t draw viewers the way they use to.  The world has changed and how fans consume sports and sports media has changed significantly.  Sports talk and analysis has been largely democratized by platforms like YouTube and podcast networks.  Sports commentary in between the games has shifted to a market where viewers/listeners are able to choose between the personalities & styles they identify with, across followings large or small.  

The only properties that remain drivers to ESPN’s cable channel are live sporting events, for which, there’s simply no substitute.  The company’s reliance on live rights, and changing consumer preferences, are forcing ESPN to evolve.  Cord cutting and the dwindling draw of studio shows have resulted in declining revenue and a need to cut cost.

Recently, the company laid off several high-profile on-air personalities, including Jeff Van Gundy, Max Kellerman, Suzy Kolber, and Todd McShay.  Having taken steps to reduce expenses, the company will now look for new sources of revenue.  It’s been widely reported that ESPN is believed to be preparing the launch of a full direct to consumer streaming service, either to supplement or replace ESPN+.  Their current streaming service tends to feature lower profile games, with rating drivers like Monday Night Football, remaining exclusive to the cable channel.

If reducing cost and planning a move to a direct to consumer model is step one in ESPN’s evolution, leveraging the brand’s value, that has been built over 40+ years, is step two.  Even as fans no longer look to ESPN for talk shows and commentary in the way that they had in the past, those four letters still hold incredible name recognition and strong brand loyalty.  In looking to capitalize on their branding, the company may have placed the right bet with Penn!

Cultures and customs change over time. Sports betting is becoming a much larger part of the mainstream consumption of professional and collegiate sports.  As such, it’s a seemingly natural fit to integrate the brand most associated with the broadcast of big games with the viewers interaction with those games, through gambling.  Now is the time for ESPN to take its brand in a new direction!

Unlike Barstool, ESPN has a wide enough reach to potentially draw bettors from competing sportsbooks.  Battles will have to be waged with juggernauts, DraftKings & FanDuel, and Penn’s ability to deliver on the tech will be critical, but the partnership could commandeer significant market share. 

The potential conflict of interest concerns will continue to be raised and regulators may intervene at some point.  In the near future, ESPN might have to decide between being a SPORTS NEWS outlet or a SPORTS ENTERTAINMENT platform.  Quite Frankly, it’s probably a shift they should make proactively, as Stephen A Smith is already established as ESPN’s most marketable personality. Doing so could help prevent what currently feels like an inevitable controversy. If the company is slow to act, and its hand becomes forced, the entertainment route is really the only option. It’s not that the “insider” reporting model can’t be monetized, it’s simply nowhere near as lucrative as the opportunity that legalized sports betting presents…

Cash Rules Everything Around Me, C.R.E.A.M.…Get the money!  

Entertainment PAYS!

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