Draftkings

ESPN is shifting its strategy on online sports gambling, ending its partnership with Penn Entertainment.

The companies announced Thursday they were terminating an agreement that offered ESPN equity in Penn, which operated the ESPN Bet sportsbook app. The app will no longer carry the familiar red ESPN logo. It will operate under a new name.

ESPN said it will partner with DraftKings, a leading sports betting company, which will provide odds and other gaming-related data for the Walt Disney Co. unit’s programs and its digital platforms. ESPN’s on-air staff will use DraftKings’ odds starting Dec. 1.

According to people familiar with the ESPN-Penn arrangement, the app simply didn’t reach its financial targets in the highly competitive business, which operates in the 31 states where online gambling is legal.

In 2023, Penn agreed to pay $1.5 billion in cash over the next 10 years for the rights to use the ESPN name on its app. As part of the deal, ESPN promoted the product across its programming and provided access to on-air talent. ESPN had the right to purchase up to 31.8 million shares of Penn stock for $500 million over the 10-year period.

“When we first announced our partnership with ESPN, both sides made it clear that we expected to compete for a podium position in the space,” said Jay Snowden, CEO and President of Penn Entertainment. “Although we made significant progress in improving our product offering and building a cohesive ecosystem with ESPN, we have mutually and amicably agreed to wind down our collaboration.”

The end of the deal comes shortly after an FBI investigation led to the arrest of Miami Heat player Terry Rozier, who allegedly pulled out of a game claiming injury to deliver a win on one of his prop bets.

ESPN’s decision is unrelated to the recent news, as the company has been in talks for months with DraftKings about a new partnership. But no longer having the ESPN name on a betting app will keep the brand out of the line of fire if the NBA case escalates.

Beginning in December, DraftKings will have its app exclusively integrated across ESPN’s platforms.

The companies said they will “collaborate to advance their shared commitment to responsible gaming, by dedicating prominent assets to educate, raise customer awareness and promote responsible play through campaigns and integrations.”

DraftKings will provide the betting tab within the ESPN app and its customers will receive special promotions for ESPN’s newly launched direct-to-consumer streaming product.

DraftKings operates in 28 states and in Washington, D.C., and Ontario, Canada, and has more than 10 million customers across its products.