The Walt Disney Co. (DIS) might not be wagering on sports betting now, but the opportunity may prove to be too big to ignore long term.
Shares of the entertainment giant wavered in morning trading as concerns on spending on streaming platforms have come into focus.
A shift in opinion from CEO Bob Iger in terms of sports betting could serve as a strong catalyst to bolster ESPN products and further the already impressive growth of ESPN+. That firm catalyst could serve to calm many reticent market minds to gamble on the stock after Tuesday's arnings report.
"This is a gambling economy too," Action Alerts PLUS portfolio manager Jim Cramer said on Wednesday morning. "If you're going to gamble, you need ESPN+."
To be sure, Cramer is referring to the company's sports analysis that could help gamblers place their bets. Iger made clear during the conference call with analysts last night that the company is not eyeing any endeavors into being your bookie.
"I don't see The Walt Disney Company certainly in the near-term getting involved in the business of gambling, and in fact, facilitating gambling in any way," Iger said. "I do think that there's plenty of room and ESPN has done some of this already and they may do more to provide information in coverage of sports as a for instance that would be relevant to and of particular interest to gambling and not be shy about it...But getting into the business of gambling, I rather doubt it."
Yet, this could be a missed opportunity.
According to Zion Market Research, a New York-based analytics solutions firm, the worldwide online gambling market was valued at $45.8 billion in 2017 and is expected to more than double to $94.4 billion globally by 2024.
For reference, a relatively small sportsbook player like Draft Kings is already commanding a valuation north of $1.5 billion.
The growth of the market, and its underlying businesses, to the level forecast by market researchers, could be accelerated by the relaxation of legislation surrounding the industry in the U.S. as well.
At present, about half of the states in the U.S. have regulated sports in some shape or form. After the Supreme Court struck down federal restrictions on sports betting under the Professional and Amateur Sports Protection Act, that could become the new norm.
"It is expected that more states are going to adopt similar regulations, allowing this market to grow, as the government want to benefit from the tax revenues," a report from the Dublin-based analysis firm Research and Markets adds.
It is also important for Disney to realize that its key ESPN competitors, like the AT&T (T) owned Bleacher Report, will not be as skittish about capitalizing on gambling.
"We are big believers that gambling is a big part of the future," Turner President David Levy said in an interview at the CES conference in January. "Bleacher Report reaches a third of all [fans ages] 18-34 every month. So BR Gaming will be a big part of what we are going to do."
Bleacher Reports mobile app is currently hot on the heels of ESPN, coming it at number eight in terms of downloads while ESPN placed third.
If betting is added as a key differentiator, the "go-to" status of ESPN's app could be eroded.
Even a simple addition of betting lines or a partnership with betting sites to direct traffic could curb that concern.
"We never expected Disney to take bets, but the creation of more content geared towards a legalized gambling industry? This could easily provide tailwinds to viewership and subscriptions as more and more people seek a trust source like ESPN for their gambling related content," the Action Alerts PLUS team noted.
In the end, Disney is likely reticent to bet on gambling in any meaningful sense given the company's family friendly image.
However, for a company that draws millions to watch gambling-centric events like the World Series of Poker, it seems frivolous to ignore the opportunity.