Welcome back to Sunday bites. We’re on Instagram now, so give us a follow.

This week, we’re covering the Penn Gaming sale of Barstool/Licensing agreement with ESPN.

We’re also saying F**k the haters (specifically, 7 of you) because we’re writing about Bob Iger this week, although he’s just a part of the story.

We held off as long as we could, but he’s finally unavoidable (Ahmed is gushing inside, it’s really weird).

This isn’t going to be in the typical format.

So please… let us cook.

ACT I: Penn Gaming and Barstool part ways

Penn Gaming sold Barstool back to Dave Portnoy (groan) for like…no money. The company acquired Barstool 3 years ago in February, and regulatory issues have made the acquisition a little unsavory.

Deal Terms

1. Dave signs a non-compete with Penn Gaming

2. Penn Gaming receives 50% of sale proceeds should Dave sell again

Our One-Bite review:

Say what you will about Dave Portnoy, but he’s built something incredible with Barstool. Their strategy? Harnessing the red beans and rice of great media companies:

1. creating great content

2. executing flawlessly on distribution.

Now, El Presidente is 500mm richer. He has 100% ownership of Barstool without the typical private equity backers that usually come with a transaction like this. The sky is the limit for Barstool. But with Dave at a 100% ownership, the next value unlock might just be an IPO down the road (way…way…way down the road).

ACT II: ESPN signs a huge deal with…Penn Gaming?

Penn Gaming, with the sale of Barstool, now enters into a 10-year licensing deal with ESPN.

• The total payment is about $1.5B (3x what Penn paid for Barstool)

• Barstool Sportsbook will turn into ESPN Bet

• Penn Gaming is going to operate the whole thing; ESPN will promote the shit out of it.

Half-assed analysis to get us to ACT III: 

Can’t wait for all these games to be fixed. We love scripted television (ha ha). The deal makes sense for ESPN, and it’s an incredibly low-lift for the company because they assume no operational costs for the running the book. Although the ticker is now going to be overwhelming to read with all the +/ - odds.

Huge credit to Jimmy Pitaro and sr. leadership for seeing the landscape and being aggressive with it.

BUT…..why get into a sports book now? why not earlier?

ACT III: Enter Disney

If we know one thing, it’s that ESPN is owned by Disney. If we know another thing, we know that Disney is a family-friendly brand.

So why is a Disney property getting into something unsavory like gambling?*

The Finale: Iger and the case of the lost leverage

The answer is: Hulu...

We wrote an email earlier in the year when we laid out ways in which Bob Iger’s sequel bout at Disney might lead back to shareholder nirvana.

One of those things was the potential sale of Hulu. But now it’s highly unlikely. With a push to streamline content, Hulu and Disney+ are integrating, all but guaranteeing a sale of the last third of Hulu back to Disney from Comcast. Iger even said it was a key part of the turnaround strategy when interviewed at Sun Valley last month.

Question #1: What do you do when you own 33% of a thing, and the person who has an option to buy back that thing has said that he loves that thing more than anything else in the world?

Answer: That’s right. You rake that person over the coals to meet your price.** Comcast is going to make Disney pay like $15B for Hulu.

Question #2: You’re a CEO in the middle of a turnaround, you have exorbitant acquisition costs coming up early next year. What do you do?

Answer: You’re going to find your way to increase revenues and find massive value unlocks in order to appease shareholders as you go massively into debt funding said acquisition.

Re-enter: Penn Gaming’s deal with ESPN.

This might be a first of many things we see at Disney, but it’s still a wait and see approach. Because so far, anything we discuss about Disney strategy ends up being wrong.

*Well, ESPN isn’t turning into a sports book itself, so there’s room to maneuver by profiting off its name through licensing.

**Disney/Comcast have options to exercise coming up in 2024 with Comcast having the option to sell Hulu to Disney or Disney having the option to buy Hulu.

None of this is investment advice.

What AI made this week

Have a great week!

Ahmed and Peter