DraftKings Shares Spike On Reports Of Multibillion-Dollar Deal With ESPN—Here’s Why It’s A Big Deal For Disney

Topline

ESPN and DraftKings are nearing a deal on an exclusive brand partnership, Action Network and Bloomberg reported Thursday night, sending the sports betting company’s stock surging and potentially revealing how the world’s largest sports media brand plans to cash in on the lucrative sports betting industry.

Key Facts

DraftKings would rename its sportsbook to include the ESPN name in the deal worth as much as $3 billion, according to Action Network, while Bloomberg did not report on specifics of the potential agreement.

DraftKings shares rose more than 5% to $16.92 in early trading before settling to a more modest 1.6% gain, while shares of ESPN’s parent Disney dipped 3.1% to $100.04 amid a broader selloff.

A DraftKings spokesperson wrote in a statement the company has a “great, long standing relationship with ESPN,” but it speaks “to a variety of companies on a regular basis and don’t comment on the specifics of those conversations,” and ESPN did not immediately respond to Forbes’ request for comment.

Key Background

The sports betting market hit $76.8 billion in 2021, according to Data Bridge Market Research, projecting the industry will reach $168 billion by 2029. Disney owns about 6% of DraftKings, gaining that stake originally owned by Fox Sports after it acquired 21st Century Fox in 2019. DraftKings shares surged during the pandemic, and its CEO Jason Robins briefly became a billionaire last spring, but the stock has crashed more than 75% since March 2021. Disney stock hasn’t fared much better, with its shares down nearly 50% from its March 2021 peak.

Crucial Quote

“Now we’re going to need a partner to do that, because we’re never going to be a book, that’s never in the cards for the Walt Disney Company,” Disney CEO Bob Chapek told CNBC last month about ESPN developing a sportsbook. Chapek’s vow to not create a separate sportsbook came after he stirred some confusion days earlier when he said ESPN was “working very hard” on developing a sports betting app.

Surprising Fact

Billionaire Daniel Loeb’s hedge fund Third Point purchased a reported $1 billion stake in Disney in August, with Loeb calling on the company to spin off ESPN in order to expand its sports betting footprint. Loeb backed off his activism last month.

Big Number

22. That’s how many states have legal online sports betting, while another 10 states permit in-person bets.

Further Reading

DraftKings’ Founders Say Profitability Depends On Rollout Of States Legalizing Sports Betting (Forbes)