In an unexpected business move, Penn Entertainment unveiled on Tuesday that Barstool Sports, the media powerhouse founded by Dave Portnoy in 2003, will be returned to its original owner. This decision closely followed the announcement of Penn's intention to form a strategic alliance with ESPN, aiming to rebrand and elevate its existing sportsbook ventures.
According to Penn's official statement, Portnoy will reclaim "100%" ownership of Barstool in an intricate deal. This agreement involves "non-compete and other restrictive covenants" on Portnoy's end. In addition, should Portnoy decide to sell or monetize Barstool in the future, Penn is slated to receive a substantial "50% of the gross proceeds" of such a transaction.
Barstool's Ownership Odyssey
It's worth noting the journey of Barstool's ownership. Back in 2016, Portnoy sold a significant stake in Barstool to The Chernin Group. Fast forward a few years, and Penn acquired Barstool in its entirety for an impressive sum of $551 million.
However, in a video released Tuesday, Portnoy elucidated the challenges faced by Barstool under Penn's regulatory umbrella, citing difficulties with gambling regulators and media outlets affecting the stock value. He candidly expressed, "Every time we took an initiative, we felt like we were moving one step forward only to be pushed two steps back”.
Portnoy's direct involvement led to some setbacks, including license denials. He also added, “The regulated industry is perhaps not the ideal environment for Barstool's distinct content." Yet, Portnoy perceives this transition as a "win-win" scenario.
He expressed relief about returning to unrestricted content creation, emphasizing, “We no longer need to tread lightly”. Affirming his commitment, he proclaimed, "I will never part with Barstool Sports again." Simultaneously, Penn disclosed plans to rebrand Barstool Sportsbook as 'ESPN Bet.'
ESPN's chairman, Jimmy Pitaro, expressed confidence in the alliance, lauding Penn’s operational expertise and cutting-edge technology. He believes the collaboration will cater to the increasing demand of consumers keen on sports betting.
Penn CEO, Jay Snowden, reciprocated the sentiment, highlighting the fruitful relationship with Barstool and appreciating Portnoy and his team's unparalleled efforts in the domain. He noted, “Barstool’s divestiture enables it to reconnect with its core, offering authentic content, free from the constraints of a licensed, public gaming entity”.