Analysts Ask: Is a $3 Billion ESPN Sportsbook Actually Value It?

Regardless of being the “crown jewel of US sports activities media partnerships,” analysts with Morgan Stanley query whether or not an ESPN-branded sportsbook would in the end achieve success or if the prices related to such a product make it prohibitively costly.

The analysts add {that a} legacy on line casino firm would possible be the very best associate for a deal to create an ESPN-branded sportsbook within the US.

Final week, the Wall Road Journal reported that ESPN, which is owned by the Walt Disney Firm, has been in talks with sportsbooks, together with Caesars Leisure and DraftKings, on a multi-year sportsbook partnership valued at greater than $3 billion. ESPN clinched advertising and marketing offers with each corporations final yr.

The deal would reportedly permit an operator to make use of the ESPN identify to rebrand its sportsbook. A deal would additionally possible embody a advertising and marketing part the place the operator can be required to make an promoting spend on ESPN’s platforms.

In a observe to purchasers Monday, Morgan Stanley analysts mentioned that if a licensing deal had been to be reached, “the satan can be within the particulars, together with what number of years and what precisely is roofed, although it appears like a betting operator would be capable of create an ESPN-branded betting product.”

Morgan Stanley tasks the sports activities betting and iGaming market (UFABET) within the US and Canada will attain roughly $20 billion in 2025, with 25% common margins, implying $5 billion in earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA). Utilizing a method to worth the chance for its shares, the agency mentioned a deal valued at greater than $3 billion would indicate that greater than $120 million to $200 million in incremental EBITDA can be wanted to justify funding in an ESPN-branded sportsbook, or greater than a 2.5% to 4% share.

Due to that, the analysts opined that they “see ESPN as probably delivering extra incremental income to a legacy on line casino firm than a legacy sports activities firm as it will be attracting a unique set of shoppers, although means to execute effectively can be key.”

Monday’s observe was written by analysts Thomas Allen and Ed Younger in addition to analysis associates Nicholas DeValeria and Alexandra Ratzker.

Such Partnerships Failed in Europe

Even so, the Morgan Stanley workforce identified that “not all media corporations make good betting corporations.” They cited a number of examples the place common media shops in Europe had been unable to capitalize on their place to make inroads into the sports activities betting house, together with The Solar within the UK, Eurosport in France, Marca in Spain and La Gazzetta dello Sport in Italy.

“The media partnerships within the US haven’t led to any clear winners thus far, both,” the analysts mentioned. “Whereas Sky Betting & Gaming [SBG] is usually held up as the instance of a profitable media model translating right into a profitable betting model, SBG’s success was pushed by revolutionary expertise and distinctive thoughts share in a way more concentrated sports activities media market than the US right now.”

The analysts additionally mentioned a sports activities betting partnership valued at greater than $3 billion would dwarf different offers which have already been signed and questioned whether or not such a bigger deal was in the end price it.

Whereas ESPN is the biggest media asset within the US, it shares sports activities protection with NBC Sports activities, CBS Sports activities, FOX Sports activities and Turner Sports activities—which have partnerships with PointsBet, Caesars, Flutter and DraftKings, respectively. ESPN can be partnered with regional sports activities networks like Bally Sports activities.

“There’s additionally now extra competitors from sports activities media apps, like Barstool, theScore and Bleacher Report and streaming companies like FuboTV,” the analysts mentioned. “Whereas [the] economics of a lot of the prior offers haven’t been introduced, PointsBet in August 2020 paid simply $393 million over 5 years for unique rights for NBC Sports activities.”

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