Penn Scraps Barstool Sportsbook Brand, Reaches Deal With ESPN

August 9, 2023
Penn Entertainment flipped the script on its sports-betting offering Tuesday, announcing a major new deal with sports media giant ESPN to rebrand its online sportsbook.


Penn Entertainment flipped the script on its sports-betting offering on Tuesday (August 8), announcing a major new deal with sports media giant ESPN to rebrand its online sportsbook.

The two companies announced a new agreement to rebrand Penn’s Barstool Sportsbook as ESPN BET this fall in the 16 states where Penn is licensed to offer wagering.

No more specific timetable was laid out for when the rebranding will take place.

As part of the deal, Penn will pay ESPN $1.5bn over the next ten years, $150m annually, for the exclusive rights to the ESPN BET trademark in the U.S. and exclusive promotional services across ESPN platforms.

Penn also grants ESPN approximately $500m in warrants to purchase 31.8m shares in Penn that vest over the ten-year term.

The deal also includes another 6.4m share warrants that are based on the ESPN BET brand reaching certain online sports-betting market share thresholds, starting at 20 percent and ending at 25 percent of the U.S. market.

According to VIXIO GamblingCompliance research, the existing Barstool Sportsbook offering had just a 2.2 percent share of the U.S. online betting market share in the first quarter of 2023.

Both sides have the ability to terminate the deal after three years if the sportsbook "has not achieved a specified level of market share," although that level is not disclosed. In addition, ESPN has the right to terminate the agreement at the end of year three or year seven if the sportsbook's market access is not an undisclosed percentage of the operator who has the largest amount of access in the U.S. market.

ESPN also has the option to designate a non-voting observer on Penn’s board of directors, or designate a member of the board after the third year of 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,” said Penn CEO Jay Snowden in a statement.

“After meeting with Jay and the Penn team, it was clear that they were the right long-term strategic partner to build ESPN BET into a leading U.S. sports betting platform,” added ESPN chairman Jimmy Pitaro.

“We are confident that the combination of our unparalleled audience along with Penn’s operational expertise and state-of-the-art technology provides us with a tremendous opportunity to serve the ever-growing number of consumers interested in betting,” Pitaro said.

Penn also announced that it was divesting its Barstool Sports sportsbook brand and media offering, selling 100 percent of the entity back to founder Dave Portnoy in exchange for “certain non-compete and other restrictive covenants.”

In addition, Penn has the right to receive 50 percent of gross proceeds Portnoy may receive in any subsequent sale or other monetization event of Barstool.

Despite Penn being an established casino operator in 20 states, Barstool frequently faced added regulatory scrutiny due to its history of producing controversial content and media accusations of sexual impropriety involving Portnoy.

Portnoy acknowledged Tuesday that his own and Barstool's reputations made it difficult for the Penn-Barstool marriage to work in the U.S. gaming market.

“We underestimated just how tough it is for myself and Barstool to operate in a regulated world where gambling regulators, the New York Times, Business Insider hit pieces [expletive] with the stock price,” Portnoy said in a video message posted to Twitter on Tuesday.

“Every time we did something, it was one step forward, two steps back,” he said.

“We got denied licenses because of me, you name it,” he continued. “So the regulated industry, probably not the best place for Barstool Sports and the type of content we make.”

Snowden said Barstool has been “a great partner” for helping to scale Penn’s digital offering.

“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,” he said.

ESPN has long been rumored to be searching for a partner willing to pay a premium to use the ubiquitous ESPN brand on its sportsbook, but was somewhat late to the party after other brands such as Fox and Barstool had done the same and the pool of potential partners who had both the required capital and the need to utilize the ESPN brand rather than their own had dried up.

In August 2021, the Wall Street Journal reported that ESPN was seeking at least a $3bn deal to license its brand for a sportsbook.

Several questions still remain outstanding about the deal, some of which may be addressed on Penn’s quarterly investor call on Wednesday (August 9).

One question is the branding of Penn’s retail sportsbooks in its land-based casinos, which were rebranded under the Barstool brand over the last several years.

Announcements from both Penn and ESPN, as well as U.S. Securities and Exchange filings from Penn, focus solely on the company acquiring the ESPN branding rights as it relates to online sports betting, with no mention of the rights to use the ESPN brand on retail sportsbooks in casinos.

Penn said in its announcement that its online casino offering, which was also branded with Barstool, will be rebranded under its Hollywood Casino brand.

In addition, questions remain outstanding regarding the Barstool sale, including whether Portnoy was required to pay anything to reacquire the company, and if not, why Penn elected to immediately divest of the brand for no immediate return rather than put it on the market.

Just this February, Penn completed the outright acquisition of Barstool, paying $388m for the remaining 64 percent of the company it did not acquire as part of the 2020 agreement that launched the Penn-Barstool partnership.

In that initial deal, the company spent $163m to acquire a 36 percent stake in the online media company and the rights to utilize its brand for sports betting and online casino gaming.

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