Barstool Sportsbook
The highly anticipated launch of the Barstool Sportsbook app is the tenth addition to Pennsylvania’s collection. Since acquiring a portion of Barstool Sports, Penn National Gaming revealed its intention to launch the app in time for the 2020 NFL season, and it achieved that goal. 2 days ago “Early returns from Michigan’s recent jump into the regulated sports betting market revealed that Penn National’s Barstool Sportsbook was the lone operator to turn a profit over the first. Our Barstool Sportsbook review expects a mobile app version of the platform to be available on both iOS and Android. Kambi Gaming will likely power the app, with long-standing ties to Penn National. A free-to-play app is currently available at Barstool which you can try out. Barstool Sportsbook is now live in Pennsylvania and Michigan. It will eventually be available in several states that offer online sports betting. Barstool Sportsbook’s promo code offers new users a $1,000 risk free bet. It is fairly standard fare among online betting apps.
Barstool Sportsbook holds a major feather in their cap for the month of December, but they may not want you to know it.
Penn National Gaming (36% stakeholder of Barstool Sports) put forward a fantastic $13 million in total sportsbook revenue for the month of December in Pennsylvania. This is more than DraftKings and FanDuel combined. Backed by a 19.1 hold percentage, Barstool Sportsbook may be the most profitable sportsbook in the industry.
For those that are not familiar, a “hold” is the percentage of money that a sportsbook keeps for every dollar wagered. In order to calculate hold, you must understand how implied win probability works. A hold is essentially another word for “vig” (which itself is short for vigorish), which is a percentage of winnings taken by an operator. Typically, vigs range anywhere from 3-5 percent.
In laymen’s terms, Barstool Sportsbook’s 19.1 hold percentage is a huge number for a sportsbook. The average hold percentage is anywhere between 5-7 percent. A hold percentage nearing 20 percent is extremely irregular compared to the typical sportsbook’s hold. Barstool’s Pennsylvania sportsbook made more money per dollar in December than any other sportsbook in the state by a longshot.
Barstool Sportsbook had its first full month of operation as a sports betting company in December. Their substantial numbers in Pennsylvania are impressive but maybe something that they do not want to be advertised.
Is There A Reason For Barstool Sportsbook’s 19.1% Hold?
A hold percentage should always be over 5% for the sportsbook. For those unfamiliar, hold percentages should be over 5% and hope to get closer to 10%. Anything over that is considered extreme profitability.
Barstool Sportsbooks 19.1% is considered extremely profitable. This could be that the sports bettors are inexperienced and struggle or it could be the vigorish is too high.
There is also another contributing factor that could explain part of it, but certainly not all of it. Hold percentage does include unpaid futures bets as revenue. Theoretically, Barstool Sportsbook could have a lot of unpaid futures bets that would contribute to this number. Once futures are paid out, it could dramatically influence the sportsbook’s hold percentage.
Barstool Sportsbook was not open to take any futures bets that may have been completed in December. For instance, NFL Futures “Win Totals” bets are paid out in December. Barstool Sportsbook launched after these popular bets took place. Barstool has not had to pay out any futures bets yet, but the sportsbook can still take those bets. This could be one explanation for this unbelievable number.
However, this does not contribute to the number in its entirety. Every sportsbook is able to take futures wagers at any time. Furthermore, there are not many futures bets that cash in December other than the “Win Totals” NFL futures bets.
The reality seems to be that Barstool Sportsbook is charging a particularly high vigorish. This will not result in sustained success if they continue to offer uneven odds and few true odds boosts like their competitors.
Inexperience A Contributing Factor
Unfortunately for Barstool Sportsbook, this number is a bad look. They are branded as a sportsbook for the players, the everyday sports fan. A sportsbook that is truly for the players would not have this high of a hold percentage.
Barstool Sportsbook’s total December action in Pennsylvania was $71,779,304. The sportsbook’s total revenue was $13,932,121. Compare this to DraftKings, which took $207,608,213 in total bets and only $7,208,027 in revenue. Furthermore, FanDuel Sportsbook took $130,909,333 in total action in December. The revenue for the company was only $5,425,957.
Barstool Sportsbook took in 1/3 of the bets (in dollars) that DraftKings Sportsbook brought in, but earned almost double the revenue. Barstool Sportsbook has yet to truly become the sportsbook for the players. Its fans are fiercely loyal, but the sportsbook’s hold percentage shows that loyalty has not been reciprocated at this point.
Perhaps the “Stoolies” (Barstool Sportsbook users) are truly the worst sports bettors in the industry or the vigorish is just too high. It will be interesting to see the numbers as they go forward in Pennsylvania and now Michigan.
WYOMISSING, PA (Jan. 29, 2020) – Penn National Gaming, Inc. (PENN: Nasdaq) (“Penn National” or the “Company”) announced today that it has entered into an agreement to acquire a 36% interest in Barstool Sports, Inc. (“Barstool Sports”), a leading digital sports media company, for approximately $163 million in cash and convertible preferred stock. Under the agreement, Penn National will be Barstool Sports’ exclusive gaming partner for up to 40 years and have the sole right to utilize the Barstool Sports brand for all of the Company’s online and retail sports betting and iCasino products.
Jay Snowden, President and Chief Executive Officer of Penn National, commented, “This exciting new partnership with Barstool Sports reflects our strategy to continue evolving from the nation’s largest regional gaming operator, with 41 properties in 19 states, to a best-in-class omni-channel provider of retail and online gaming and sports betting entertainment.”
Mr. Snowden continued, “With its leading digital content, well-known brand and deep roots in sports betting, Barstool Sports is the ideal partner for Penn National and will enable us to attract a new, younger demographic, which will nicely complement our existing customer database. In addition, with 66 million monthly unique visitors, we believe the significant reach of Barstool Sports and loyalty of its audience will lead to meaningful reductions in customer acquisition and promotional costs for our sports betting and online products, significantly enhancing profitability and driving value for our shareholders.”
Jon Kaplowitz, Head of Penn Interactive, commented: “We look forward to introducing our 20 million mychoice customers to the Barstool Sportsbook brand through our retail sportsbooks and our interactive products. Our growing team of product and engineering talent at Penn Interactive is focused on what we anticipate will be a best-in-class sports betting app, which is expected to launch in the third quarter of 2020. Our team is excited to begin collaborating with Barstool Sports on ways to utilize its key talent and leading content to drive audiences to Penn National’s online gaming products and retail locations, as well as to special events and fan experiences.”
Erika Nardini, Chief Executive Officer of Barstool Sports, said, “Barstool Sports is a dynamic content company that has grown into a media juggernaut thanks to some of the best talent and fans in the world. Over the last five years, Barstool Sports has brought its audience, creativity and expertise to the biggest sports betting and DFS operators in the country with great results. The chance to combine our content and fans with Penn National's massive footprint, and to develop a unique and compelling omni-channel approach together, was for us a no brainer.”
Dave Portnoy, Founder of Barstool Sports, added, “This opportunity is a dream of mine and why I started Barstool Sports in the first place. Barstool Sports has a deep sports and gaming history and from the moment we met Jay and the Penn National team we knew this could be an exciting and game changing partnership and we can't wait to get started. I think with our shared vision and goals, we are uniquely positioned to be a leader in this business.”
Mike Kerns, Partner at TCG, stated, “We’re excited to partner with Penn National on Barstool Sports’ next chapter. We have long believed in the power of Barstool Sports’ unique brand, and with Erika’s leadership and Dave’s vision, the Company has realized remarkable growth over the last four years. We believe the marriage of the Barstool brand and passionate audience with Penn National’s gaming leadership will change the industry.”
Mr. Snowden concluded, “As we continue to execute on our omnichannel strategy, we plan to remain focused on our efforts to de-lever our balance sheet while building on our long-term progress in expanding operating margins at our regional casinos. As previously announced, our goal is to achieve a lease-adjusted net leverage level of 5.0x by the end of 2020.”
Transaction Details
Penn National’s initial investment for 36% of the equity of Barstool Sports is comprised of approximately $135 million in cash and $28 million in shares of non-voting convertible preferred stock. After three years, Penn National will increase its ownership to approximately 50% with an incremental investment of approximately $62 million, consistent with the implied valuation at the time of the initial purchase.
Under the terms of the agreement, Penn National has immediately exercisable call rights, and the existing Barstool Sports shareholders have put rights exercisable beginning three years from closing, for the remaining Barstool Sports shares based on a fair market value calculation to be performed at the time of exercise. Penn National also has the option to bring in another partner who would acquire a portion of Penn National’s shares of Barstool Sports. Penn National will have customary governance rights, including initially two seats on Barstool Sports’ seven-member board of directors.
Following the close of the transaction, entities affiliated with The Chernin Group, which previously owned approximately 60% of Barstool Sports, will own 36% of Barstool Sports, and the remaining 28% will be held by Barstool Sports’ employees, including Mr. Portnoy and Ms. Nardini.
The Company expects to close the transaction in the first quarter of 2020, subject to customary closing conditions set forth in the purchase agreement.
Penn National Gaming will host an analyst day in June to discuss the Barstool Sports transaction further and expand upon the Company’s omni-channel vision for the convergence of sports betting and casino gaming.
Conference Call and Webcast
Penn National will host a conference call and simultaneous webcast today, Wednesday, January 29, 2020 at 8:00 a.m. ET to review the Barstool Sports transaction, share the Company’s vision for sports betting and iGaming, and host a question and answer session. To access the conference call, interested parties may dial www.pngaming.com. During the conference call and webcast, management will review a presentation which can be accessed at www.pngaming.com. A webcast replay will be available for 90 days following the live event at www.pngaming.com. Please call five minutes in advance to ensure that you are connected. Questions and answers will be taken only from participants on the conference call. For the webcast, please allow 15 minutes to register, download and install any necessary software.
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About Penn National Gaming
Penn National Gaming owns, operates or has ownership interests in gaming and racing facilities and video gaming terminal operations with a focus on slot machine entertainment. The Company operates 41 facilities in 19 jurisdictions. In total, Penn National Gaming’s facilities feature approximately 50,500 gaming machines, 1,300 table games and 8,800 hotel rooms. The Company also offers social online gaming through Penn Interactive and has a leading customer loyalty program with over five million active customers.
About Barstool Sports
Founded in 2003 by David Portnoy, Barstool Sports is a leading digital sports, entertainment and media platform that delivers original content across blogs, podcasts, radio, video and social, supported by nearly 70 dedicated personalities. It benefits from approximately 66 million monthly unique visitors, including an estimated 48% of males and 44% of females in the Millennial and Generation X generations across the United States. In 2019, Barstool Sports grew by approximately 65%, delivering nearly $100 million in revenue from digital and audio advertising, ecommerce, events, licensing and subscription.
About The Chernin Group
The Chernin Group was founded as a holding company to acquire and operate direct-to-consumer brands in media and tech. After a decade building consumer businesses, The Chernin Group management team formed TCG – a multi-stage investment firm based in Los Angeles and San Francisco. TCG’s portfolio includes digital media, commerce, marketplaces, sports, gaming, consumer finance, and health and wellness brands and platforms.
Forward-looking Statements
All statements included in this press release, other than historical information or statements of historical fact, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including statements regarding the Company’s investment in Barstool Sports and the related transactions, the Company’s online strategy, the potential benefits of the investment in Barstool Sports, including the benefits for the Company’s online and retail sports betting and iCasino products, the expected financial returns from the transaction with Barstool Sports, including reductions in customer acquisition and promotional costs, the projected closing date of the investment in Barstool Sports, the Company’s ability to repay debt in 2020, are subject to risks, uncertainties and changes in circumstances that could significantly affect the Company’s future financial results and business. Accordingly, Penn National cautions that the forward-looking statements contained herein are qualified by important factors that could cause actual results to differ materially from those reflected by such statements. Such factors include, but are not limited to: (a) the Company may not be able to achieve the expected financial returns due to fees, costs and taxes in connection with the Company’s roll out of its own online and retail sports books and iCasino products; (b) states may not pass legislation approving online and retail sports books and iCasino products; (c) the closing of the transaction with Barstool may be delayed or may not occur at all, for reasons beyond our control; (d) the ability to satisfy the closing conditions to the transaction in a timely basis or at all; (e) the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; (f) potential adverse reactions or changes to business or regulatory relationships resulting from the announcement or completion of the transaction; (g) the outcome of any legal proceedings that may be instituted against the Company, Barstool Sports or their respective directors, officers or employees; (h) the ability of the Company or Barstool Sports to retain and hire key personnel; (i) the impact of new or changes in current laws, regulations, rules or other industry standards; (j) the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the Company and Barstool Sports to terminate any of the transaction agreements between the companies, and (j) other risks, including those as may be detailed from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”). For more information on the potential factors that could affect the Company’s financial results and business, review the Company’s filings with the SEC, including, but not limited to, its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. The Company does not intend to update publicly any forward-looking statements except as required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this press release may not occur.
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CONTACTS:
General Media Inquiries:
Eric Schippers, Sr. Vice President, Public Affairs
Penn National Gaming
Kelly Martin, Head of Talent Relations and Communications
Barstool Sports
Kelly.Martin@barstoolsports.com
Barstool Sportsbook App
Financial Media and Analyst Inquiries:
Justin Sebastiano, Sr. Vice President of Finance and Treasurer
Penn National Gaming
Barstool Sportsbook Illinois
Joseph N. Jaffoni, Richard Land
JCIR
212-835-8500 or penn@jcir.com