Penn National Gaming, Owner of Tropicana, Buys Stake in Barstool Sports

Cartoon Hands ShakingPenn National Gaming, a regional gambling operator which owns the Tropicana Casino in Las Vegas, announced on Wednesday that it has bought a minority stake in Barstool Sports, the digital sports, entertainment and media platform.

With the $163 million deal, Penn National Gaming hopes it will put them in a prime position to compete in the growing sports-betting market in the US. Barstool, known for its roots as a Boston sports blog founded in 2003, is valued at a whopping $450 million.

When considering the deal, Barstool Sports will become a private gaming partner for Penn National. This deal could be active for up to 40 years and will give them the exclusive right to use the Barstool brand, whether that’s for online betting or retail products.

Penn National expects to close the deal in the first quarter of 2020, according to a company press release.

“With its leading digital content, well-known brand and deep roots in sports betting, Barstool Sports is the ideal partner for Penn National,” Jay Snowden, president and CEO of Penn National, said in a statement.

Increased Company Value Over Time

Initially, the deal will grant Penn National a 36% stake in Barstool Sports, however, that number will increase to around 50% in three years, with an additional investment of $62 million. Initially, Penn National will also receive two seats on Barstool Sports’ board of directors. Penn will receive other forms of executive control as well.

“Penn National Gaming has one of the biggest infrastructures in the country for gambling. They have sports tracks, they have casinos, they’re all over the country. They have the infrastructure, we have this rabid audience, this fan base craving it. Together, we’re going to create an omnipresent approach to gambling,” David Portnoy, president and founder of Barstool Sports, said in statement on Twitter.

Existing Deal Has Supreme Court Ruling to Thank

This deal never would have come to fruition if it weren’t for a key Supreme Court decision that occurred in May of 2018. On a federal level, the court ruling legalized sports gambling in the US. Now, individual states have the ability fo decide if they want to approve the legalization of sports betting and the terms that come along with it.

Since then, there’s been a rush by both media companies and the gambling industry to capitalize on what they both assume will be a boom in online betting. At the time of writing, the primary leaders of this movement are DraftKings and FanDuel. While they were operating as “daily fantasy” sports games, the two organizations spent a lot of money on marketing the activity and are now at the forefront of online and mobile sports betting within the United States.

The daily fantasy bubble quickly deflated, but the investment those companies made exposing themselves to a young audience seems to have paid off. The two companies are now surpassing the older, more established gambling institutions where online sports betting is legal.

Future Plans

Penn National, which runs or owns dozens of low-profile casinos and hotels around the US (Tropicana in Las Vegas being its most well-known property), believes that Barstool will be critical in attracting consumers to its casinos. The brand is also planning to launch an online betting app and bring in more traffic through these accessible means.

The head of Penn Interactive, Jon Kaplowitz, has high hopes for the Bartool Sportsbook brand. On behalf of his company, Kaplowitz states they’re looking forward to introducing 20 million customers to the new brand, through their retail sportsbooks and interactive products. In a statement, he said:

“Our growing team of product and engineering talent at Penn Interactive is focused on what we anticipate will be a best-in-class sports betting app, which is expected to launch in the third quarter of 2020.”

A person briefed on Barstool’s business estimates the company generated between $90 million and $100 million in revenue last year, with the majority coming from podcasts, merchandise sales, and gambling deals. Under the new agreement, Penn National Gaming’s revenue is projected to grow rapidly.