Barstool Sports Heading Back into Betting?

Barstool Sports, now back under founder Dave Portnoy's ownership, is in advanced discussions for a comprehensive sports betting deal with DraftKings, according to sources familiar with the matter.

The proposed arrangement, considered a traditional marketing partnership, entails Barstool endorsing DraftKings odds and receiving benefits from customer referrals to the sportsbook. Unlike past ventures, Barstool will not lend its name to a sportsbook or betting app.

Although the agreement is yet to be finalized, negotiations revolve around a multiyear deal expected to pay Barstool in the low eight figures annually. An obstacle to sealing the deal lies in a lock-up period stemming from Barstool's recent separation from Penn Entertainment, preventing any betting deal closure until after the Super Bowl.

DraftKings and Barstool declined to comment on the ongoing talks, while representatives for Penn did not respond to inquiries.

This development occurs less than a year after Penn sold Barstool back to Portnoy for a symbolic $1, following a series of transactions amounting to $551 million. Initially, Penn acquired 36% of Barstool for $163 million, later purchasing the remaining 64% for $388 million. However, plans to leverage Barstool's brand for a sustainable betting app did not materialize as expected, leading to the sale to Portnoy. The transaction included non-compete clauses, and Penn would receive 50% of gross proceeds if Barstool is sold in the future.

Barstool's reentry into sports betting aligns with its origin as a weekly betting and fantasy pamphlet in 2003. While gambling advice remains integral to Barstool's content, the absence of a sponsor limits its involvement in directing the audience to specific sportsbooks.

Former Barstool CEO Erika Ayers Badan hinted at a return to sports betting during a December event, stating, "I think you'll see, into next year, that we start to establish ourselves back in that space."

Marketing partnerships with media companies play a crucial role in sportsbooks, enhancing name recognition and customer acquisition. DraftKings, a key player in this strategy, spent $1.19 billion on sales and marketing in fiscal 2022 and holds partnerships with various sports podcasts. The termination of DraftKings' deal with ESPN last year, tied to ESPN's collaboration with Penn Entertainment for ESPN Bet, paved the way for ongoing talks with Barstool.

It remains to be seen how this potential deal will impact DraftKings' marketing strategy, given its recent quarterly drop in year-over-year marketing spend—the first in over three years.