Barstool, DraftKings Partnership Could Be Interesting, Says Analyst

Sports media personality Dave Portnoy, founder of digital sports outlet Barstool Sports, is reportedly in advanced talks with online sports betting operator DraftKings regarding a multi-year marketing partnership—or acquisition. While details remain scarce, analysts state that a potential deal between the two companies could prove interesting given Barstool’s large and engaged fanbase. 

According to various reports, DraftKings is currently finalizing a contract with Barstool Sports that would grant the sports betting and iGaming operator exclusive advertising rights and potentially an equity stake in the digital publisher. 

Barstool Sports, known for its cheeky tone and emphasis on sports gambling, boasts a loyal readership, particularly among young adult males. A deal with DraftKings would ostensibly allow the sportsbook to leverage Toolies to drive customer acquisition.

The news comes just months after Penn Entertainment cut ties with Barstool Sports and gave ownership back to founder Dave Portnoy for just $1, according to Forbes Magazine.

Penn Entertainment’s Bad Bet on Barstool Sports

In 2020, casino and entertainment company Penn Entertainment placed a bold bet on Barstool Sports as a cornerstone of its sports betting strategy. The Hollywood Casino operator acquired a 36% stake in Barstool Sports for $163 million that year.

In February 2023, Penn followed through with another $388 million for the remaining 64% stake in Barstool, as reported by Variety. The company envisaged leveraging Dave Portnoy’s expansive media presence and engaging his audience for its Barstool Sportsbook app.

However, by August last year, it became evident to Penn that its bet on Barstool was ultimately a losing hand. With the brand failing to provide the expected boost for its sports betting operations, the casino operator opted to sell Barstool Sports back to founder Dave Portnoy for a symbolic dollar.

The sale back to Portnoy reportedly included non-compete clauses preventing Barstool from formally re-entering sports betting partnerships until after the current NFL season. While Penn had invested over $500 million for full ownership, the unraveling partnership demonstrated the difficulties of translating an irreverent media brand into sports betting success.

With Barstool soon to be freed from Penn’s commercial restrictions, DraftKings seeks to leverage lessons from its rival’s flopped Barstool experiment. DraftKings aims to execute a sportsbook integration strategy beyond Penn’s capabilities by securing exclusive sports betting ties to Barstool’s audience and reach.

While Penn Entertainment’s gamble on Barstool as its sports betting vehicle backfired mightily, DraftKings appears ready to bet big that it can make the model work where its competitor could not.

Barstool-DraftKings Makes Sense

Once again, under the leadership of founder Dave Portnoy, Barstool Sports appears poised to re-enter the sports betting space through an expansive new partnership with DraftKings. Multiple anonymous sources indicate the media company has been in advanced discussions with DraftKings on a multi-year deal worth low eight figures annually that would see Barstool promote DraftKings’ betting odds and platforms in exchange for a share of referred customers. 

While the agreement would not involve Barstool directly operating a sportsbook or app, it could still generate significant revenue while allowing the brand to capitalize on the burgeoning U.S. sports betting market. However, due to restrictions from Barstool’s recent spin-off from Penn Entertainment, any official deal will only be finalized after Super Bowl LVII’s conclusion in February. 

Many analysts, including Jed Kelly, the managing director at Oppenheimer, believe that DraftKings linking up with a publisher like Barstool Sports makes a lot of sense, at least on paper. Indeed, Barstool has cultivated an audience that aligns nicely with DraftKings’ target demographic, and there’s certainly potential to move the needle if they play it right.

What a DraftKings-Barstool Partnership Could Look Like

Though details remain fluid, reports indicate DraftKings seeks to become the exclusive sports betting partner across all Barstool Sports properties and platforms. Barstool Sports maintains partnerships with multiple sportsbooks, including Penn National’s Barstool Sportsbook app, which launched in New Jersey, Illinois, Michigan, and dozens of other states.

DraftKings would secure exclusive advertising inventory and branding placement across the Barstool Sports website, podcast network, and other outlets as part of a potential agreement. Additionally, some analysts speculate DraftKings may pursue an equity position in Barstool Sports.

If an investment component manifests, DraftKings will follow a similar playbook to what Penn National executed when it acquired a 36% stake in Barstool Sports for $163 million in 2020. The move gave Penn National exclusive access to Barstool’s brand and customer base for its nascent Barstool-branded sports betting app. 

Like Penn, DraftKings likely views locking down Barstool’s audience and media real estate as an effective customer acquisition strategy despite an already packed marketing budget. Between leveraging Barstool’s reach and potentially taking Barstool Sportsbook out of the equation, an agreement could give DraftKings a leg up on rivals securing valuable sports bettors.

Deal Presents Upside, But Questions Remain

Analysts agree that a Barstool Sports partnership provides upside for DraftKings and some potential pitfalls. While Portnoy’s brand boasts strong engagement metrics across its podcasts, news outlets, and social channels, quantifying its convertible audience for online sports betting is challenging. 

There are also questions about whether Barstool’s generally sophomoric editorial voice meshes cleanly with DraftKings’ brand image. Maintaining an upscale, mainstream-friendly identity has been pivotal to DraftKings’ strategy as legal sports betting expands rapidly across the U.S. 

Some analysts wonder if an overt affiliation with Barstool Sports’ crass persona may undermine those efforts over the long run. That said, in the hyper-competitive and increasingly expensive market to acquire sports betting customers, DraftKings likely views any potential reputational risks as worth the price. 

Wrapping Up

While DraftKings already spends heavily on advertising and marketing initiatives across both digital and traditional channels, a deep partnership with a publisher that caters squarely to potential sports bettors could offer increased conversion. Analysts think DraftKings views a deal with Barstool as a way to augment its already aggressive customer recruitment efforts. If finalized, it would mark Barstool’s highest-profile foray yet back into the sports gambling sphere under Portnoy’s renewed control.

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