DraftKings falls 10% on new threat for sports gambling market share from ESPN-Penn partnership

One of the starring sports gambling stocks fell sharply connected Wednesday aft media elephantine ESPN took a ample measurement into the online betting world.

Shares of DraftKings were down 10% successful midday trading aft Penn Entertainment announced that it had signed a 10-year woody with ESPN. Penn volition rebrand its sportsbook — presently named aft Barstool — to ESPN Bet.

Shares of DraftKings was nether unit aft ESPN and Penn National Gaming announced a partnership.

ESPN, which is portion of Disney, had antecedently been reluctant to afloat clasp the highly competitory online gambling industry. However, ESPN is shedding cablegram subscribers, and Disney CEO Bob Iger told CNBC successful July that the institution was unfastened to strategic partnerships with the sports media brand.

As portion of the deal, Penn volition wage ESPN $2 cardinal successful currency and banal warrants implicit 10 years to licence the brand. Shares of Penn roseate 8% connected Wednesday.

The determination could awesome an extremity to a non-exclusive selling woody that ESPN has with DraftKings. Disney besides has an equity involvement successful DraftKings.

"It is imaginable ESPN could person required DraftKings to driblet its ain marque successful favour of ESPN branding, which would person intelligibly presented its ain hurdles. The PENN/ESPN concern besides raises the question of whether Disney volition clasp onto its little than 5% involvement successful DraftKings oregon look to unwind its position," MoffettNathanson expert Robert Fishman said successful a enactment to clients Wednesday.

"Big picture, we volition spot if this is the archetypal measurement for Disney to reposition ESPN done caller partnerships and adjacent a imaginable caller strategical equity spouse that mightiness assistance ESPN with organisation and contented arsenic good arsenic superior to de-risk the plus for the company," Fishman added.

Disney's fiscal third-quarter net study is owed retired connected Wednesday aft the marketplace close. The media giant's banal was down little than 1% up of the report.

— CNBC's Michael Bloom contributed reporting.