The DraftKings and Barstool Sports story

Following Penn’s offloadings of Barstool upon the launch of ESPN Bet in August, Barstool could not partner with another sportsbook until the NFL Season ended. With Taylor Swift-fever gripping the US, Super Bowl LVIII had one more surprise up its sleeve.
 Not even an hour after the Kansas City Chiefs took the win over the San Francisco 49ers, Barstool Founder Dave Portnoy took to Twitter to announce the company’s next move – a multiyear partnership with DraftKings. “We’re back in the gambling business,” Portnoy said in one of his videos following the announcement, dressed in a DraftKings vest. “We just formed a partnership with DraftKings. We’re back where we started. Big, huge deal, I don’t know the numbers, a lot of zeros, maybe the biggest deal in the history of the gambling space.”
 Before diving into the deal, some context. Barstool Sports was founded by Portnoy in the early 2000’s as a gambling and fantasy sports magazine, later going online. The platform grew exponentially, with an ‘everyday man’ attitude that frequently saw the platform and Portnoy called out for misogyny and other offensive comments. Today, Barstool Sports has 16 million followers on Instagram alone.
 In early 2020, Penn Entertainment purchased a 36% stake in Barstool for $163m, with the intention to purchase the remaining stake of the company at a later date. Indeed, this purchase would be completed in February 2023 with the remaining 64% of Barstool stake acquired for $388m, though it was far from smooth sailing. During this time, Portnoy faced charges of sexual harassment, with several US gaming boards warning Penn against completing the acquisition. This was despite Barstool Sportsbook already being live in several states.
 When the chance to launch a sportsbook with ESPN arose, Penn leapt at it. Following an $850m write-off on the acquisition and the return of Barstool to Portnoy for $1, ESPN Bet entered the scene.
 Since then, Penn’s Barstool Sportsbook has been replaced with ESPN Bet, while Barstool has been unable to re-enter the sports betting market. However, all of that has now changed.

Partnering with DraftKings
In the sports betting market, DraftKings is the second-biggest by market share in the US, falling only behind FanDuel. It has a deep-set understanding of popular culture, with Michael Jordan positioned as Special Advisor to the Board of Directors and much like Barstool Sports, came from humble beginnings, starting operations over a decade ago from one of the Founders’ homes.
 From Barstool’s perspective, the benefits of the partnership are clear. DraftKings is a significant industry player with a fun brand image. It is also a multi-year deal, giving the two plenty of time to make a dent in the market. Plus, DraftKings has the funds back it.
 In its Q4 2023 report, revenue was up 44% year-on-year for a total of $1.23bn. The company still reported an operating loss, sure, but this loss was cut significantly from last year, going from a net loss of $232.2m to $43.8m – a trajectory that may see DraftKings operating at a net profit very soon.
 If 2023 was a year for revenue growth, 2024 will be a year of differentiation, according to DraftKings CEO Jason Robins. “Looking ahead to 2024 and beyond, our focus remains on disciplined execution against our core value drivers... and fulfilling our product roadmap to consistently differentiate ourselves competitively,” he said.
 Though, is working so closely with Portnoy the best call when it comes to differentiations your offering? DraftKings will have to wait and see, though as has been shown with Penn, Portnoy has the uncanny ability to shift a business’s stock prices through words alone.

Acquiring Jackpocket
Speaking of DraftKings’ Q4 results, alongside its reported earnings, DraftKings also revealed that it had acquired Jackpocket for $750m. The acquisition is expected to boost DraftKings' adjusted EBITDA by $60m – $100m in 2026, with Robins stating he is “excited to enter the rapidly growing US digital lottery vertical.”
 Less than two weeks after the acquisition was announced, Jackpocket earned a certification from the Internet Compliance Assessment Program (iCAP) for “best practices in player protection,” making Jackpocket one of the first iGaming operators in the US to receive such a certification.
 While not completed, the transaction is expected to close by the second half of 2024.

The DraftKings arsenal
 Consider, then, the number of businesses now within DraftKings’ armory. It is affiliated with Barstool Sports, a previously successful sportsbook and major social media figure; meanwhile, Jackpocket provides a new avenue into the digital lottery market, plus in-house products including the peer-to-peer fantasy sports site Pick6. The company has its thumb in a lot of metaphorical pies, and with the number one sportsbook spot so close, it is no shock to see DraftKings trying out some unique strategies in its attempt to climb to the top.
 We should use this time to mention a new contender in the sports app market. Apple Sports is Apple’s offering to the sports betting market, launching in February and currently offering leagues including the NBA, Premier League and NHL. Customisable to user’s tastes, the app displays betting odds as well as real-time scores, and match stats and several other features. The catch? The app does not take bets.
 Having only launched recently, it is likely we will see further developments to the app in the future. Furthermore, the app's odds, lineups and other statistics are currently being supplied by DraftKings, adding another notch to DraftKings' belt in its attempts to take gold in the sports betting market. While it is uncertain whether betting will become a feature on the app (and whether this, too, will be supplied by DraftKings), with Apple’s immense wealth and hold over the smartphone market (which has been key to the success of online sportsbooks like DraftKings), it is unlikely Apple Sports will be going anywhere anytime soon.

The catch
All of this sounds well and good, but there is one crucial factor to consider. Following his reacquisition of Barstool, Portnoy has stated he will hold the company “’til I die.” This, in part, can be explained due to a clause in the reacquisition deal stating that, if Barstool were to be re-sold, Penn Entertainment would receive 50% of the gross proceeds. A grudge against Penn, or a Founder protective of his brand? It is hard to tell. Maybe both. But the fact is with Portnoy set to maintain control of Barstool, as a partner of the affiliate, DraftKings may always be looking over its shoulder with an added element of regulatory risk.
 Still, a multiyear contract is a long time. Enough time for these brands to do some serious work together and for Barstool to get its needed leg-up in re-entering the sports betting market. So far, it is impossible to say exactly what that will look like, but what we do know is that it will certainly make a splash in the US sports betting market.
 Let’s just hope Portnoy keeps himself out of trouble long enough to not knock over the ladder they are climbing together. FanDuel's no #1 spot remains well within DraftKings' sights.