The Incredible Rise of Barstool Sports
This week, a mere 17 years since its inception, Barstool Sports sold a 36% stake in its company to Penn National Gaming for $163 million, boosting its valuation to $450 million. With the sale, this is the first time that any part of the company will be held by a public corporation. More shockingly, however, is that the Chernin Group bought a controlling share in the company four years ago for an undisclosed amount, however the company was unofficially valued at roughly $15 million, representing an estimated ROI of 1,500%. Barstool’s prolific rise can be attributed to a universally recognizable image, diehard fan base of customers, brilliant social-media based marketing, and innovative new products, which personify success in the modern digital age.
The company began when David Portnoy quit his job to start a gambling newspaper in the Boston area, using cheap sources of labor for delivery such as paying homeless people. From day one, the company’s customers were extremely loyal and the fan base continued to grow gradually. However, it was not until 2007 that Barstool launched its online platform that would allow it to prosper in the age of digital media and become the behemoth that it is today.
With an online platform and a growing base of diehard supporters, Barstool was able to generate considerable revenue from merchandise sales as opposed to premium subscription-based content that many other online publication companies rely on. Doing so allowed the company to profit from advertising its product and not have to alienate a portion of its supporters by limiting access to content. Furthermore, the growth of social media and its platform that currently has millions of followers allowed the company to attract members of its target demographic, young male sports fans, that are among the highest participants in social media. Recently, the company has begun advertising to a new target audience by sponsoring NASCAR driver Matt DiBendetto, and increasing its presence at NASCAR stadiums and events.
In the last few years, the company has been able to compound all of its early successes while staying true to its original identity by investing heavily in podcasts. Today, Barstool’s podcasts “Call Her Daddy”, “Pardon My Take”, and “Spittin’ Chiclets” are among the world's most popular and present the same business strategy of encapsulating a loyal fanbase by having relatable and popular hosts. The podcasts have led to increased advertisement revenue and a sharp uptick on podcast-specific merchandise sales for the company. Further endeavors, such as its amateur boxing circuit, “Rough n’ Rowdy”, have led to increased exposure and advertising revenue.
However, its recent sale marks the company’s newest and potentially most lucrative chapter. With the Supreme Court ruling in favor of legal online sports betting, the industry has exploded and is projected to top $100 billion USD by 2024. Companies such as Draftkings and Fanduel have risen to prominence in the industry. Even more, Penn National has plans to channel Barstool’s soaring popularity and roll out Barstool-themed casinos and mobile sportsbooks. A large portion of the company’s fanbase are already active gamblers, and Barstool has a widely popular subdivision, called Barstool Bets, that provides various sources of media surrounding betting. Until now, Barstool was unable to reap the benefits of gambling as it did not have a platform to take on bets. The marriage of Barstool and Penn National will now allow Barstool to tap into a very lucrative source of income that it has never been able to do before. The company’s entrance into the mobile sports betting sector is a decisive move in the long history of well-timed expansions that has allowed Barstool to grow so rapidly. With few competitors in the sector’s infant stages after deregulation, Barstool is now poised for unprecedented growth, which is incredible given the enormous growth that it has already recently seen.
The incredible rise of Barstool sports can be viewed as a case study for the success of 21st century internet-based startups. Its low capital requirements of minimal physical infrastructure and rapid growth propelled by inexpensive social media marketing represents the business structure of many of the world's most prominent new companies such as Uber and Facebook. The company's commitment to protect its founding principal of making its product accessible to fans without subscription fees unlike other online media corporations such as the New York Times and Wall Street Journal has allowed to the company to reap the benefits of die-hard customers. So when Dave Portnoy claims that the moon is the potential for the company, he is absolutely correct.
Works Cited
“Global Online Gambling Industry Size 2009-2024.” Statista, Statistica, 23 Sept. 2019, www.statista.com/statistics/270728/market-volume-of-online-gaming-worldwide/.
Kafka, Peter. “A Casino Company Is Buying Barstool Sports in a $450 Million Deal.” Vox, Vox Media, LLC., 29 Jan. 2020, www.vox.com/recode/2020/1/29/21113130/barstool-sports-penn-national-deal-dave-portnoy-chernin.
Marcus, Daniel. “Barstool Sports Makes Penn National Deal Official At $450 Million Valuation.” Forbes, Forbes Media, LLC., 29 Jan. 2020, 10:20, www.forbes.com/sites/danielmarcus/2020/01/29/barstool-sports-makes-penn-national-deal-official-at-450-million-valuation/#46b7354b3761.
Sayre, Katherine, and Benjamin Mullin. “Race Is On to Cash In on Sports Betting.” The Wall Street Journal, Dow Jones & Company, 30 Jan. 2020, www.wsj.com/articles/penn-national-gaming-to-buy-minority-stake-in-barstool-sports-11580274060?mod=searchresults&page=1&pos=1.
Sherman, Alex. “Legal Gambling from Your Phone Could Be a $150 Billion Market, but Making It Happen Will Be Tough.” CNBC, CNBC, LLC., 29 Apr. 2019, www.cnbc.com/2019/04/27/fanduel-draftkings-race-to-win-150-billion-sports-betting-market.html.
