Barstool Sports Navigates New Partnership with DraftKings Amidst Ownership Changes
In a significant shift within the sports betting landscape, Barstool Sports is currently in negotiations with DraftKings to forge a sports betting deal. Following a surprising change of ownership that saw Dave Portnoy reclaim the reins of the company he founded, Barstool is poised to enter into a promotional agreement with the renowned sportsbook operator.
A Deal on the Horizon
The potential partnership would mark a strategic move for both entities, with Barstool set to promote DraftKings without directly attaching its brand to a sportsbook operation. Sources close to the matter suggest that if the deal materializes, it could be valued in the low eight figures annually for Barstool.
However, any formal agreement will have to wait until after the Super Bowl due to a lock-up arrangement established during Barstool's recent divestiture from Penn Entertainment. This clause restricts Barstool from finalizing any betting deals until the conclusion of the NFL season.
Ownership Reversal and Financial Backdrop
Penn Entertainment, previously known as Penn National Gaming, sold Barstool back to Portnoy for a nominal fee of $1. The sale marked an end to a brief period during which Penn had acquired a 36% stake in Barstool for $163 million, followed by the remaining 64% for an additional $388 million. Penn's initial strategy was to leverage Barstool's robust brand identity to bolster their own sportsbook ambitions, but this plan failed to meet expectations.
Subsequently, Penn joined forces with ESPN to launch a new venture, ESPN Bet, following the sale of Barstool. This transition came at a substantial cost, with Penn reporting an $850 million write-off related to the acquisition of Barstool.
The transaction terms granted back to Portnoy included non-compete clauses and other restrictive covenants. One notable condition stipulates that Penn will receive half of the gross proceeds should Portnoy decide to sell Barstool in the future.
Moreover, until the current NFL season wraps up, Barstool is barred from re-entering the betting arena, an industry where it originated as a betting pamphlet back in 2003.
Barstool's Strategic Intentions
Despite not having a betting sponsor at present, Erika Ayers Badan, a representative from Barstool, has signaled the company's intent to re-establish itself within the sports betting domain. This move comes as marketing agreements become increasingly vital for sportsbooks to draw in customers effectively.
DraftKings, familiar with such strategies, has previously acquired VSiN and formed partnerships with various sports podcasts to enhance its market presence. This approach aligns with DraftKings' substantial investment in sales and marketing, which amounted to $1.19 billion in fiscal 2022, although this figure represented a decline from previous years, marking the first drop in over three years.
The potential collaboration with Barstool represents a shift for DraftKings, especially considering the termination of its marketing partnership with ESPN, which opted to collaborate with Penn for ESPN Bet instead.
Barstool and the Betting Industry
Despite the corporate shuffling, gambling advice and picks continue to be a cornerstone of Barstool's content offerings. "Gambling advice and picks remain a critical part of Barstool’s content," a spokesperson mentioned, underscoring the brand's enduring commitment to the betting sector. "I would still argue that [sports betting] is a huge part of what we do today. Our crew bets obsessively on games, we always have... But I think you'll see, into next year, that we start to establish ourselves back in that space."
This forward-looking stance suggests that Barstool intends to not only maintain its legacy within the betting world but also expand upon it through strategic partnerships and market re-entry once contractual limitations expire.
The unfolding developments between Barstool Sports and DraftKings, coupled with the former's restored leadership under Portnoy, are setting the stage for a renewed interplay between media brands and sports betting enterprises. As the industry continues to evolve, all eyes will be on how these collaborations shape the competitive dynamics and consumer engagement within the sports wagering ecosystem.