New giant on the block
In what will be a sizable shift in the US sports betting industry, ESPN and Penn Entertainment have partnered to create ESPN BET. It will be the sports media leader’s first official entry into the sports wagering business, though it has partnered with other companies as sponsors and broadcast data providers.
Penn is paying ESPN $1.5 billion plus another $500 million in warrants to purchase Penn stock, an indication of how much the company believes ESPN’s name is worth. Penn’s current Barstool sportsbooks will be rebranded as ESPN BET; the company operates in 16 states.
Now, rather than featuring lines from other betting companies like DraftKings or Caesars, ESPN will (perhaps obviously) use ESPN BET odds and content in its programming.
“Our primary focus is always to serve sports fans and we know they want both betting content and the ability to place bets with less friction from within our products,” said Jimmy Pitaro, Chairman of ESPN, in a press release. “The strategy here is simple: to give fans what they’ve been requesting and expecting from ESPN. Penn Entertainment is the perfect partner to build an unmatched user experience for sports betting with ESPN BET.”
Penn Entertainment will receive odds attribution, promotional considerations, and content integration with the deal, but this naturally eliminates the Barstool brand from the sports betting market.
Portnoy grabs his baby back
To that end, though, Barstool’s founder, Dave Portnoy, has bought back 100% of Penn’s shares in Barstool to take back complete control of the brand. He has agreed to “certain non-compete and other restrictive covenants” and Penn has the right to half the proceeds if Portnoy sells Barstool again.
The Penn Entertainment/Barstool Sports partnership was an interesting one, to say the least. Here you had a traditional gambling company pairing with the “bro culture” of Barstool and brash personality of its founder. Penn begin its gradual acquisition of Barstool in 2020, buying 36% of the company for $163 million with the option to grab the entire pie.
In August 2022, Penn exercised its option to buy all remaining shares of Barstool.
Barstool Sportsbook – the brand to which Penn changed its sportsbooks and named any that it launched thereafter – carved out a solid niche for itself in the competitive US sports betting market. Though it has never been able to compete with FanDuel and DraftKings, its single-digit-percentage market share put it within range – though still behind – BetMGM and Caesars. Its market share has been low, but still, sitting in the top five in the United States isn’t bad.