Why The Penn-ESPN Deal Is Bad For Bettors

A Win/Win/Win deal in the sports betting world has been completed. Disney CEO Bob Iger reached a $1.5 Billion deal with Penn Gaming for ESPN to be Penn’s exclusive media partner, and they are rebranding their Barstool Sportsbook “ESPN Bets”.

Disney and Bob Iger add revenue for ESPN and a growth vertical

Penn moves on from a media company with only ~8 million monthly users to one with 117 million.

The third winner is Barstool CEO Dave Portnoy.

He got editorial control of his company back. He does have to give 50% of any sale back to Penn, so effectively they still own 50% of what matters.

But he gets his company back, even if he personally owns only a small percentage of it.

3 winners.

However, there is one loser in this deal.

You and me.

The Sports Bettors.

Let me give you a peek behind the curtain. A couple of years ago, before I launched Pigeon Picks, I attempted to pull off a similar deal to this one, albeit on a much, much smaller scale. But the center piece goal remained the same, and its how I know this deal is going to be bad for sports bettors.

Once upon a time…

I was the Chief Strategy Officer and co-owner of a small football media company. A couple of years ago when the company values were much different, our business was quite simple. Ad revenue from clicks, and then revenue from first deposits on sports book promos. That’s it. We built up a traffic base to our site that was anywhere from 80-89% organic search traffic.

We got so good at it due to our SEO (Search Engine Optimization) expert, that we began bringing in several million unique users each month. That traffic was funneled to ads and to the sports book promos, all in the same content.

As CSO, I was hell-bent on finding different revenue streams from just ad-revenue. My data had shown we had likely peaked with our current resources and we needed to diversify.

My team focused on our second largest revenue stream at the time. Much like Barstool Sports, the conversion revenue from sports book promos was bigfor us, our second largest behind only ad revenue. We partnered with a 3rd party company who worked directly with the various sports books to procure the promos at a set price.

We essentially acted as the distributor of those promos. We would infuse them into all of our content, in the hopes a % of the nearly exclusively organic search traffic we were getting would click on them and become first time depositors at the various sports books.

What my team began to work on was how else we could maximize the sports betting promos. Sports betting was on a meteoric rise, and we believed it would eventually be the dominant engagement activity for football fans, eventually surpassing Fantasy Football.

How could we take our brand, which at the time, I believed, was focused on education and helping fans be better informed, and position it to ride this wave?

The first question we asked was how can we better funnel additional traffic to these links? That was what we had to work with in the immediacy.

Then, a potentially bigger idea struck us. An ambitious idea for a company our size.

Could we package some of our unique IP into an exclusive partnership with one of the books, and cut out the middle man 3rd party?

Breaking News

What was that unique IP?

Aside from our click-focused boiler plate news content that every other media company was also putting out (power rankings, mock drafts, position rankings, quick analysis to news, etc), we also occasionally broke news via an NFL insider.

Breaking news in and of itself is not unique. Tons of media companies do it when they can. But when you are the ones to break a story, you become synonymous with it, effectively making it IP. Having an insider who can routinely break stories gives you a leg up on all of the other news aggregation companies, which is what we essentially were without it.

My team believed our inside information was the piece we could package to one of the books. Nothing moves betting lines like news reports.

The strategy was simple. Pitch to the sports books that we had access to inside information, and the books could use that information to help them set and/or adjust their lines before their competitors or the public. We would feature their sports book in our news content, and we would funnel our traffic directly to them.

We put together a pitch deck, complete with our portfolio of stories we had broken, the traffic we got on those stories, and how it impacted us across various mediums, like web and video.

But, the crown jewel of the deck was, in our opinion, the smoking gun.

Proof Of Concept

Around the time of the NFL Draft, during an episode of a show I created and co-hosted with Trey Wingo, our insider broke the news that an unexpected player was in “serious consideration” to go number one overall, and that in his opinion, if the draft were held that night, that player would in fact go number one overall.

Just after that, a couple of nights before the draft, the books all moved the lines on who was favored to go number one. Suddenly, the unexpected player in our report was favored.

He in fact, did go number one overall.

In an interview with Trey Wingo during the draft, the book maker for a prominent sports book confirmed that that report forced him to move the lines for that sportsbook. Moving the lines to favor him saved the books lots of money, as those who bet on him to go number one got less favorable odds.

Our reporting moved the betting odds. We had proof of the value of what we were proposing. The books could own the odds, and the news.

We put both clips in the deck. The clip from our show breaking the news, and the interview with the book maker saying the report moved the lines.

So What Happened?

We made our big pitch to two prominent sports books, but ultimately nothing materialized. The executives loved the idea and the pitch, but didn’t think we were big enough for it to really matter for them.

And they were right. We weren’t. But we had some great ideas.

It is because of that experience, that I know why this deal between Penn Gaming and ESPN is bad for sports bettors. ESPN is big enough to matter for a sports book.

They are, in fact, the biggest.

They bring in 117 million active users a month to their platforms. They have the most used fantasy football app in the world.

But more importantly, they have the biggest and most well known insiders in almost every major sport:

• NFL: Adam Schefter

• NBA: Adrian Wojnerowski

• MLB: Jeff Passan

• NCAAF: Peter Thamel

Those are the key pieces to this deal. The sports books hate giving up value to bettors. They obviously want to always have the edge in every line they post. Their odds are carefully calculated.

But imagine you run one of the many sportsbooks, and now you have exclusive info before the public. Imagine you had a head start on knowing an unlikely event was about to take place, contrary to your own calculations (a massive player injury or arrest, draft positioning, trade suitors, etc).

Imagine that when a news report broke, and you moved your lines as a result, the traffic to those reports would be funneled directly to your book.

You now have the ability to move the lines the moment it goes public, before the public can capitalize on the value…

…Or Worse

You would have the ability to manipulate public betting behavior by moving people off of a favorite and on to an different player if you wanted to effect the direction of the money coming in.

I know it sounds nefarious, but there is literally no mechanism preventing this from happening.

Don’t believe this will be a problem?

Ask NBA insider Shams Charania, the first “news breaker” to partner with a gaming company.

On June 22nd, hours before the NBA draft, Charania tweeted out to his 2.1 Million followers that Scoot Henderson, a basketball prospect expected to be one of the first picks off of the board, was “gaining serious momentum at No. 2 with the Charlotte Hornets.”

At the time, player Brandon Miller was favored to go number 2 overall. within minutes of Charania’s “report”, the lines at FanDuel, where he has a financial relationship, moved so that now Scoot Henderson was favored at -380, meaning a bettor would have to bet $380 just to win $100, and the money going to that pick from bettors soon followed.

Well, Charania’s report was wrong. Brandon Miller did in fact go number 2 overall, and Scoot Henderson did not. Charania was an analyst on the FanDuel’s television broadcast of the draft that night.

This means that as the pick came in, bettors were losing money to the same company that was paying Charania to be on TV that night, following his report.

Now, I want to be clear. I am not accusing Charania of anything improper. But, that is kind of the point. It does not need to be nefarious for it to be problematic.

By the way, this incident was never formally investigated and FanDuel released a statement claiming they have no prior knowledge of Charania’s inside information before it is reported by him on his own platforms.

But again, that was never investigated, following his report costing people money at the very platform paying him for his analysis.

ESPN Potentially Presents A Larger Scale Problem

Now, with this deal with ESPN, Penn has access to the most popular and followed insiders for the major sports. Some have even had their ethics repeatedly called into question for previous grievances, such as Adam Schefter.

ESPN has already given assurances that these insiders will not have access to their betting shows. But that doesn’t mean anything. They have access to twitter, or X, or whatever it’s going by these days. These four insiders have a combined 17.8 million followers.

As we’ve seen, one report could move an entire market. Only now, when they do it, it will be directly linked and funneled to the ESPN branded sports book due to this partnership with Penn.

If I was a sports bettor, and I obviously am, I would stay away from that book and now I can’t help but take a long pause when any one of these insiders presents a report. Which is unfortunate. Trade deadline season, draft season, free agency, these are the accounts you tune into. 1e

But, now, while I may still tune in, I won’t be running to the ESPN sports book to capitalize on the information, and you shouldn’t either.

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