Three of the most recognized and successful brands just shook up the sports and gaming world. Penn Entertainment announced it has split with previous partner Barstool Sports, and has formed a new partnership with ESPN.
Penn Entertainment’s deal with ESPN covers just sports betting, as of now. The new platform that’s set to be released in the future will be called ESPN Bet.
Several Pennsylvania sportsbooks have passed Barstool Sportsbook in handle over the past few years as it worked to establish itself.
Penn Entertainment to launch ESPN Bet this fall
There will be more information on the partnership during Penn Entertainment’s earnings call on Aug. 9, however, the company did send out a press release with key highlights:
Exclusive right to the No. 1 US sports brand: Penn has secured the exclusive right to the ESPN Bet trademark for online sports betting in the US for an initial 10-year term, which may be extended for an additional 10 years upon mutual agreement.
Launch of ESPN Bet: The online Barstool Sportsbook will be rebranded ESPN Bet in the fall of 2023; theScore Bet will continue to operate in Canada.
Deep integration: ESPN Bet, operated by Penn Interactive, will benefit from exclusive promotional services across ESPN platforms including programming, content and access to ESPN talent.
ESPN becomes a highly aligned, long-term strategic partner: Agreement enables efficient customer acquisition and retention spend across premier sports content.
Penn Entertainment is making a $1.5 billion payment to ESPN over the course of the 10-year agreement. ESPN will also be granted approximately $500 million of warrants to purchase about $31.8 million of Penn Entertainment common shares that will vest ratably over 10 years, in exchange for media, marketing services, brand and other rights provided by ESPN.
Penn CEO, Jay Snowden, commented on the deal:
“This transformative, exclusive agreement with ESPN marks another major milestone in PENN’s evolution from a pure-play U.S. regional gaming operator to a North American entertainment leader. ESPN Bet will be deeply integrated with ESPN’s broad editorial, content, digital and linear product, and sports programming ecosystem. ESPN Bet will also benefit from PENN’s operational experience, extensive market access and proprietary technology platform, which successfully debuted in the U.S. this July.”
What happens to Barstool Sportsbook?
Barstool Sports is exiting the gaming industry, according to Dave Portnoy’s “emergency press conference” on Twitter. Portnoy, Barstool’s founder, announced he purchased back his company from Penn Entertainment. He said:
“We underestimated just how tough it is for myself and Barstool to operate in a regulated world. The regulated industry is probably not the best place for Barstool Sports and the type of content we make.”
Penn Entertainment sold 100% of Barstool Sports back to Portnoy in exchange for certain non-compete and other restrictive covenants. Snowden said:
“In connection with the transaction, we are selling Barstool back to founder David Portnoy. Barstool has been a great partner and we are thankful to Dave Portnoy, Erika Ayers, Dan Katz and their team for helping to rapidly scale our digital footprint across 16 jurisdictions in the U.S. and introducing their audience to our retail and digital products. 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.”
All three parties have provided vague details on the next steps. ESPN Bet is expected to launch “in the fall of 2023.” Barstool has not made any announcement on when its sportsbook would wind down, either.
Barstool Sportsbook’s Twitter account is still operational, however the company changed the handle. Originally, the handle tag was @BSSportsbook. Now the handle is @stoolgaming.
Though this move may leave more questions than answers, PA bettors will soon be wagering on an ESPN app.
Barstool struggles in PA sports betting market
Because of Barstool Sports’ brand recognition and loyal following, Penn Entertainment expected the partnership to yield substantial results. That did not happen for either company.
As Portnoy alluded to, Barstool faced controversy the entire duration of the partnership with Penn.
Barstool blurred the lines of responsible gambling behavior by smashing objects after losing bets. Then, the company had to fire an employee who rapped song lyrics that contained a racial slur. PlayPennsylvania raised the question earlier this year if Barstool could operate in a regulated industry. It appears we have gotten our answer.
Not only did Barstool struggle on a regulatory front, the sportsbook itself did not perform to expectations. Barstool lost significant market share in Pennsylvania over the last two years.
The operator commanded 13.2% market share in December 2020 and February 2021. Then in June 2023, handle plummeted to 4.6%. BetMGM, Caesars and BetRivers all passed Barstool in handle by 2023.
Barstool now gets to go back to the non-regulated industry and do what it does best. While Penn found a new partner with ESPN, who is looking to make a splash in the sports betting industry.
There may not be any losers in this deal.