During the recent recession and for years after, gaming was not considered a mainstream industry. New verticals like iGaming are changing that mindset, attracting a younger generation of up and coming talent to the industry. Partnerships like the one recently announced between Penn National and Barstool serve as an accelerant, broadening the pool of candidates considering a career in the industry.
“For more than 10 years, Penn has been one of the few operators in our space that are truly talent-centric,” JBK CEO John Globokar said. “Penn has been very mindful of their culture, ensuring the individuals they bring into the organization are in alignment culturally. That won’t change. Penn should quickly begin to see a substantial increase in talent interested in the company that most likely wouldn’t have otherwise considered a career in gaming. That is the power of the Barstool brand, attracting both consumers and talent.”
Penn officials said they have seen some changes, as new types of candidates apply for positions. That includes everyone from gaming mathematicians to electronic gaming technicians.
“On the iGaming side, the applicant pool has gone up since the announcement,” said Rafael Verde, Penn’s Senior Vice President of Regional Operations.
Deal Offers New Industry Blueprint
Adaptation is the key to sustained success. The Barstool deal is a perfect example.
By its own admission, the average age of Penn’s casino customers is in the mid-50’s. As Penn CEO Jay Snowden put it in a Jan. 29 media call, the number has “been aging up, not aging down.” But it’s a challenge to attract younger consumers, as companies have to weigh the cost of acquisition versus the return on investment. That’s why the Barstool deal, and Penn’s overall strategy, serves as a template for the gaming industry’s future.
“I do think you’ll see more deals like this,” said Matthew McEwan, Sports Betting Dime’s Senior Betting Analyst. “Sportsbooks benefit by pairing with these massive brands. If you look at who’s betting on sports, it’s your 20 to 40-year-old male. Getting that audience is every sportsbook’s dream.”
And Barstool is where that audience lives. The company has a dedicated following of 66 million people spread across social media, Sirius XM Radio, pay-per-view and their website. These followers don’t just absorb the content, they spend money based on what they’re told. According to Nielsen and customer survey data, 62 percent of Barstool followers bet on sports. Out of that number, 44 percent play at least once a week and 41 percent place an average bet of $51 or higher.
“Barstool not only has one of the bigger followings, they have one of the most engaged,” McEwan said. “Their following is passionate. That’s what everyone is trying to infiltrate right now.”
Industry Can Learn From Media
Typically, to interact with the younger audience, companies buy ads, boost social posts and produce content. Testing specific marketing content to a new demographic often requires a significant investment of company resources with uncertain results. But in this case, the guaranteed audience is already there. By partnering with an established media company, gaming operations step away from the admittedly foreign content production business and ease back into familiar roles. There’s also the attraction of lower marketing costs due to the partnership.
“This deal will significantly reduce our customer acquisition spends by serving as the primary (customer) acquisition funnel,” Snowden said on the Jan. 29 media call.
Penn invests $163 million in Barstool as part of the deal, comprised of $135 million in cash and $28 million in Penn equity. In return, the company gets a 36 percent equity position in Barstool and exclusive rights to use the Barstool brand for its retail sportsbook, online betting and iCasino products, as well as the right to operate Barstool branded sports bars or restaurants. Also, Barstool will exclusively promote Penn’s products and casinos for up to 40 years. The last part is key. The deal is for “up to 40 years without any additional consideration.” Consider a few things here. First, the average gaming company spends between 8 to 10 percent of revenue annually on marketing. Second, Penn National brings in an estimated $400 million in free cash flow yield during the same period. On that alone, the investment pays for itself within the first decade.
Building the Digital Infrastructure
Beyond the marketing aspect, Penn’s deal also provides a blueprint for the future of gaming distribution. The company already owns 41 physical properties in 19 states. But in the 21st century, you need more than that. During the Jan. 29 call, Snowden mentioned that over the last year, more than 50 engineers had been working to design a sports betting app for Penn. A consistent theme during that call and in other discussions with Penn officials was brand awareness. They see this app as a way to build on that. A study by Time shows that the 18-24 age group checks their phones 74 times a day on average. For those ages 25-34, that number drops to 50. Through push notifications and other interaction, a mobile app gives Penn another outlet to target that 18-34 demographic.
To go along with the app, Penn officials also organized a group designed to maximize their digital footprint.
“We and Barstool have assembled a cross-functional team with the purpose of leveraging Barstool content to drive people to Penn’s retail and online properties,” Snowden said. He added the team would also work to integrate Penn’s sports betting content with Barstool’s website.
“Penn is no stranger to pioneering new trends that shake the industry,” said JBK CEO John Globokar. “For example, in November of 2012, Penn announced intent to pursue the separation of its real estate assets from its operating assets. Completed in late 2013, GLPI became the gaming industry’s first-ever REIT, which was soon after repeated by several publicly traded competitors. My sense is this will be a huge success for both entities and you’ll see many influential gaming operators attempt to leverage their distribution with content creators.”
Vice President of Communications, JBK International