The agreement would pave the way for the media giant to capitalize on the growing wave of legalized sports betting, according to the people, who asked not to be identified because the talks are private. The structure and details of the partnership couldn’t be immediately learned.

DraftKings shares rose as much as 8.8% on Friday, defying a broader market slump. The stock has fallen about 39% so far this year, valuing the company around $7.5 billion. Disney slipped 2.1% as of 9:49 a.m. New York time.

A tie-up between the two companies “makes strategic sense,” said Bloomberg Intelligence analysts Brian Egger and Geetha Ranganathan. “Licensing EPSN’s brand to a sports book and integrating bet odds in broadcasts could help both companies widen their audiences.”

ESPN declined to comment. A spokesperson for DraftKings said it doesn’t discuss conversations it has with other companies, while noting it has “a great, long standing relationship with ESPN.”

Media companies are looking for ways to cash in as more states legalize sports betting. Many TV networks have seen a flood of ad dollars from sportsbooks that are competing to sign up bettors.

ESPN has already invested heavily in sports gambling, though it has steered clear of taking actual bets. The broadcaster has betting-related shows such as Daily Wager and marketing deals with DraftKings and Caesars Entertainment Inc. where links to the sportsbooks are integrated into ESPN’s website. Disney also acquired a stake in DraftKings as part of its acquisition of Fox’s entertainment assets in 2019.

Disney and gambling

In a recent interview, ESPN Chairman Jimmy Pitaro told Bloomberg that the sports media giant wants to “eliminate friction” for bettors.

“We know that sports fans are craving not just more sports betting content, but they’re craving the ability to actually place bets in a seamless fashion from their online digital sports experiences,” Pitaro said.

Disney has been searching for a major sports betting partner for ESPN for more than a year, seeking as much as $3 billion for an extended deal.

Since then, the stock market has reconsidered valuations for sports betting operators. Penn Entertainment Inc., parent of the Barstool Sportsbook, has lost more than half of its value, for example. Major players, including Caesars and Wynn Resorts Ltd., have slashed their marketing spending amid ongoing losses in the business.

As a company known for wholesome family characters like Mickey Mouse and Snow White, Disney has long shunned gambling. The Burbank, California-based company refused to put casinos on its cruise ships or license its characters to slot machine manufacturers. But with the explosion of sports betting across the US that attitude has begun to change.

Disney Chief Executive Officer Bob Chapek told Bloomberg last month that ESPN is critical to his overall vision of the company, one that involves more direct connections to consumers.

“Sports betting is a part of what our younger, say, under-35 sports audience is telling us they want as part of their sports lifestyle,” Chapek said in that interview.