The new Barstool Sportsbook, operated by Penn National Gaming, in Detroit's Greektown Casino. Image credit: Penn National Gaming on Twitter.
In May 2018, the Supreme Court repealed a national ban on sports gambling. The new laws gave individual states the option to legalize betting on sports however they saw fit, leaving the national scene a bit murky.
Almost three years later, 25 states and Washington, DC have legalized sports betting, with 21 of those markets currently in operation. Thirteen more states currently have active or pre-filed pro-gambling legalization. Some of those markets only offer physical sportsbook, while others have limited online options, but regardless, by the mid 2020s, more than half of the country will have the ability to legally gamble on sports.
This is a big deal. Not only for the American public, as more than 30M people bet on Super Bowl every year, but also for gaming businesses. According to the American Gaming Association, $21B was legally wagered on sports in 2020, up from $13 billion in 2019. Michigan, which recently legalized online wagering, saw its sportsbooks handle more than $115M from customers in just the first nine days of 2021.
The massive market is still in its nascency. As the more states open up their books, the more opportunity exists for growth-focused gambling businesses to expand.
One of those businesses, Penn National Gaming, is arguably the biggest winner to come out of the space in the last few years. The legacy horse gambling brand went public in 2013 (NASDAQ: PENN) and found middling success on the market, with a stock price hovering in the $20 range for most of the 2010s.
But since the March 2020 market dip, Penn's stock has gone from $4.50 a share to more than $115 at time of publish. Through a combination of shrewd acquisitions and investments as well as fortunate timing, the company is now the largest regional casino in the U.S. Who is the team behind this growth, and what can Penn's strategy for expansion tell us about the larger gambling market in the U.S.?
Penn's expansion directive started in 2017, a year before the national sports gambling law was repealed, when Jay Snowden was promoted from COO to President and COO. Shortly after, Penn acquired gambling and hospitality leader Pinnacle Entertainment for close to $3B in cash and stock, an integration that almost doubled the size of the company.
In January 2020, Snowden was named CEO and President. Almost immediately afterward, Penn spent $163M to buy a 36 percent stake of sports media and entertainment company Barstool Sports. Founded in 2003 by controversial founder Dave Portnoy, who the Daily Beast once referred to as a "misogynistic troll-king," Barstool makes its reported $90-100M in annual revenue through podcasts, blogs, and merchandise. Several of the brands most popular podcasts have incorporated gambling content for years, creating a media company with the most "gambling content creators" in the U.S. It was obvious deal at the time for Penn that has only become more lucrative over the last year.
So far, only eleven states currently allow full mobile betting with multiple platform options and Penn is live in seven of them, including the Barstool Sportsbook in Pennslyvania and Michigan. Users can place bets on lines formed by their favorite podcast hosts, a dynamic no other media or gaming company in the country can replicate, while Penn has helped grow the Barstool Fund, a fund started by Portnoy to support small businesses during COVID-19, to more than $35M.
Snowden has played a big role in the successful partnership, as has Todd George, EVP of Operations, who the company said "played a critical role in integrating the Barstool Sports brand with Penn's core business."
Penn Interactive, the digital arm to Penn National Gaming that operates the Barstool Sportsbook, is run by Jon Kaplowitz, the SVP of Interactive Gaming. The business development veteran joined the company in February 2019 from Comcast, where he led growth in new markets and verticlas, and now heads strategy and operation for all of Penn's interactive gaming products.
Alongisde SVP, Chief Strategy Officer Chris Rogers, a former corporate attorney, Kaplowitz is one of the few C-level strategic executives at Penn who didn't come directly from another gaming company.
New EVP, Chief Legal Officer Harper Ko, who started in January 2021, has more than 20 years of experience in legal and regulatory compliance for gaming equipment suppliers. Jennifer Weissman, an SVP who has been Penn's Chief Marketing Officer since 2015, worked in marketing at Caesars Entertainment for almost 20 years before joining the team. And all four SVPs of Regional Operations had prior gaming experience: Erin Chamberlin (oversees all operations in Colorado, Maine, Massachusetts, Pennsylvania, and West Virginia), Justin Carter (South), Aaron Rosenthal (West), and Rafael Verde (Illinois, Ohio, Indiana, and Michigan).
From here, Penn has plans to continue expanding into states where the regional laws allow for it. Illinois could be next. They will also be buying more Barstool stake in the next few years to get its total share up to 50%. Regardless, what the team has accomplished so far could already have ramifications across the industry. Imagine ESPN integrations where viewers could follow or fade the pregame picks of Stephen A. Smith, or halftime commentators creating interactive second half props live on air. This could be the ultimate marriage of sports entertainment and legal sports gambling, especially if Penn National Gaming's value continues to explode.
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