Media Companies Keep Turning to Gambling. It’s Not What You Think

Brian Steinberg
·3-min read

Gambling is often full of risk, but it may also be the surest bet stressed executives in the frenzied media business these days can make.

Disney earlier this month became the latest of the traditional media conglomerates to hook up
with purveyors of sports wagering. Under terms of a deal struck with Penn Entertainment, Disney’s ESPN stands to receive $2 billion in cash and warrants over10 years from the gambling purveyor. In return, ESPN will help market a new sportsbook, ESPN Bet, by incorporating the name into its shows and content.

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“It has become a big part of storytelling,” Mike Morrison, ESPN’s vice president of sports betting and fantasy, says about betting. ESPN runs a show called “The Daily Wager” that is devoted to odds-making, but he sees new opportunities to host discussions about betting during pre-game shows and during game play, all with ESPN Bet getting a shout-out.

Notably, neither ESPN nor Disney will actually take a bet on any of their media platforms as a result of the arrangement. That may be wise. It’s hard to see the backer of premium family properties like “Lilo & Stitch” and “Toy Story” getting heavily involved in the worlds of casinos and wagering. What’s more, who has money to invest in a massive business venture amid a downturn in advertising revenue, TV viewers’ move to streaming and a weeks-long Hollywood labor strike?

Disney is only making a small wager. Breaking into the online sports betting market “would require significant capital to build out technology and compliance infrastructure and fund massive advertising and promotion programs to attract and retain bettors,” says John Harrison, who leads EY’s media and entertainment practice in the Americas. “By entering through a capital-light partnership anchored in licensing and other agreements, media companies secure exposure to incremental growth, customer engagement and cash flow.”

Not long ago, sports betting was seen as a path to the future for big media brands. Not only were consumers eager to take part in legalized betting, but networks believed the interactive technology that facilitates wagers might extend to other kinds of programs (want to text about the outcome of the next episode of “Masked Singer”?).

After a few years of contending with betting giants like DraftKings and FanDuel, however, there’s a growing sense betting may not be the panacea for which many had hoped. The business requires
scale that media companies don’t have the money to build right now, says Patrick Crakes, an
industry consultant and a former Fox Sports executive. “Gamblers are pretty sophisticated. They
move around and take advantage of different offers.”

Yes, there is money to be made. NBCUniversal struck a five-year deal with PointsBet of Australia in 2020. The pact gave the media company an equity stake and a guarantee that PointsBet would advertise advertising on NBCU properties such as its local sports outlets. Fox struck a deal with The Stars Group in 2019 that launched the Fox Bet sportsbook and gave Fox a stake in the company. When Flutter Entertainment then bought Stars, Fox wound up with a 2.5% ownership stake in Flutter and an option to
buy a stake in FanDuel, which Flutter controls.

Disney will also have new warrants that might bring control of some gambling activity under its umbrella. It isn’t clear that ESPN wants to keep them. “We have time to address the warrants,” says Morrison. “We will see the best way to manage them over time.”

Owning a betting business outright? That might be a roll of the dice no media outlet wants to take.

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