The gambling and content sides of the sports media world saw two seismic related developments Tuesday. One saw ESPN strike a deal with Penn Entertainment to rebrand Penn’s current online “Barstool Sportsbook” offering as “ESPN Bets.” The second saw Barstool Sports founder Dave Portnoy buy back 100 percent of that company from Penn. Portnoy announced that in an “emergency press conference”:
Emergency Press Conference – I Bought Back Barstool Sports pic.twitter.com/dmUk0eNowx
— Dave Portnoy (@stoolpresidente) August 8, 2023
Here are more details on the Barstool/Penn transaction from a Penn release, with that also touching on how this came about thanks to Penn striking that deal with ESPN:
PENN sold 100% of the Barstool Sports, Inc. (“Barstool”) common stock to David Portnoy in exchange for certain non-compete and other restrictive covenants. PENN also has the right to receive 50% of the gross proceeds received by David Portnoy in any subsequent sale or other monetization event of Barstool
Jay Snowden, Chief Executive Officer and President of PENN, commented, “This transformative, exclusive agreement with ESPN marks another major milestone in PENN’s evolution from a pure-play U.S. regional gaming operator to a North American entertainment leader. ESPN Bet will be deeply integrated with ESPN’s broad editorial, content, digital and linear product, and sports programming ecosystem. ESPN Bet will also benefit from PENN’s operational experience, extensive market access and proprietary technology platform, which successfully debuted in the U.S. this July.”
…Mr. Snowden continued, “In connection with the transaction, we are selling Barstool back to founder David Portnoy. Barstool has been a great partner and we are thankful to Dave Portnoy, Erika Ayers, Dan Katz and their team for helping to rapidly scale our digital footprint across 16 jurisdictions in the U.S. and introducing their audience to our retail and digital products. The divestiture allows Barstool to return to its roots of providing unique and authentic content to its loyal audience without the restrictions associated with a publicly traded, licensed gaming company.”
“Our agreement with ESPN will provide us access to the largest ecosystem in sports, with 105 million+ monthly unique digital visitors, an audience of more than 370 million across social platforms, 25 million ESPN+ subscribers, and the nation’s #1 fantasy database. PENN’s ability to leverage the leading sports media brands in both the U.S. and Canada with ESPN and theScore, combined with our newly launched sports betting app, will allow us to significantly expand our digital footprint and catapult ESPN Bet into a strong podium position in this space. We believe we can achieve substantial adjusted EBITDA in our Interactive Segment over the coming years – and this will translate to very strong free cash flow generation for the Company and value creation for our shareholders,” concluded Mr. Snowden.
Penn initially bought a minority stake in Barstool in January 2020, with that transaction valuing the full Barstool enterprise at $450 million. They acquired the rest of the equity in Barstool this February. And they’ve made many moves to boost Barstool, from acquiring theScore (which looks to still be part of Penn after this deal) at least partly so they could use its tech stack to support Barstool Sportsbook to shutting down theScore Bet in the U.S. to further promote Barstool Sportsbook to using Barstool branding for their physical sportsbooks to opening sports bars and concession stands and launching liquor brands. But now, those sides are going their separate ways, with Penn instead pivoting online operations to ESPN branding.
This makes sense on some levels. There had been some reports and discussions of tensions rising between Barstool and Penn, although Portnoy had disputed those. And those even seem referenced in Snowden’s comment of “The divestiture allows Barstool to return to its roots of providing unique and authentic content to its loyal audience without the restrictions associated with a publicly traded, licensed gaming company.” And a continued relationship between Penn and Barstool might have gotten very awkward after this Penn-ESPN deal (which produced good results for Penn in after-hours trading Tuesday) given the messy history between Barstool and ESPN.
But it’s still wild to see Penn sell Barstool back to Portnoy. And it will be interesting to see what that means for everything from the branding on Penn’s physical sportsbooks (not mentioned in this release) to the sports bars, liquor deals, and more, and to see what it means for Barstool’s content now they no longer seem to have a specific sportsbook to promote. And a lot of interesting things here likely will receive more reporting in the coming days, from how much Portnoy paid for this to what those restrictive covenants and noncompetes entail to how Barstool will change outside Penn.
[Business Wire, Dave Portnoy on Twitter]
