Dave Portnoy's Barstool Sports story sounds incredible. He purchased his company back for just $1 after selling it to Penn Entertainment for $551 million. This digital media powerhouse transformed remarkably from a simple print publication in 2003 into a massive brand that connects with over 200 million fans today.
The Birth of Barstool Sports
Dave Portnoy's frustration with his Yankee Group job led to an unusual business idea in 2003. He discovered that offshore sportsbooks would buy newspaper ad space, which inspired him to launch a free black-and-white publication about sports gambling and fantasy football projections.
From print magazine to digital empire
Barstool Sports started small, with Portnoy handing out papers at Boston subway stations. He came up with a creative distribution plan and hired local homeless people to distribute copies near transit stops. The publication really took off in 2004 after Portnoy started putting photos of women in bikinis on the front cover.
A loyal reader offered to build Barstool's first website in 2007, which marked the start of their digital journey. The company managed to keep both print and online presence until 2010 before going completely digital. This smart move paid off - Barstool reached 250 million monthly views by 2016.
Early revenue streams
Barstool's original money came from offshore betting websites like PartyPoker. The brand soon expanded beyond just sports and gambling. They added lifestyle content that brought in new audiences.
Word-of-mouth marketing drove Barstool's organic growth. They launched successful merchandise lines and concert series while expanding to New York, Chicago, and Philadelphia. On top of that, they created Barstool U to connect with college students.
First major investments
Everything changed in January 2016 when The Chernin Group bought a 51% stake in Barstool Sports, valuing the company between $10 and $15 million. This deal moved the company from Boston to New York City.
Portnoy stayed on as Chief of Content with complete creative control under this new partnership. Erika Nardini joined as CEO in July 2016, bringing years of media and tech experience from Microsoft, Yahoo, and AOL. This strategic collaboration brought new products like Barstool Gold and pay-per-view boxing events.
The investment worked wonders - Barstool's ad revenue grew substantially. Their merchandise sales shot up 400% year-over-year. They attracted major partners like DraftKings, SeatGeek, AB InBev, DirecTV, and H&R Block. By 2019, Barstool made between $90 and $100 million in revenue, mostly from podcasts, merchandise sales, and gambling deals.
Key Business Deals That Shaped Barstool
Barstool's journey from a digital media company to a sports betting powerhouse changed dramatically through two major acquisitions. These mutually beneficial alliances completely changed the company's direction and market position.
The Chernin Group acquisition
Barstool's first most important external investment came from The Chernin Group. TCG bought a 51% controlling stake in Barstool Sports in early 2016. The deal valued the company between $10 million to $15 million and brought strategic changes while keeping Barstool's core identity intact.
TCG's ownership led Barstool to make several key moves:
Relocated operations to Manhattan
Built a dedicated content studio
Appointed Erika Nardini as CEO
Portnoy managed to keep 100% editorial oversight even after selling majority control. The partnership wanted to grow Barstool's team, improve content production, and build better technology infrastructure. TCG's media expertise proved to be a great way to get insights, as board members Mike Kerns and Jesse Jacobs brought years of industry experience.
Penn Entertainment partnership
Penn Entertainment's entry brought an even bigger transformation. The partnership happened in three phases:
Original Investment (2020): Penn bought a 36% stake for $163 million, valuing Barstool at $450 million.
Complete Acquisition (2023): Penn bought the remaining 64% for $388 million, bringing the total investment to $551 million.
Unexpected Reversal (2023): Penn sold Barstool back to Portnoy for just $1 in a surprising turn. This resulted in a pre-tax non-cash loss between $800-850 million.
Regulatory challenges plagued the Penn partnership. Barstool's unconventional content style made it hard to operate in the regulated gambling industry. Portnoy admitted, "We underestimated just how tough it is for myself and Barstool to operate in a regulated world".
Penn CEO Jay Snowden later explained the cultural mismatch. He said being part of a publicly held, regulated gaming company made Penn "an unnatural owner" for Barstool. In spite of that, Barstool's audience grew 194% during their partnership and reached over 200 million followers across platforms.
The story didn't end there. Penn switched gears to partner with ESPN in a $1.5 billion deal. The agreement lets Penn keep 50% of proceeds from any future Barstool sale. Portnoy, now back at the helm, celebrated their return to unrestricted content. He declared, "For the first time in forever, we don't have to watch what we say, how we talk, what we do".
How Barstool Makes Money
Barstool Sports has created multiple revenue streams that brought in around $250 million in 2023. Let's take a closer look at what makes this media empire tick.
Content monetization
Podcasting leads Barstool's revenue generation. The company sits at number three in U.S. podcast rankings, just behind NPR and The New York Times. Their smart ad placement strategy puts commercials at the start, middle, and end of each episode.Â
The company earns fixed fees based on listener count. Podcast ads alone brought in more than $15 million back in 2018.
Barstool makes money through several other channels:
Video content on YouTube, Facebook, TikTok, and Instagram
Display advertising on their website
Premium subscription service Barstool Gold at $50 for one year or $100 for two years
Rough N' Rowdy boxing events that cost viewers $19.99 per show
Merchandise sales
The e-commerce side of Barstool has taken off, with merchandise sales jumping 400% compared to the previous year. Their online store features hundreds of items, mostly clothing such as t-shirts and hoodies. Their loyal fans, known as "stoolies," regularly buy branded merchandise.
Sports betting revenue
The Barstool Sportsbook app creates revenue through:
Profits from lost bets
Vigorish (commission) on placed bets
The app grabbed 10% of the U.S. online sports betting market in its first year
Brand partnerships
Barstool builds mutually beneficial alliances with sports leagues, teams, athletes, and celebrities.
These partnerships create:
Original content together
Cross-promotional opportunities
Premium brand integrations
Host endorsements across audio, video, and social platforms
Their creative services team helps partners with design, experiential marketing, and custom assets that feature Barstool talent. Partners can also license content rights and use talent images.
Breaking Down Barstool's $550M Valuation
Penn Entertainment's $1 sale of Barstool Sports back to Dave Portnoy tells an interesting story about company valuations. The company's previous $550 million valuation makes this development particularly noteworthy.
Revenue breakdown
Barstool's Q2 2023 revenue hit $52.7 million. The company posted a $12.8 million loss that quarter, but its multiple revenue streams point to strong growth potential:
Advertising is the life-blood of operations, as podcast revenue tops $15 million yearly
Merchandise sales grew 20% year over year for three straight years
Premium subscription service pulled in 30,000+ subscribers in just one year
Market position
Barstool has grown into a powerhouse in digital sports media. The platform ranks in the global top 500 websites according to SimilarWeb. Their competitive edge comes from:
A deeply connected millennial and Gen Z audience
Strong digital presence that generated 27 billion video views
Brand partnerships that stick - 92% retention rate with partners spending 27% more each year
Growth metrics
Barstool's growth from 2016 to 2022 tells quite a story:
Revenue shot up 3,650%
Team size grew 42% in 2022
Reality shows pulled in 25 million views
Their advertising really works - 58% of podcast listeners buy products after hearing ads. The team expanded rapidly too, growing 42% in 2022. These numbers help explain Penn's original $660 million valuation, which included $723.9 million in intangible assets.
Conclusion
Barstool Sports shows evidence of media breakthroughs by transforming from subway handouts into a $550M powerhouse. Penn Entertainment's exit created an important move in the company's direction.
The company maintains various revenue streams and a loyal fanbase that will accelerate its growth. The business has returned to Portnoy's control and seems positioned perfectly for its next phase of unrestricted content creation.
FAQs
Q1. What is the current valuation of Barstool Sports?Â
Barstool Sports was previously valued at $550 million. However, in a recent turn of events, Penn Entertainment sold the company back to its founder Dave Portnoy for just $1, making its current valuation unclear.
Q2. How does Barstool Sports generate revenue?Â
Barstool Sports has multiple revenue streams, including podcast advertising, merchandise sales, sports betting through the Barstool Sportsbook app, brand partnerships, and content monetization across various digital platforms.
Q3. Who owns Barstool Sports now?Â
Dave Portnoy, the original founder of Barstool Sports, has regained full ownership of the company after buying it back from Penn Entertainment for $1 in 2023.
Q4. What led to Barstool Sports' rapid growth?Â
Barstool Sports' growth can be attributed to its transition from a print publication to a digital media empire, strategic investments from The Chernin Group and Penn Entertainment, and its ability to engage a loyal millennial and Gen Z audience across multiple platforms.
Q5. How has Barstool Sports' content strategy evolved over time?Â
Barstool Sports started as a print publication focused on sports gambling and fantasy football. It has since expanded to include lifestyle content, podcasts, video content, and even pay-per-view boxing events, while maintaining its unconventional and unrestrained content approach.