Kenny Rogers once famously stated that “you gotta know when to hold ’em, know when to fold ’em”, but you also sometimes have to know when to double down. DraftKings did just that when they announced a major partnership with ESPN, a short time after the network did away with the struggling ESPN Bet venture. And all of this took place despite the company dealing with a $300 million wound from one of the worst NFL seasons ever.
This is certainly a questionable move for a company that just watched ESPN Bet fail horribly, and for ESPN, this will be their second attempt at sports betting within a three-year span. It is also interesting that ESPN covers a number of sports betting scandals, yet wants to push their own sportsbook, this time with someone else’s name attached to it.
In August 2023, ESPN officially launched ESPN Bet through PENN Entertainment in a $2 billion deal. Unfortunately, the relationship would come to an end just two years later, creating one of the sports betting industry’s most expensive cautionary tales. Enter DraftKings. Within an hour after shutting down ESPN Bet, the Boston-based sportsbook and fantasy sports provider locked down exclusive rights as the sports network’s official sportsbook and odds provider.
The ESPN Takeover
Open the ESPN app, and you will see a betting tab powered by DraftKings. Turn on ESPN for an NBA game, and you will likely see an odds bar pop up from DraftKings. The halftime show, you guessed it, was promoted by DraftKings.
This is not just your basic advertising opportunity for DraftKings; it’s more of a takeover. While ESPN chairman Jimmy Pitaro said this wasn’t just another sponsorship deal, for DraftKings, it is about being anywhere and everywhere sports fans are.
The partnership gives DraftKings the ability to integrate itself across ESPN’s entire system, including the ESPN app, odds during the broadcasts, and access to 73% of the national NBA broadcasts when combined with their NBCUniversal deal. The ESPN deal starts December 1, with users being able to access DraftKings’ sportsbook, daily fantasy, and Pick6 through ESPN’s app, with full integration coming in 2026.
Why Penn Entertainment Failed
So why did Penn Entertainment fail? With a market already dominated by DraftKings and FanDuel, it was incredibly hard to create a top-tier sportsbook from scratch, despite committing over $4.3 billion to online sports betting over the past five years. It was next to impossible for Penn Entertainment to realistically take over a company that had over 10 million customers across 28 states, the technology, the brand, and the scale.
The $300 Million Hit
Now, regarding those NFL losses. DraftKings brought in $1.14 billion in the third quarter, about 8% below expectations. They posted a $126 million EBITDA (earnings before interest, taxes, depreciation, and amortization) loss. A few unlucky weeks cost them $250 million in revenue.
The 2024 NFL season was a disaster for sportsbooks. Favored teams won 75% or more of their games in ten separate weeks of the 18-week season, the highest total since 1983. Over this forty-year period, the average for favorites winning was 4.6 weeks. When the favorites keep covering spreads, and popular bets keep hitting, sportsbooks take a huge loss. DraftKings’ hold percentage dropped from 11% to 5.2%. Truist Securities analyst Barry Jonas described it as the worst stretch DraftKings had ever experienced in terms of money related to NFL bets. According to industry analysts, this is normal variance. Bad weeks happen. The math evens out over time.
DraftKings CEO Jason Robins cut 2025 guidance but still said he’s never felt more bullish about the company’s future.
DraftKings is also expanding. They’re launching prediction markets, adding Spanish language options for the 2026 World Cup, and just won approval for sports betting in Missouri.
DraftKings took a beating this quarter. But they just secured access to millions of ESPN viewers. While Penn Entertainment heads back to the drawing board and rebrands, DraftKings is now ESPN’s exclusive partner.
Can ESPN make this work after the ESPN Bet disaster? Considering DraftKings’ customer base and its technology, ESPN is willing to double down, hoping that the answer is yes. The bigger question for the sports media giant is whether or not it can handle the conflicts that come with being attached to a gambling program, regardless of how the optics look.
