In this picture illustration, the American day-to-day dream sports contest and sports wagering business DraftKings logo design is shown on a smart device screen.
Budrul Chukrut|Lightrocket|Getty Images
One of the leading sports betting stocks fell dramatically on Wednesday after media giant ESPN took a big enter the online wagering world.
Shares of DraftKings were down 10% in midday trading after Penn Entertainment revealed that it had actually signed a 10- year handle ESPN. Penn will rebrand its sportsbook– presently called after Barstool– to ESPN Bet.
Shares of DraftKings was under pressure after ESPN and Penn National Gaming revealed a collaboration.
ESPN, which becomes part of Disney, had actually formerly hesitated to totally accept the extremely competitive online betting market. However, ESPN is shedding cable television customers, and Disney CEO Bob Iger informed CNBC in July that the business was open to tactical collaborations with the sports media brand name.
As part of the offer, Penn will pay ESPN $2 billion in money and stock warrants over 10 years to certify the brand name. Shares of Penn increased 8% on Wednesday.
The relocation might signify an end to a non-exclusive marketing offer that ESPN has with DraftKings. Disney likewise has an equity stake in DraftKings.
“It is possible ESPN could have required DraftKings to drop its own brand in favor of ESPN branding, which would have clearly presented its own hurdles. The PENN/ESPN partnership also raises the question of whether Disney will hold onto its less than 5% stake in DraftKings or look to unwind its position,” MoffettNathanson expert Robert Fishman stated in a note to customers Wednesday.
“Big picture, we will see if this is the first step for Disney to reposition ESPN through new partnerships and even a potential new strategic equity partner that might help ESPN with distribution and content as well as capital to de-risk the asset for the company,” Fishman included.
Disney’s financial third-quarter incomes report is due out on Wednesday after the marketplace close. The media giant’s stock was down less than 1% ahead of the report.
— CNBC’s Michael Bloom contributed reporting.
