Barstool, DraftKings in “Advanced Negotiations” Over Partnership Deal

Grant Mitchell
By:
Grant Mitchell
01/25/2024
Industry
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Highlights

  • Dave Portnoy bought Barstool back from PENN Entertainment for $1
  • Barstool cannot agree to a new sports betting deal until after the Super Bowl
  • DraftKings’ stock soared following reports of a potential partnership

Just a few months after Dave Portnoy bought Barstool back from PENN Entertainment for $1, the company has entered “advanced negotiations” with DraftKings.

Reports indicate that a potential partnership would not see Barstool branding its name on a mobile sportsbook or betting platform. Instead, the company would endorse DraftKings odds and have a sign-up and referral affiliate bonus. 

Nothing has been cemented between the two parties, but talks are centering over a potential multiyear deal that will see DraftKings pay Barstool at least $10 million annually.

Barstool getting back into sports betting 

While talks are heating up between the two entertainment giants, Barstool is unable to agree to a deal with a sports betting company until February 12, the day after Super Bowl LVIII. That’s because a clause was included during its severance with PENN that banned the company from partnering with another sportsbook until the end of the NFL season.

Barstool’s former CEO, Erika Badan, suggested that Barstool would return to the sports betting scene in December.

“I would still argue that [sports betting] is a huge part of what we do today,” Ayers Badan said at a conference hosted by Sportico. “Our crew bets obsessively on games, we always have… But I think you’ll see, into next year, that we start to establish ourselves back in that space.”

PENN initially purchased 36% of Barstool for $163 million in February 2020 and then spent another $388 million for 100% of the company in February 2023. 

The relationship ultimately failed to materialize into anything substantial and was mired by a hit piece and general controversy targeting Portnoy. 

Once Disney announced its intent to join the sports betting market, PENN snapped up the opportunity (later leading to the creation of a $1.5 billion project, ESPN Bet). Since it could not operate multiple online sportsbooks at the same time, it ultimately decided to sell the company back to Portnoy for a George Washington.

PENN will receive 50% of the sale price if Barstool’s leadership opts to sell the platform again in the future.

Staying ahead of the market 

Sportsbooks often partner with media companies, shows, and influencers to help grow their brand. DraftKings is no exception to this rule and has been involved with a number of high-profile outlets and organizations, including the NFL and ESPN until the latter launched its native betting platform.

DraftKings spent an estimated $1.19 billion on marketing campaigns and operations during the 2022 fiscal year. One of its major budget decisions at the start of 2023 was to dial back new customer promotions, a decision that ended up helping the company’s bottom line in the long run. 

DraftKings’ stock peaked at $40 on Wednesday, the highest it’s been since November 2021. It’s also up 15.3% year-to-day at the time of writing.

The company expects its growth to continue. Internal research led to the conclusion that legal sports betting is growing faster than anticipated in states with legal markets, and the company is also set to expand to North Carolina now that a March 11 launch date has been confirmed by the state commission. 

Meanwhile, ESPN Bet is live in 17 states and already has a hold of 8% of the online sports betting gross gaming revenue share, according to gaming research company Eilers and Krejcik Gaming. The company’s original goal before launch was to seize a 10% market hold within the first three years of operation.

Many industry experts were surprised that the non-compete clause between PENN and Barstool only lasted for less than a calendar year, especially with the massive losses (including an $850 million write-off) PENN took on the deal and the additional $1.5 billion it owed to Disney.

Grant is a sports and sports betting journalist who prides himself in his up-to-the-minute reporting on the latest events in the industry. A member of Virginia Tech’s 2021 graduating class, he has quickly put together an impressive portfolio since moving to the professional world full-time. Grant’s favorite sports to cover are basketball and both types of football (American and soccer), and he is pushing written, audio, and video content. He has been employed by companies as highly regarded as Forbes and continues on a great trajectory in the industry. When he’s not on the clock, you can find Grant at the gym, looking for adventures, or hanging out with his family.