PENN deal with ESPN signals the end for Barstool Sportsbook

PENN Entertainment will be converting Barstool Sportsbook into ESPN Bet.

Talk about betting on yourself.

That’s exactly what Dave Portnoy did in 2003 when he went all in on his Barstool Sports four-page sports newspaper.

Fast forward 17 years and Portnoy did the unfathomable as he sold 36% of his baby for $163 million to PENN Entertainment. Then earlier this year, Portnoy unloaded the rest of his company to PENN for $388 million.

Talk about a windfall.

Yesterday, though, the story took an unexpected twist as a result of PENN paying $1.5 million to ESPN and in turn will convert Barstool Sportsbook into ESPN Bet in the fall, according to reports. PENN is betting on the horse that is the top sports media brand in the world.

As part of this news, Portnoy purchased Barstool Sports back from PENN.

The word “purchased” in this case should be used loosely as he regained the company that he founded and sold for a total of $551 million for a whopping price of $1, according to reports.

According to the terms of the divesture, PENN sold 100% of the Barstool Sports Inc. common stock to 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, which, as part of the agreement, is now allowed to accept advertisements from sportsbooks going forward.

In short, PENN is fine letting Portnoy take back his brand as it didn’t quite hit the nerve of sports bettors as its content does with its vast fan base.

Jay Snowden, Chief Executive Officer and President of PENN, said in a press release, "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 added, "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."

While the Barstool name assisted PENN in quickly distributing the online sports betting app across 16 jurisdictions, it could only secure a single-digit market share, while FanDuel and DraftKings maintain 70%. Barstool Sportsbook also failed to secure a license in New York, which is a state that’s wagered $9.1 billion online through June of this year.

It’s never been said exactly why Barstool Sportsbook didn’t receive a license in New York, but it’s believed to be due to its then connection to Portnoy and the Barstool Sports brand.

In a Twitter post yesterday, Portnoy indicated PENN and himself “underestimated just how tough it is for myself [Portnoy] and Barstool to operate in a regulated world… “Every time we did something, it was one step forward, two steps back. We got denied licenses because of me. You name it. So, the regulated industry, probably not the best place for Barstool Sports, and the type of content we make.”

Emergency Press Conference - I Bought Back Barstool Sports pic.twitter.com/dmUk0eNowx
— Dave Portnoy (@stoolpresidente) August 8, 2023