ESPN’s Big Gamble on Sports Betting

From a story on CJR’s The Media Today by Betsy Morais headlined “ESPN’s Big Gamble”:

In 2018, the US Supreme Court struck down the Professional and Amateur Sports Protection Act and lifted the gate to sports gambling across the country. Betting is now legal in thirty-four states, plus Washington, DC; in the past five years, according to the Washington Post, Americans have wagered more than two hundred billion dollars on sports.

Fantasy-league platforms—such as FanDuel and DraftKings—have metamorphosed into sportsbooks that are swallowing sports media whole. In 2019, on an earnings call, Bob Iger—the CEO of Disney, the parent of ESPN—said, “I don’t see The Walt Disney Company, certainly in the near term, getting involved in the business of gambling, in effect, by facilitating gambling in any way.” Last week, ESPN announced a ten-year, $1.5 billion deal with Penn Entertainment, a casino company, to create a sportsbook called ESPN Bet.

“On a superficial level, the Penn deal is a dramatic volte face for a company that had once sworn off sports betting when that sort of moralizing was still economically palatable,” Dylan Byers observed, in his newsletter for Puck. And yet, he added, “the convulsions and transformations of the media business over the last few years gave Iger little choice but to relent to inexorable market forces.”

In a 2021 piece for CJR, Danny Funt explored those convulsions and transformations as they applied to sports journalism and its relationship to gambling. Funt covered the ethical quandaries of journalists capitalizing on nonpublic information, reporters going to work for betting firms, and sportsbooks acquiring media outlets. Michael Lombardi—a former NFL team executive, later a sports reporter, who provides gambling advice at VSiN, “the CNBC of sports betting”—told Funt, “If you don’t like change, you’re going to like irrelevance even less.”

NBC Sports had recently gotten in the game, forming a partnership with a sportsbook called PointsBet worth nearly five hundred million dollars; Fox and CBS signed deals with other gambling companies—as did ESPN, which, as Funt noted, had, despite certain appearances, courted sports-betting for years.

The ESPN deal with Penn, which gives ESPN options to buy five hundred million dollars in Penn stock, “allows ESPN to rake in a large sum of money related to gambling without—in keeping with Disney’s family-friendly brand—becoming a sports book itself,” per the New York Times. ESPN Bet is scheduled to debut in the fall, a reinvention of what had been Barstool Sportsbook, named for Barstool Sports, a media company that Penn is selling back to its founder.

Byers raised the suggestion that Barstool Sports “is actually getting out of a losing situation” with Penn—and noted that ESPN Bet is modeled after Fox Bet, which is now being shut down. Flutter Entertainment—the firm that partnered with Fox, the largest online betting company in the world, and the parent of FanDuel—lost a reported three hundred and thirteen million dollars in the US last year. Ultimately, Byers wrote, “the Penn deal isn’t a solution to ESPN’s larger revenue challenge.”

The announcement of ESPN Bet came a month after ESPN laid off about twenty on-air commentators and told staff that some contracts would be renegotiated at reduced salaries or left to expire. Earlier in the year, Iger announced that he planned to cut seven thousand jobs at Disney and, the Times reported, that ESPN and its streaming offshoot would “become a stand-alone unit for the first time, a move that was instantly interpreted as making the sports behemoth easier to spin off or sell.”

In July, on CNBC’s Squawk Box, Iger said, “Everything’s on the table.” That Disney’s cable networks—anchored by ESPN and its spinoffs—drove fourteen billion dollars in revenue and three billion dollars in profit during the first half of the year seems little consolation: “Revenue for those six months was down 6 percent from a year earlier,” the Times reported, “as profit plunged 29 percent.”

Wall Street logic aside, for ethical journalism, sports betting is “slippery turf,” Funt wrote for CJR. When it comes to reporting on finance, there are established rules: “Mainstream outlets strictly prohibit their employees from investing in the companies they cover. (The Securities and Exchange Commission wouldn’t approve, either.)” Within sports media, however, “gambling in the press box is common, especially in football, and few sports outlets bar reporters from betting within their beats.”

This summer, ahead of the NBA draft, a sports journalist—paid by both The Athletic and by FanDuel—moved betting odds; when an uproar ensued, Dave Sharapan, a longtime oddsmaker, told the Washington Post, “The lines of everything between the leagues, teams, official betting partners and media people and the books and the business—there are no more lines.” And as Eccles told Funt, if a sports site “is totally independent and really run from an editorial angle, if it’s not benefiting you, why the hell own it?”

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