VSiN-DraftKings, the Deal That Made No Sense

When Penn Entertainment, formerly Penn National Gaming, aligned itself with Barstool Sports, many felt the deal made perfect sense.  Barstool Sports, after all, amassed quite the following over the years.  Its "bro" community, some of whom proudly wear the gambling degenerate badge of honor, would make for the ideal fit.....or so it seemed on the surface.

Neither company really knew what they were getting into. Penn National was ill-prepared to deal with the controversies surrounding Barstool Sports colorful owner David Portnoy and his cast of unapologetic characters. It all came to a head when Barstool was forced to fire a beloved host, Ben Mintz, after he used a racial slur while reading rap lyrics during a livestream.  Portnoy quickly realized just how boxed in he was, limited in what he could and could not say out of fear Penn might lose precious gaming licenses.

Portnoy bought back Barstool Sports for "pennies on the dollar".  Penn paid $550 million months prior for 100% control.

“Penn sold 100% of the outstanding shares of Barstool to David Portnoy in exchange for a nominal cash consideration ($1.00 dollar) and certain non-compete and other restrictive covenants,” the company disclosed in a 10-Q filing.

Penn would go on to rebrand Barstool Sportsbook as ESPN Bet.  ESPN is arguably the largest sports media enterprise in North America.  For Penn this makes sense.  For ESPN, it remains to be seen.  ESPN Bet is among the most egregious when it comes to limiting winning players. 

In the end, Penn Entertainment's Barstool - and now ESPN - tie-ins make some degree of sense.

The marriage between Vegas Stats & Information Network (better known as VSiN) and DraftKings, on the other hand, was a real head scratcher.

Nobody outside of the most hardcore of gamblers has heard of VSiN.  It probably wouldn't be a stretch to suggest that the majority of Gambling911.com readers have never heard of VSiN.  Most folks do know who Brent Musburger is.  He's the company's founder.  That's about the extent of familiarity here.  That's not to take anything away from VSiN.  They offer a nice enough platform for a select customer base.  But they have nothing close to the name recognition of an ESPN, or even Barstool Sports for that matter.

Musburger and his family only started the company in February 2017 with limited household access. The niche audience is sports gamblers.  The entire concept is about turning folks into knowledgeable bettors, exactly the type of customer DraftKings does not want.

This week we learned that Musburger's media company, much like Portnoy did, bought back VSiN from DraftKings.

“While a lot has changed in the sports betting industry over the past three-and-a-half years, our original vision for VSiN still holds and we are committed to delivering the most credible, independent information and analysis sports bettors can find anywhere,” said Brian Musburger. “We truly appreciate the work we’ve done with DraftKings and look forward to continuing to collaborate on future projects. Bill and I couldn’t be more excited about leading VSiN into the future and cementing our position as a trusted authority in sports betting.”

VSiN will continue to deliver the news, analysis, and insights that bettors need to inform their betting decisions, with 18+ hours of unique sports betting content each day, a press release stated.

“DraftKings continues to optimize its investments in content and media to align with the most critical areas and needs of our business strategy, objectives, and goals,” said Stephanie Sherman, Chief Marketing Officer, DraftKings. “We want to thank Brian, Bill, and the entire team at VSiN for a great relationship, and we look forward to continuing to advertise on the network.”

Here is what real VSiN consumers felt about the DraftKings takeover:

"Great news. I had cancelled my subscription after it became clear that DraftKings was eliminating everything that made VSiN unique. Please establish or re-establish relationships with a variety of  books, both in Nevada (SouthPoint, Circa, etc) and throughout the country."

"I've been loyal from day 1 but the morning show guest hosts today were awful and Golic knows zip about sports betting."

"Good to hear that, it went downhill after it got bought by DK.  Hopefully it came turn around or I won't renew my membership next year."

As for DraftKings, the next week could prove rocky.

Bank of America analyst Shaun C. Kelley reiterated a Buy rating on DraftKings and lowered the price target from $54 to $50.  He cited near-term pressure and a potential second-quarter earnings miss.

"We think a 2Q miss is expected by investors, and think focus will be on the 2024 guide and outlook for customer acquisition," Kelley said.

The analyst expressed concerns over customer acquisition, gross margins in the sports betting sector and any changes to forward EBITDA guidance.

DraftKings reports second quarter financial results after market close on Aug. 1.