As the sports betting industry continues to grow and expand, industry-leading giants are expressing curiosity in exploring avenues to get in on the action. One such company appears to be the Walt Disney Company, as noted in the company’s earnings call on Wednesday. Disney owns an 80% stake in ESPN, and its sports segments were the bright spot in an otherwise down quarter with decreasing revenue. With the sports industry adapting to the expanding sports betting market, Disney is looking to be at the forefront of that change.
ESPN’s Profitability for Disney
ESPN is coming off a phenomenal quarter for Disney as the worldwide leader in sports grew in viewership and subscribers. ESPN+, the company’s premium streaming platform, increased its subscribers by 66% over this fiscal year, and 90% of the most-watched broadcasts on Disney’s TV networks were sports events. It’s no secret that the driving force of the Disney Bundle that also includes Hulu and Disney+ is ESPN+ with its diverse catalog of sports events. In addition, Disney inked a ten-year NFL rights deal that begins in 2023. Despite all this success, ESPN’s advertising revenue was flat during the fourth quarter compared to the same period last year.
ESPN Exploring Sports Betting
Disney CEO Bob Chapek called ESPN a “perfect platform” for Disney to expand its operations into sports betting. Gambling can help create new revenue streams while attracting and retaining a younger audience. ESPN is well aware of these benefits and has already inked deals with Caesars Entertainment and DraftKings to link their sportsbooks to ESPN.com. In addition, ESPN was discussing a potential brand licensing deal with both those companies in August, but that did not come to fruition.
Growth of Sports Betting
In 2018, the United States Supreme Court struck down the Professional and Amateur Sports Participation Act, which cleared the way for states to legalize sports betting on their terms. Since then, 32 states and Washington D.C. have launched a legal market. According to the American Gaming Association, during the first half of 2021, Americans bet $24 billion with legal sportsbooks translating to $2 billion in gross gaming revenue. By 2030, the sports betting market is expected to grow to $400 billion in total wagers translating to $30 billion in revenue, according to Macquarie Research.
Media and Sports Betting Synergy
ESPN is a step behind some of its contemporaries as plenty of media companies have dove headfirst into sports betting. Fox, Sports Illustrated, Barstool, and theScore are all media companies to have launched their own sportsbooks in partnership with larger companies. Recently, fuboTV launched its first Fubo Sportsbook in Iowa and is rolling out a product that seamlessly integrates the viewing experience with options for live sports betting. With its diverse catalog of broadcast rights, ESPN would be in a powerful position to deploy a similar strategy.
What About Disney’s Family Values?
Concerns have been raised over Disney getting involved in sports betting due to its family values. In the past, gambling has been rejected by the company as it did not work with the original vision set forth by Walt Disney many years ago. However, concerns over brand withdrawal have dissipated as sports betting has become more mainstream and a significant part of how people engage with sports. Chapek stated that new research shows it “strengthens the brand of ESPN when you have a betting component, and it has no impact on the Disney brand” in terms of preserving its family-centric values.
What Comes Next?
It’s unclear what avenue Disney will explore related to sports betting, but, per Chapek, the Disney company is “keenly interested and pursuing aggressively.” In September, Chapek stated there is a long way to go before ESPN is embedded as its own sportsbook, but it has the potential to “partner with third parties in this space in a very meaningful way.” It will be interesting to keep an eye on how Disney moves forward with the sports betting industry. Still, it sounds like significant developments are on the way for this leading media and entertainment company.