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The new ESPN BET venture will launch in 17 states Tuesday (November 14), officially marking the belated arrival of one of the biggest players in the U.S. sports world into the sports-betting space.

Prior to the announcement of its partnership with Penn Entertainment to launch ESPN BET in August, ESPN, and its parent company Disney, had been a passive observer in the rapidly expanding U.S. sports-betting space over the past five years.

In February 2019, Disney CEO Bob Iger was skeptical of the famed family brand getting involved with the gaming space beyond coverage on ESPN.

“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,” Iger said in an earnings call at the time.

As investor interest in sports betting soared, however, Disney could not help but notice, and following Iger’s initial retirement, his successor Bob Chapek frequently spoke on earnings calls for over a year about how the company saw sports betting as an opportunity and teased action from the company sooner rather than later.

Iger has since returned to the company as CEO.

Media reports had initially indicated that ESPN was seeking a media partnership similar to the Sky Bet venture in the UK or the ill-fated Fox Bet attempt in the U.S., with the Wall Street Journal reporting in August 2021 that ESPN was looking for at least $3bn in a deal and had conversations with DraftKings and Caesars Entertainment about licensing its brand.

However, it would take another two years for an ESPN deal to cross the finish line, and over that time, sports-betting valuations tumbled as a clear pecking order emerged in the sports-betting industry with DraftKings, FanDuel and BetMGM solidifying podium positions while most other operators scrambled for single-digit market share.

Ultimately, ESPN agreed to a deal with Penn that sees the gaming operator pay $150m annually for up to ten years for the exclusive rights to use the ESPN brand, as well as granting ESPN approximately $500m in warrants to purchase more than 31m shares in Penn stock that vest over the ten-year term.

The deal comes with an early exit clause, however, as each side can leave the marriage after only three years if the venture fails to reach a specific level of U.S. sports-betting market share.

Although that figure has not been disclosed, Penn CEO Jay Snowden hinted shortly after the deal was announced that the target is at least 10 percent of the U.S. sports-betting market in terms of overall revenue.

“We’re not doing this deal to be 4 percent or 5 percent market-share player,” Snowden said in August. “That’s not going to be acceptable for us, it’s not going to be acceptable for ESPN, and so, you should assume if those are the ranges we’re in, that’s not going to work out long term.”

One of the biggest questions surrounding ESPN’s involvement, particularly given its early reticence, is how invested the company is in the ESPN BET venture’s success. 

The company will receive additional Penn stock warrants if the venture’s market share exceeds 20 percent, but such a target is a lofty one in an environment where Penn’s previous effort, Barstool Sportsbook, was hovering around 2 percent of U.S. market share, according to 91����ԭ�� GamblingCompliance research.

Snowden said during an appearance at the ESPN Edge Conference last week that in his early meetings with ESPN, it became clear that ESPN was looking to better integrate sports betting into its own product.

“It was crystal clear to me in that conversation that the ESPN sports fan, who goes to ESPN platforms every day to check on scores and storylines and box scores, look at the lines of these games, but when they're ready to place a bet, they have to leave ESPN 's ecosystem and go somewhere else to place the bet.

“And so it was very clear to [ESPN CEO] Jimmy [Pitaro], this isn't something that ESPN wants to do,” he continued. “This is something that ESPN has to do, because sports fans are demanding it.”