DISNEY IS NOT ENTERING THE CASINO BUSINESS.

?

Well, through brand licensing, they kind of are. But is it a bad thing?? Not by a half-court long shot.

ESPN’s Sportsbook Plans

?To be more specific, ESPN (a wholly owned subsidiary of Disney) is supporting a licensed brand introduction this Fall of ESPN Bet Sportsbook, an on-line gambling platform with national reach potential.? The brand licensee in this effort,? Penn Entertainment, commit to a minimum royalty guarantee of $1.5 billion over the next ten years.

Is this controversial?? Sure.? For many reasons.? Allow us to use licensing tenets to break down the strategy, to show why it makes sense.

When counseling brands on how to expand their reach through strategic licensing, at Brand Squared Licensing apply our fundamental rules:

Before entering a new category:

1. Determine if this is a meaningful extension areas which the trademark licensor cannot directly enter
2. Calculate risk to the equity
3. Ensure the execution drives consumers back to the core service
4. Quantify new profits that cannot be established elsewhere

Focus on meaningful extension areas…

So much emotion surrounds on-line gambling.? Allow this blog to be dispassionate for a bit.

On-line gambling is meaningful.? The numbers say it all. ? Global on-line gambling generates $95 billion per year in consumer dollars.? The growth trajectory is over 9% per year according to Statista. Since the supreme court deregulation in 2018, on-line sports betting gambling through finite key operators (Draft Kings, MGM) has driven this growth. Room for competition abounds – like streaming platforms ten years ago.? So, brands may directly invest, extend their equity into the space through licensing, or allow others to profit from it.

…which the brand cannot directly enter.

ESPN cannot create its own gambling platform.? The company has no experience running a multi-state gambling enterprise, is absent of any tech infrastructure to handle betting transactions.? Plus - ESPN has no gambling license.? The brand cannot legally take bets and disperse winnings. ??That doesn’t mean on-line gambling is incorrect as an experience for the ESPN brand.? ESPN must use brand licensing, and let other entities pay for the build.

Calculate risk to the equity.

Any passionate fan of Disney could debate this eight ways to Space Mountain.? Everyone gets it.? On-line gambling does not mix with the Disney family DNA.

But ESPN is a separate brand.? With a distinct history, persona, business model, consumer base, and competitive framework.? Where sports fanatics unite.? Men 18+ will watch the network for hours on end, and while watching, yes, they gamble where they can – in fantasy leagues, among friends, or sports book locations.?

ESPN is also one of the primary distribution networks for professional football, auto racing and mixed martial arts – three of the most arguably violent and dangerous sports businesses in existence. ?Is this actually erosive to Mickey or Buzz Lightyear? Come on.? Or a question in reverse - why would ESPN cover sports differently? ESPN made a promise to its consumer.? If ESPN covered the NFL or MMA in an abridged, milder family manner to coincide with Disney equity, ESPN would lose complete relevance.

So what is the risk to Disney?? Over the near 30 years that ESPN has been part of the Walt Disney Company, I can think of no programming or coverage that has been any detriment to the Disney brand.? ESPN has never eroded the Disney consumer equity.? So an ESPN brand licensing extension into on-line gambling – a sports-related consumer experience that ESPN’s primary consumer enjoys – will likely have no effect whatsoever on the integrity of Disney family-branded content.?

Execution Drives Consumers Back To Core Service.

ESPN needs more eyeballs.? All networks do.? So, use a billboard that pays ESPN instead of costing ESPN.? That’s what best-in-class strategic, brand licensing achieves.

Penn – the on-line gambling licensee of ESPN – believes this alliance can capture 20% of the market within several years.? Makes sense.? Consumers rely on ESPN for the professional sports experience, when they can neither play nor be at the stadium.? Penn will draw occasional ESPN enthusiasts to the platform, to which ESPN can market itself featuring meaningful content.? Penn sold Barstool Sports last year for one dollar, yet retained Barstool Sports’ entire user database.? ESPN can leverage Penn as a licensee to robustly increase viewership of its networks, among a broader swath of consumers – consumers that may first be introduced to ESPN through Penn.

Creating New Profits, Not Established Elsewhere.

$1.5 billion in royalties over ten years as a minimum guarantee.? Twenty percent market share of sports betting. An eleven-figure business within five years. That is profit which can

1. Never come from a theme park, a movie theater, or a streaming platform
2. Build earnings per share, raising stock to acceptable investor levels?
3. Subsidize those other divisions of The Walt Disney Company, which face unprecedented pricing, labor and competitive pressure?

Disney stakeholders want more profit, higher wages, and new capital to invest in great content. Like any public corporation – especially legacy media - it must fish where the fish are before other players invade the waters.? So say I to ESPN:? Double down on this one.