Well that bet seems to have paid off. Penn National Gaming’s market cap has surged by $1.3 billion in about three weeks since it said it would spend $163 million on a 36% stake in digital sports media outfit Barstool Sports. Gaining access to the sports and media platform’s 66 million unique monthly visitors gives it a leg up in the battle for the dynamic U.S. sports gambling market.
Casino companies have been drawing up plays to dominate sports gambling ever since the U.S. Supreme Court paved the way for states to legalize sports betting in mid-2018. Around half of the U.S. population should have access to regulated sports gambling by 2022, according to Eilers & Krejcik Gaming. And the potential market in 2024 could be worth over $6.5 billion, according to JPMorgan.
The trouble is reaching the gambling fans. While younger sports fans are very valuable, older generations more often trot into brick-and-mortar casinos. Barstool Sports is a way to bridge the gap. Around 65% of its audience is under 44, and use the website to thumb through videos and gossip about sports figures, celebrities and regular folks. And around 62% of its users already bet on sports. For Penn, connecting with a well-known sports brand with a loyal fan base should lower the cost of acquiring new gambling customers. Penn is expecting to release a sports betting app later this year. And the deal means that Barstool Sports will exclusively promote this and Penn’s other digital products, as well as traditional casinos, to its audience for up to 40 years.
Tackling sports gambling this route should make it easier to compete with FanDuel and DraftKings, the two sports gambling sites that control around 70% of the increasingly dominant New Jersey sports gambling market. Penn has a big footprint and experience to offer – it already has a presence in 19 states. Regulatory concerns, like excessive advertising, addiction and underage gambling, could cause officials to stunt the industry’s growth, and online gambling could eventually become a commodity. But Penn has been in operation for decades, so it’s well versed in handling the regulatory maze. The deal might have some risk, but the odds certainly seem to be in Penn’s favor.
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