The casino company will pay ESPN $1.5 billion to license its brand name for its sports betting operation over the next 10 years. The new agreement reflects gambling companies’ desire to attach themselves to sports media brands and is ESPN’s first such deal with a sports betting firm and a nod to the network’s struggles amid declining cable viewership. 

“ESPN has been out there as a sort of white whale for a long time,” says Oklahoma State University management professor John Holden, who studies the sports media and gambling industries, tells Fortune. “It was somewhat inevitable that at some point, ESPN was going to jump into this industry.”

Penn’s sportsbooks had previously been branded with Barstool Sports, the sports media company founded by Dave Portnoy, and which Penn fully acquired in February. To make way for the new ESPN partnership, Penn will sell Barstool back to Portnoy for just $1 and 50% of any proceeds from a future sale, according to the The Hollywood Reporter.

Portnoy, who had stayed on with Barstool after its acquisition, welcomed the new arrangement for restoring editorial freedom he felt he’d lost because of the highly regulated nature of the gambling industry. In a video posted to X (formerly Twitter), he also vaguely  acknowledged that some of his conduct, which included sexual harassment allegations, was incompatible with the clean image that state gambling regulators prefer.

The branding musical chairs leaves both ESPN and Barstool Sports in the positions that had previously been occupied by the other. In the past, the Disney-owned ESPN had been hesitant, if not outright reluctant, to enter the world of sports gambling, which it considered incompatible with the Magic Kingdom’s family-friendly image. But ESPN is now under intense financial pressure because of cable subscribers cutting the cord in the streaming era, and is therefore grappling with declining revenue. Disney is reportedly considering a partial sale of ESPN to a deep-pocketed buyer. 

Meanwhile, Barstool sports made a name for itself precisely with its brand of sports commentary that pushed the limits and was heavily infused with sports betting lingo and advice. But its name recognition with the general public pales compared to ESPN’s. 

“The way we’ve talked about sports betting is to make it very conversational, and to really make sports betting an organic, authentic, and integrated part of what we do,” Barstool CEO Erika Ayers said on a podcast appearance in February. 

Penn and ESPN didn’t immediately respond to requests for comment.

Disney dragged its feet in entering the sports betting market because of its general aversion to gambling, Holden says. But it could afford to wait because the strength of ESPN’s brand gave it the luxury of time during the jockeying for position that comes with any nascent industry, Holden says.  

Penn Gaming originally purchased a 36% stake of Barstool Sports in 2020 for $163 million, before buying the rest in February for $388 million. Penn made the deal, in large part, to use the Barstool trademark in its betting operations without having to pay an ongoing licensing fee. When the February deal closed Penn CEO Jay Snowden specifically cited Barstool’s large audience, which it hoped it could turn into future bettors at its own casinos and online gaming sites. 

Penn appears to have taken a similar approach in its latest deal with ESPN, upgrading from the upstart Barstool Sports with “the worldwide leader in sports.” The new deal hints that Penn may not have received the marketing boost it had hoped for with the Barstool deal. 

“Penn thought that they were going to sort of walk into third place in market share,” Holden says. 

As of the second quarter of this year the top two sportsbooks by market share were FanDuel, with 47%, and DraftKings, with 32%, according to their latest earnings reports. Part of Penn’s deal with ESPN includes additional payments if the former reaches 20% to 25% market share in online sports betting. 

ESPN will not operate the new sportsbooks, to be called ESPN BET. However, it will promote it regularly on its various television and streaming programs, according to an investor presentation. The move is in keeping with how Disney CEO Bob Iger envisioned ESPN’s role in sports gambling in 2019, saying there was “plenty of room” for ESPN to provide sports coverage that would be of interest to bettors “and not be shy about it,” without ever getting into the gambling business itself. ESPN BET will consist of a mobile app, website, mobile website and brick-and-mortar retail locations, ESPN said in a statement on its website. Taking its time ultimately netted ESPN what it wanted: a lucrative licensing deal that keeps it out of the gambling business. 

“I don’t think [Disney and ESPN] have got a lot of risk here,” Holden says. “There’s a lot of upside for them if everything goes right, but they don’t have a lot of risk from the deals.” 

Sports betting became legal in the U.S. in 2018 when the Supreme Court overturned the Professional and Amateur Sports Protection Act, paving the way for state-by-state legalization. In 2022, the sports betting industry generated $7.5 billion in revenue, up 72.7% from the year before, according to the American Gaming Association, the industry’s trade organization. As of today, 34 states and Washington D.C. have legalized sports betting, while another four have approved legislation that has yet to go into effect. The piecemeal nature of legalization means that the industry’s biggest companies—both domestic and international—continue to jockey for position amid a land grab for market share. 

The well-positioned market leaders like FanDuel and DraftKings have recently been joined in the online sportsbook market by legacy casinos like MGM and Caesars. They’ll soon be joined by Michael Rubin’s sports memorabilia juggernaut Fanatics, which recently acquired the Australian sports book Pointsbet for $225 million in June. When asked what success for ESPN looks like in this increasingly crowded market, Holden offers a very pragmatic answer: “the checks clearing.”