- Casino operator Penn National Gaming agreed to buy a minority stake in Barstool Sports for $163 million, a deal that now values the popular sports and pop culture blog at $450 million.
- Since sports gambling was legalized in 2018, media and gambling companies have been rushing to enter the market.
- By combining their forces, media companies get access to revenue streams outside of advertising, while gambling companies get access to new consumers and a broader reach.
- While some believe this model will spread, others note that Barstool has a unique following and ability to monetize its audience that sets it apart from others.
Penn National Buys Barstool Stake
Casino operator Penn National Gaming announced Wednesday that it bought a $163 Million stake in sports pop culture blog Barstool Sports, valuing the media company at $450 million.
In a press release, Penn National said that they had acquired a 36% stake in Barstool, adding that in three years the casino operator will “increase its ownership to approximately 50% with an incremental investment of approximately $62 million.”
Penn National will now be the “exclusive gaming partner” of Barstool for “up to 40 years,” according to the press release.
Penn National will also have “the sole right to utilize the Barstool Sports brand for all of the Company’s online and retail sports betting and iCasino products.”
Barstool founder Dave Portnoy separately announced the deal in a video on Twitter, where he talked about how he started Barstool as a “gambling rag” 17 years ago, and how the company has a deep history connected to gambling.
“We just needed a company with a shared vision,” he said. “That vision is Penn National Gaming. They have one of the biggest infrastructures in the country for gambling. They have sports tracks, they have casinos, they’re all over the country.”
“They have the infrastructure, we have this rabid audience, this fan base craving it,” Portnoy added.
“Together, we’re going to create an omnipresent approach to gambling, on-premise, off-premise: Barstool casinos, bars, pizza places, you name it, we’re going to build it. All fueled by the Barstool media engine.”
Win-Win for Media and Gambling Companies
The deal is a significant step for Barstool and Penn National, but it is also representative of a broader change in the gambling industry.
In 2018, the Supreme Court ruled that sports gambling was legal in the U.S., giving individual states the power to decide if they wanted to legalize.
According to the Wall Street Journal, 20 states and DC have legalized sports gambling. While some of those states only allow it to take place in casinos, others do permit online betting.
Since the decision, there has been a rush by both the gambling industry and media companies to capitalize on that new market, specifically when it comes to online gambling.
Those efforts have proven to be incredibly lucrative. According to the American Gaming Association, gamblers have placed $15.8 billion in sports bets and generated $1.1 billion in revenue for sportsbooks since the Supreme Court ruling.
Online betting has been the most profitable in states where it is allowed like New Jersey, where nearly 84% of the $4.58 billion the state brought in from sports wagers last year came from online bets, according to the Journal.
The thing that is so unique about this market is that media and gambling companies do not have to be competitors. When companies like Penn National and Barstool combine their resources, both benefit.
Working jointly is good for companies like Barstool because digital-media companies primarily depend on advertising revenue. But combing forces with a gambling industry giant allows them to diversify their revenue streams.
It is also beneficial for big gambling operations like Penn National because media companies give them access to their large, young audience.
For example, Barstool sports has 66 million monthly unique visitors. By pairing with a popular company like Barstool, Penn National— which is very lucrative but not very well known— can grow its profile nationally while simultaneously cutting down on costs.
This saves gambling companies money because attracting new customers through normal means like advertising Facebook and Google can be expensive.
According to filings from the sports betting company DraftKings, the company paid an average of $406 for each new customer acquired in New Jersey in the first half of 2019.
Future of Sports Gambling
While some predict that this model will be used for other media and gambling company pair-ups in the future, others are not so sure.
In an article for Forbes, writer Daniel Marcus argued that from the get-go, Barstool, “has been willing to leverage its’ rabid and loyal fan base into other revenue opportunities outside of the traditional advertising model.”
Marcus notes that Portnoy has always mobilized Barstool’s fans in a unique way, like through selling merchandise and convincing fans to actually buy that merchandise in a way other companies have not.
He also said that while other media companies have leaned into premium subscription models, Barstool has always supported growth without doing so.
“For those assuming this deal will trigger some sort of domino effect that will benefit the other sports media entities that are currently in play, I wouldn’t count on it, as few of them have proven they are able to effectively monetize their audiences beyond advertising,” he wrote.
While Portnoy has been effective at reaching his fans, he has also been a controversial figure. In August, he came under fire after he threatened to fire Barstool employees who talked to union activists in a series of tweets.
He was later forced to remove the tweets in a settlement with the National Labor Relations Board.
See what others are saying: (The Wall Street Journal) (Forbes) (Business Insider)
Morphe Ends “Commercial Activity” With Jeffree Star
- When YouTuber Shane Dawson came under fire for his history of racist content and jokes about pedophilia, the makeup retailer Morphe pulled his Conspiracy collection from sale.
- But the brand was slammed by influencers and customers for continuing its partnership with Jeffree Star despite his history of racism, as well as allegations of abusive comments, blackmail, gaslighting, and more.
- Now Morphe says it will “cease all commercial activity related to Jeffree Star and affiliated products.”
- Some are concerned that its emphasis on “commercial activity” could mean that it’s still connected to Star in other ways. However, Morphe has previously denied rumors that Star is a co-owner or investor.
Beauty Community Pulls Support From Morphe
Makeup retailer Morphe announced Friday that it was cutting ties with Jeffree Star following a huge wave of public outrage and controversy within YouTube’s beauty community.
The massive beauty influencer has remained pretty silent since fellow Youtuber Tati Westbrook’s explosive video, “Breaking My Silence.” In that 40-minute video, she suggested that both Star and YouTuber Shane Dawson manipulated her into filming her infamous “Bye Sister” video about James Charles and orchestrated the backlash against him last year.
After Westbrook’s latest claims, the immediate outrage came against Dawson, who was forced to confront a long history of content that includes racist jokes or caricatures and remarks about pedophilia, among other concerning topics.
But people haven’t forgotten about Star. For weeks, he’s faced both new and old allegations of racism, abusive comments, blackmail, gaslighting, and more. Unlike Dawson however, he hasn’t said a word about it.
At the peak of the outrage against Dawson, retailers like Target cut ties with him while YouTube suspended monetization on his channels. Another standout move came from Morphe, which pulled his Conspiracy makeup collection from sale.
Morphe’s move caused some controversy itself. Some called it performative considering the fact that the brand still sold Jeffree Star Cosmetics and collaborations it created with Star despite his past.
When asked about this, the brand told customers via email that it did not “condone or agree with the actions and behavior of Shane Dawson.” However, it wrote that “Jeffree Star has acknowledged mistakes made in the past and has apologized, taken accountability, and worked hard to make amends within the community.”
Morphe makes a statement on why they don’t sell Shane Dawson’s palette anymore.— 𝙩𝙚𝙖 𝙨𝙚𝙨𝙝 (@TeaSeshYT) July 1, 2020
They “do not condone” Shane’s actions or behavior but Jeffree Star has “taken accountability and has worked hard to make amends within the community”…. pic.twitter.com/yJwoTUQIyV
Some people felt that wasn’t actually the case and questioned Morphe’s allegiance to Star. In response, many began announcing their plans to stop supporting the brand.
It wasn’t just customers who were upset. Several influencers publicly called out the retailer for working with Star Some took it a step further and even terminated their affiliate codes, like Jackie Aina, Alissa Ashley, and Nicol Concilio.
Alissa Ashley joins the list of beauty YouTubers and influencers cutting ties with Morphe and reveals that Jeffree Star is allegedly a part owner of the beauty retailer. 👀 pic.twitter.com/IR7YVUW00R— THE NEIGHBORHOOD TALK (@TNHTalk) July 2, 2020
Morphe Drops Jeffree Star
Morphe finally addressed concerns Friday when it tweeted a statement that read, “Today we’ve made the decision to cease all commercial activity related to Jeffree Star and affiliated products. We expect this to conclude within the coming weeks. As we look to the future, we will continue to share updates on what lies ahead for the Morphe brand.”
A short time later, Jeffree Star Cosmetics addressed the news, saying it was “shocked and extremely saddened” by Morphe’s decision. It said it was proud of all they had accomplished after five years of working together and then went on to stay it had incredible plans for the remainder of 2020.
Speculation About Language in Statement
Following this news, many online were pleased. Others called it long overdue while some felt it was too little too late.
Aside from those people, there were a lot who were skeptical about the language used in the statement. Those people were particularly focused on the fact that Morphe said it would “cease all commercial activity” with Star.
For instance, one Twitter user wrote, “the use of ’commercial activity’ means something. It means they may still be continuing “investment activity” with JS, meaning he may still make money through them. Why not just say ‘cease all activity’? Words matter.”
That idea feeds into the rumor circulating within the beauty space that Star is a co-owner or investor or Morphe. It’s also a rumor that Westbrook suggested could be true in her recent video.
However, it is worth noting that Morphe has previously disputed the rumor. Following Westbrook’s video, a representative told Insider, “We can confirm that Jeffree Star retains no ownership of Morphe.”
“He’s not an investor. He’s not a co-owner. Our only relationship is through retail distribution of Jeffree Star Cosmetics and our 2019 MorpheX collaboration.”
Despite the statement, people have remained suspicious.
Regardless, Morphe’s announcement is a huge deal because it means that Star’s products will no longer be carried both on its website and in Morphe stores across the country. That move will definitely have a financial impact on both brands, but it seems like it was worth it to Morphe if it meant it could help save its reputation with customers.
See what others are saying: (The Verge) (Insider) (Teen Vogue)
Influencers Fight to #SaveTikTok Amid Data Concerns
- As privacy concerns over TikTok grow, U.S. Secretary of State Mike Pompeo said officials were considering a ban of the app.
- TikTok users and creators like Michael Le are trying to fight against this using the hashtag #SaveTikTok, arguing that the app has been a light in dark times for many people.
- On the other hand, big companies like Wells Fargo are telling their employees to delete the app from their work devices, while the DNC and RNC have both warned their staffers about the app.
- Gamer and streamer Ninja announced that he has deleted the app as well, saying he hopes a “less intrusive company” can recreate the successful concept.
TikTok Users Try to Save the App
TikTok creators are fighting to save the video-sharing app from a potential United States ban as security concerns over the platform continue to grow.
In early July, Secretary of State Mike Pompeo said that the U.S. is “looking at” banning the app, which is owned by Chinese-based company ByteDance. India banned the app over security concerns in June. Since then, users of the app have been left to wonder where they would go if they lost access to TikTok.
Michael Le, a creator on TikTok who has garnered a following of 33.8 million users, posted a video encouraging people to #SaveTikTok.
“I’m starting a petition with hashtag #SaveTikTok,” Le said in a video that has now been viewed nearly 9 million times and liked by over 2 million people. “2020 has had so many tragedies, and TikTok has been one of the most positive outlets for us all whether it’s watching or creating content,” he continued.
TikTok has been a popular app for a while, but since lockdown measures began in response to the coronavirus pandemic, its popularity has grown even more. It’s become the social media platform of choice for many, particularly Generation Z, as many parts of the world continue to isolate.
According to Sensor Tower, the app has been downloaded 2 billion times. 165 million of those downloads have come from the U.S.
Le said that while the app has “flaws” it has inspired people in hard times and lifted spirits during the pandemic. He asked that people comment #SaveTikTok on his video to create the social petition. As of Monday morning, his video has received over 460,000 comments, many of which use the hashtag. Some of those comments came from other popular creators like Tony Lopez, Jon Klaasen, and Justin Vibes. The #SaveTikTok hashtag has received a total of 311 million views throughout the app.
Concerns Remain Strong
However, not everyone is working to save the app. Some large companies and prominent figures have advocated for deleting TikTok.
Wells Fargo has asked that all its employees delete the app from their work devices because of security concerns. The Democratic and Republican National Committees have even warned that their staffers about the app.
Amazon sent out a memo asking their employees to delete it but quickly backtracked the order, explaining it was sent in error.
On top of all that, popular gamer and streamer Tyler “Ninja” Blevins announced that he deleted the app and hopes a “less intrusive company” can recreate the successful concept.
As for why so many people are wary of TikTok, many believe that the app is sending user information to China. TikTok has repeatedly denied this, claiming that user safety is their top priority and that they have not and will not share information with China.
Geoffrey Fowler, a technology columnist for the Washington Post, has explained that the app does collect a substantial amount of information of its users. It is not exactly clear whether or not that information makes its way to China, though it is possible. In a Monday morning piece, Fowler wrote that the app collects information on the content you consume, in-app messages you send, as well as location information, your phone contacts, age and other social network connections.
While this is likely not more than the information Facebook might be grabbing from its users, it is still a sturdy haul. To find out what happens with that information, Fowler worked with Patrick Jackson, the chief technology officer at a privacy company called Disconnect to watch data flow out of TikTok. While they did not see it make its way to servers known to be in China, they believe it is possible, and even likely, that data could be transmitted to other locations that they could not verify.
See what others are saying: (Washington Post) (The Verge) (Wall Street Journal)
Manufacturer Behind Kylie Cosmetics and KKW Beauty Sues to Keep Coty From Stealing Its Trade Secrets
- Seed Beauty, the company that manufactures Kim Kardashian West and Kylie Jenner’s makeup lines, believes Kylie Cosmetics gave confidential trade secrets to its competitor, Coty Inc, which Jenner sold 51% of her brand to earlier this year.
- Seed is now suing Kylie Cosmetics and Coty in an effort to stop them from sharing and using those secrets.
- The lawsuit comes just days after Seed won a temporary injunction in a similar case against KKW Beauty, which Coty recently acquired 20% of, preventing it from sharing confidential information as well.
- KKW Beauty denied claims that it shared information with Coty, and though Coty and Kylie Cosmetics have not responded to the lawsuit yet, they will likely argue that Seed’s allegations are speculative and that the secrets it claims Kylie Cosmetics shared aren’t actually trade secrets.
Kardashian-Jenner’s Strike Deals With Coty Inc.
The company behind Kylie Jenner and Kim Kardashian West’s makeup lines, Seed Beauty, is taking legal action to protect its trade secrets now that both stars have massive deals with Coty Inc.
Coty Inc. is the beauty conglomerate that owns brands like CoverGirl, Sally Hansen, Rimmel, and others. It has recently made headlines for striking million-dollar deals with the sisters in what some view as an effort to refresh their image and attract a younger audience. For some time now, Coty has been struggling to keep up with its competitors in the industry, so it seems like their new strategy is to link up with more social media-driven brands like Kardashian West and Jenner’s.
Earlier this year, Coty bought 51% of Kylie Cosmetics for $600 million, and just this week, news broke that Kardashian West sold 20% of KKW Beauty to the company for $200 million.
The deals were huge for the sisters, valuing both of their brands at around $1 billion and leaving them each with net worths of $900 million. However, the deals were pretty concerning for Seed Beauty, which partnered with Jenner since her line started in 2016, taking care of logistics, manufacturing, development, storage, and distribution.
Seed also took on the same responsibilities for KKW Beauty when Kardashian West launched the line in 2017. Now, Seed Beauty is worried that Coty has, and will continue to, get access to the secrets that it believes make Seed a strong force in the beauty industry.
Seed Beauty Sues After Kylie Cosmetics Allegedly Shares Trade Secrets
On June 30, Seed Beauty filed a civil lawsuit against Coty and King Kylie, the LLC behind Kylie Cosmetics, to prevent the misappropriation of trade secrets.
The lawsuit says that because of Coty’s inability to “successfully compete in the new digital cosmetics world through its own innovation,” the company has engaged in a plan “to steal the secret sauce behind Seed,” through its deals with the sisters.
The suit claims, “Coty made a $600 million investment in King Kylie, but it really was a subterfuge to learn Seed’s confidential business methodologies.”
“Any competitor who acquired such information would be given an unfair competitive advantage,” it adds.
The suit also alleges that Kylie Cosmetics knowingly shared Seed Beauty’s confidential intellectual property and Coty knowingly accepted that information. The complaint is highly redacted, so it doesn’t specify the secrets that Seed wants to keep private, but it could include things like information about product formulations, information about the business’ core operations, and the structure of its partnerships, according to Forbes.
Seed says it repeatedly asked Kylie Cosmetics not to share certain parts of their partnership agreement over the course of negotiations with Coty, which were rumored to have begun in June of 2019.
However, according to the suit, Jenner’s team refused to confirm or deny whether or not they had shared information. Seed also says it asked Coty not to ask for, or use, its trade secrets, but Coty similarly refused to assure Seed that it wouldn’t.
Now, Seed Beauty is asking the court to permanently bar Kylie Cosmetics from disclosing it’s trade secrets. It’s also asking that the court force Coty to promise not to use information that it’s already allegedly acquired. On top of that, it wants Coty to be prevented from developing any color cosmetics with Kylie Cosmetics for a period of time that was redacted in the suit.
“This action is to stop Coty’s theft of Seed’s pioneering and proprietary digital-first business model that has revolutionized the cosmetics industry,” the suit says.
Injunction Against KKW Beauty
But again, the Seed’s concerns don’t just focus solely on Coty’s relationship with Kylie Cosmetic. In expectation of a Coty-KKW deal, Seed filed a similar lawsuit against KKW Beauty, also seeking protection of its trade secrets.
Seed filed the lawsuit on June 19, likely after learning from its experience with her sister’s deal. KKW Beauty then filed an opposition to the lawsuit, claiming that Seed’s legal action was an “attempt to stifle the success of the Kardashian-Jenner family.” It also argued that KKW Beauty did not share any trade secrets with Coty and requested that the court compel arbitration.
KKW Beauty lawsuit reads, “The purported harm to Seed is entirely speculative, unfounded, and already complete,”
“By contrast, KKW stands to suffer comparatively more significant harm if the Court were to enter the amorphous injunction proposed by Seed.”
Ultimately, the court granted the temporary order, which lasts until August 21. That order prevents the brand from sharing details about its partnership with Seed, including “the terms of those agreements, information about license use, marketing obligations, product launch and distribution, revenue sharing, intellectual property ownership, specifications, ingredients, formulas, plans and other information about Seed products.”
Still, that court order didn’t stop Kardashian West and Coty from striking a deal, which was formally announced on June 29, and this legal situation is far from over.
It’s likely that Coty and Kylie Cosmetics will both argue that Seed’s allegations are speculative and that the secrets it claims Kylie Cosmetics shared aren’t actually trade secrets.
Still, the legal battles may be worth it in Seed Beauty’s eyes, as it has built itself quite a good reputation in the industry. According to the lawsuit, Seed goes to great lengths to protect its trade secrets by doing things like limiting access to areas of its factory, requiring all employees to sign non-disclosure agreements, and having security monitor the property.
In the Beauty space, Seed is well known for its speed and efficiency thanks to what it calls its “unique business model,” which makes it capable of turning an idea into a product within weeks. The company is not only known for working with the Kardashian-Jenner’s but is also massively successful for its own line, Colourpop Cosmetics, as well as its partnership with YouTuber Tati Westbrook for her new cosmetics line.
So it’s not surprising to see Seed go to great lengths to keep its secrets to success out of its competitor’s hands.
Coty and Kylie Cosmetics have not yet formally responded to the lawsuit or issued a public comment. The first court hearing is scheduled for October, according to Insider.