Sports-betting insiders explain why Barstool is a hot acquisition target, and how a sale could spark more media and gambling tie-ups
- Barstool Sports is close to selling to a casino company, according to Vox.
- A deal could help Penn National, the casino company, expand its national profile and cut down on the cost to acquire new gamblers.
- A Barstool sale, if completed, could also spur, and set the tone for, future deals between media companies and sports-betting operators.
- "It's going to accelerate the process of figuring out how to create deeper relationships with media companies beyond just buying ads," one sports-industry advisor said.
- Click here for more BI Prime stories.
A sale of Barstool Sports to a casino company could set the tone for future deals between media and sports-betting firms, as gaming companies hustle to stake their claims in the growing legal US sports-gambling market.
Vox's Peter Kafka reported last week that The Chernin Group is in talks to sell a majority stake in Barstool to regional-casino owner Penn National (which declined to comment to Business Insider).
The controversial digital-media brand that's popular with US millennials is one of many publishers that have pushed into sports betting as more US states move to legalize the activity.
In September, Barstool launched a platform, called Barstool Bets, with content for gamblers and a free, daily betting game. The platform is meant to be a hub for sports bettors who Barstool can sell ads against, or monetize in other ways. The move caught the eye of gaming operators.
Penn National, Barstool's reported casino suitor, operates sportsbooks in states including Pennsylvania, West Virginia, and Mississippi, where sports gambling is newly legal. Nationally, the company is not as well known. A deal with Barstool could bring Penn National more recognition as it expands betting into other states.
"Regional casino brands like Penn National are great for local gamers, but completely unknown nationally for sports betting," said one person familiar with the talks, who spoke under condition of anonymity. "So regional players gobbling up media companies with national brands to go after sports betting makes tons of sense."
Sports-betting operators in the US are racing to scale their operations as legal gambling reaches more US states and new competitors crop up.
Some of these companies - including regional players like Penn, and international operators that are now in the US like William Hill - don't yet have the profiles to compete at the national level. It's also pricey to acquire new gamblers through conventional channels, like Facebook and Google, or affiliate channels. Buying or partnering with media companies could give betting operators access to more potential gamblers. Legal betting also offers sports-media companies new potential revenue streams at a time when broadcast rights are getting more expensive and digital-media companies are struggling to survive on advertising alone.
Barstool wouldn't be the first media company to make a deal with a gambling outfit.
In 2019, Fox bought a 5% stake in Canada-based gaming company, The Stars Group, and launched a sports-betting platform called Fox Bet as part of the deal. TheScore, a digital-media outfit in Canada, also operates a sports-betting app, and has a deal with Penn to bring theScore's sportsbook brand to US states like Louisiana and Mississippi.
Owning a media brand like Barstool could help gaming operators cut down on the high cost of acquiring customers
It's not just Barstool's brand recognition that would appeal to a gaming company like Penn. It's expensive to acquire sports bettors.
Most operators today find gamblers by bidding for ads on digital platforms like Facebook and Google, or through affiliates like Catena Media and Gambling.com Group that exist purely to funnel people to gambling sites in exchange for commissions.
DraftKings, which recently announced plans to go public, reported in December that it paid, on average, $406 per new customer acquired in New Jersey during the first half of 2019, and $371 during the second half of 2018.
Those costs could rise as sports betting spreads nationally and more operators compete for players.
Buying a media company with a built-in audience of sports fans who are interested in betting could save an operator like Penn money when acquiring customers down the line.
Industry watchers are expecting a flurry of dealmaking in and around sports betting
Barstool has apparently caught the eye of other sports-betting companies as well.
"We continue to speak or have spoken with everybody from DraftKings to FanDuel to Stars to PointsBet to Penn to William Hill to MGM to Rush Street, etc.," Dave Portnoy, Barstool's founder, said in a statement. "I think that if we aligned ourselves with one company with a shared vision, that company would have an extraordinary advantage in the race to becoming the leading gambling company in the United States."
A deal could be a win for Barstool, too. The digital-media brand might not be as attractive to a traditional-media buyer because of its controversial reputation. Barstool's personalities, including Portnoy, are known for making brash, off-the-cuff remarks, and the company has been accused of creating a culture of cyberbullying and online harassment, The Daily Beast reported.
If a deal for Barstool closes, the operators that miss out might set their sights on other media companies.
"All these folks are thinking about how do you acquire users?" said Mohit Kansal, partner at Clairvest Group, a private-equity firm that has holdings in a number of gaming companies, including casinos, racetracks, and sports-betting technology. "What are ways that I can lock up acquisition sources? Can I cut out the middle man?"
That could lead to more media and sports-betting tie-ups, or other kinds of deals like joint ventures.
"It's going to accelerate the process of figuring out how to create deeper relationships with media companies beyond just buying ads," one sports-industry advisor said.
Industry experts are expecting a flurry of activity tied to sports betting in general during the next 12 months, spurred by DraftKings' planned public listing, as well as the potential Barstool deal. Every operator if trying to get bigger and broader in the US now, to avoid falling behind when legal sports betting reaches national scale.
It has not been reported how much a majority stake in Barstool could fetch. The company was last valued at $100 million in January 2018.
Any sports-betting company that's considering buying a media outfit like Barstool would have to weigh whether to buy the company outright, negotiate a revenue-share deal, or enter into a joint-venture with Chernin.
"I think parties thinking about such transactions struggle with this," the person familiar with some of Barstool talks said. "The first deal that gets done might set the tone" for future deals.