The last week of January brought news of a unique deal between casino operator Penn National Gaming, owner of two casinos and two racinos in Ohio, and Barstool Sports.

Penn National will make an initial investment of $163 million for a 36% interest in the Barstool Sports media company. The initial $163 million investment consists of approximately $135 million in cash and approximately $28 million in shares of non-voting convertible preferred Penn stock.

Additionally, under the terms of the deal, Penn will increase its stake in Barstool to 50% in three years for an additional investment of approximately $62 million. The deal also contains an option for Penn to eventually purchase the remaining interest in Barstool.

Penn National is hoping that the deal will drive some of Barstool’s 66 million monthly consumers to one of Penn National’s 41 casinos in 19 states. Penn secured exclusive rights to Barstool’s brand for use at Penn’s properties and for its online gaming operation. The deal has a 40 year term and will enable Penn to capitalize on Barstool’s already established sports betting presence.

Sports Betting Opportunities

Sports betting is currently occurring in 14 states with 14 more considering sports betting legislation. Six states have passed legislation and will roll out sports betting within this year. Mobile betting has proven to be responsible for the lion’s share of legal sports betting, accounting for about 80% of wagering in New Jersey in 2019. Penn is banking on that percentage applying nationwide as more and more states legalize.

Barstool, established in 2003, has always had a focus on sports betting and offered tips since its inception as a Boston based print publication.  In 2019, Barstool had a soft launch for its site Barstool Bets, which, according to Penn National, has already had about 100,000 people sign up since September. Sports bettering attracts a generally affluent, male customer base and Barstool’s primary audience is male. Sixty-five percent of Barstool’s audience falls between the ages of 21 and 44 and 62% of them gamble on sports. Of that 62%, 44% claim to bet weekly with an average bet of $51. The strength of the Barstool brand and its cohesiveness with sports betting is what Penn wants to capitalize upon and monetize.

Under the terms of the deal, Barstool will maintain editorial control over its websites but will incorporate Penn National advertisements. Similarly, Penn National will brand its brick and mortar sportsbooks and its mobile app, debuting in August, as Barstool.

Penn National has agreements with other sports betting companies DraftKings, PointsBet, theScore, and The Stars Group to operate online betting in its casinos. But Penn has not captured the massive increase in online sports wagering that other properties have who have partnered with other sports media companies like FanDuel. Penn seeks to change that with this new deal.

Additional Benefits

Penn hopes to see additional benefits beyond sports betting through this deal in the form of a younger customer base. Penn’s CEO Jay Snowden noted that their average customer is in their mid-50s but both Barstool’s audience and sports bettors are a younger demographic. Snowden stated, “Sports betting is a great nexus for us to attract and convert younger sports bettors.” Since 65% of Barstool’s audience is between the ages of 21 and 44 this provides the opportunity for Penn to reach its target market while also lowering the average age of its customers.

“We needed to find a sports media partner that had a great brand, had a loyal audience, that wanted to fully integrate and align with Penn National Gaming and that wanted skin in the game with us,” Snowden stated. “And Barstool is that partner.”