Penn National Gaming is investing heavily in Barstool Sports, a media company known for its brash content engaging a young audience, to help drive that customer base to the gaming company’s sportsbook app when it launches in August.
Penn National and Barstool executives held a joint conference call for media and investors Wednesday morning to announce Penn National would be spending $163 mm in cash and stock for a 36% share in the media company, with greater investment and possible full acquisition down the road.
For Penn National, which has 41 gaming properties in 19 jurisdictions, the transaction is all about targeting younger customers — the core of Barstool’s demographic — for its future online offerings, as well as existing retail properties.
Barstool brand going to be widely used by PNG
The agreement makes Penn National the exclusive gaming partner for Barstool Sports for up to 40 years, giving it the sole right to utilize the media company’s brand at its retail properties and with online sports betting and casino sites.
The first tangible sign from the partnership will be putting the Barstool Sports brand on Penn National’s 14 existing sportsbooks within casinos, including the Hollywood and Meadows properties in Pennsylvania.
When the sportsbook goes digital before the start of the 2020 NFL season, the app will carry the Barstool Sports name. And in 2021, officials said, a new iCasino offering will carry that brand as well and be different, with more table games, than what Penn National currently offers through Hollywood Casino.
Jay Snowden, president and CEO of Penn National, noted that its brick-and-mortar casino customers’ average age is in the mid-50s, which is hardly optimal looking ahead, including for the growth of sports betting revenue.
While Penn National has partnerships and revenue sharing with online sportsbook operators to provide them skins in states where the company is licensed, including Pennsylvania, PNG is driven in the Barstool transaction by focus on its own pending app.
Penn National has had some 50 engineers in Philadelphia involved in developing and testing that app, which has lagged behind other casinos’ sportsbook launches. The company’s officials say its app will have a uniquely engaging interface and appeal for users to justify the wait.
The younger demographics are crucial
“Sports betting and iCasino is a massive opportunity for Penn National Gaming and Barstool combined,” Snowden said. “Sports betting obviously is a great nexus for us to start to attract and convert younger [customers]. You look at who bets on sports, and they tend to be younger, they tend to be affluent, and they tend to be male.”
That demographic all aligns with the core audience of Barstool Sports, which started as a four-page “gambling rag” some 16 years ago, according to founder Dave Portnoy, and has grown to an edgy, dominant, multi-media force through its website, social media, podcasts, audio and video content, and personalities.
Company officials report its content attracts 66 million unique users monthly. The various Barstool platforms will be used to guide those followers toward Penn National’s online products and physical casinos.
Snowden said PNG knew it needed such a well-known partner in order for its sportsbook app to compete successfully with operators such as DraftKings and FanDuel. Those companies quickly climbed to the top among online sites in the competitive New Jersey market not just due to quality, but because they started so far ahead with brand recognition and massive customer data bases, he noted.
Penn National has no such national recognition on its own.
“The piece we’ve been missing is we needed to find a sports media partner that had a great brand, had a loyal audience, and wanted to fully integrate and align with Penn National Gaming and wanted some skin in the game with us,” Snowden said.
Talks have taken place since the summer
Executives of the two companies have since July been discussing the potential for such a partnership while noting they both also had talks with numerous other companies.
The deal values Barstool’s worth at $450 mm and enables its executives to retain editorial control of their content. After three years, Penn National is to invest $62 mm more to raise its ownership stake to 50%.
Snowden said the track record of PNG’s new partner, however, suggests it knows media best and there’s no reason for the bigger company to interfere. It wouldn’t gain anything by taking over Barstool with a larger ownership stake, he said, although that could still happen eventually.
“We have a path to control,” he said, “but we wanted to be invested in Barstool and not in control of Barstool. It’s important to us that Barstool continue to evolve as it has for the last 16, 17 years.”
The relationship can only benefit the casino company, Snowden stressed.
“They’re experts at digital and social media, very different than traditional media, and I think that’s important as you think about who the sports bettor is,” he said. “Our collective focus is on introducing and driving a significant number [among the]Barstool audience into Penn retail casinos and online products.”
The media company understands millennials
Erika Nardini, chief executive officer of Barstool Sports, touted the company as one that understands “how to create content that breaks through” among people in their 20s, 30s, and 40s interested in sports and comedy.
The company has grown exponentially in the past 3½ years in particular, she said, with highly diversified revenue increasing 53% to 65% annually to nearly $100 mm a year now.
“We have every key demographic important to sports betting,” Nardini asserted. “We will integrate Penn National whenever and wherever possible to drive conversion [to its online site and properties]. Ultimately, it gives us a place to bring our audience.”
Snowden said that despite the size of its investment in Barstool, PNG makes that up by forgoing millions of dollars in marketing costs that would have been needed otherwise to build its own brand. Those Barstool followers provide a ready-made audience.
“It will significantly reduce our customer acquisition spend by serving as the primary customer acquisition funnel for our sports betting products,” he said.
Photo by Shutterstock.com
Subscribe and get alerts on new PA online gambling sites and bonus codes