The growth in technology and media over the last few years has produced several notable examples of scrappy start-ups that disrupt massive markets and, in the process, disintermediate their much larger competitors. By the time such start-ups become household names, they have endured plenty of late nights, make or break moments and eleventh-hour miracles to make payroll and keep the company going. While from the outside these companies might seem like overnight success stories, the reality is they have usually scratched and clawed and been incredibly savvy on their way to success.
One recent example of this phenomenon is Barstool Sports, a Manhattan-based company that straddles the sports, technology and entertainment industries. Some people love them, some people hate them, but either way the Barstool story offers a valuable blueprint for entrepreneurial success – not just in the sports, technology or entertainment industries, but for entrepreneurs in any market dominated by monolithic, deeply entrenched competitors.
Viva la Stool
The Barstool origin story follows a familiar script. In 2004, Dave Portnoy, the company’s founder, quit his job in IT sales in search of a way to combine his love of sports with his desire to run his own business. After poking around a few sports-related opportunities, Portnoy discovered a potentially profitable niche delivering targeted original content to gamblers and fantasy sports enthusiasts through a simple print publication. Drawing on his background in sales, Portnoy scraped together a year’s worth of ad revenue from offshore casinos and started publishing a simple newspaper on topics he knew well, building his audience by handing the paper to people as they exited train stations in his hometown of Boston, Massachusetts.
After taking the company online in 2007, Portnoy cobbled together a cast of like-minded bloggers in cities such as New York, Chicago and Philadelphia, as well as on college campuses across the fruited plain, each of whom produced and curated original content that appealed to a very specific audience – all under the Barstool banner. After several years of grass roots growth, the Barstool brand has since been on a meteoric rise among the highly coveted “18 to 35-year-old male” demographic. Yet, unlike other web-based companies, Portnoy shrewdly realized that the company could not survive on advertising revenue alone, and so he focused his efforts on diversifying the company’s revenue through live events (concerts, etc.) and merchandise (t-shirts, stickers and other merchandise, such as flags emblazoned with one of its well-known mantras like “Saturday’s are for the Boys,” which can now be seen flying at tailgates everywhere). In a very meta way, Barstool itself has gone viral by capitalizing on the viral nature of wildly popular videos, social media and internet memes.
In January 2016, after several years turning suitors away, Portnoy announced that he sold a majority stake in Barstool (reported to be 51%) to The Chernin Group, a media and entertainment investment firm lead by industry heavyweight Peter Chernin. In doing so, Portnoy demonstrated tremendous self-awareness and publicly acknowledged that, more than money, he needed a strategic partner to take Barstool to the next level. Despite taking on an outside investor, Portnoy retained a meaningful equity stake in the business and, most importantly for the brand, absolute editorial control. For its part, The Chernin Group brought deep business expertise to the company by placing two representatives on the Barstool board of directors and by encouraging the hiring of Erika Nardini, a former AOL marketing executive, who was named the company’s first outside CEO. Barstool was growing up. Well, sort of.
While Barstool has stayed true to its roots, it has also demonstrated that it is serious about being a real, profitable business. Indeed, Barstool cranks out topical content on a daily (sometimes real time) basis and pounces when opportunity presents itself. For example, within the last year the company leveraged its rapidly growing popularity by extending its self-produced daily show, called Barstool Rundown, into a limited-run program on Comedy Central, which was broadcast live during the week leading up to Super Bowl LI in Houston. More recently, the company announced that it would team-up with ESPN to produce a show on the “Worldwide Leader” called Barstool Van Talk, itself a spinout from Barstool’s widely-popular podcast called Pardon My Take, which is hosted by Barstool personalities Dan “Big Cat” Katz (one of the original bloggers to join Portnoy in the early days) and a man known only as PFT Commenter (a name derived from his internet origin as a pithy commenter on the Pro Football Talk blog run by Mike Florio). If you’re having trouble following along, the critical point here is that much larger brands like Comedy Central and ESPN are looking outside their own walls to tap into something that is becoming elusive to them – relevance among a generation of “eyeballs” that consume content in rapidly evolving ways.
Interestingly, however, ESPN canceled Barstool Van Talk after only one episode – not because of the quality of the content (it was much too early to tell whether the show would be a success), but rather because of an internet firestorm sparked by several female employees at ESPN who objected to Barstool and its content, which they deemed (among other things) “misogynistic.” We leave it to you to judge for yourself the propriety of Barstool content, but we note that while (as with almost all comedy) Barstool often crosses lines that make some people uncomfortable, the charges of sexism and misogyny against the company may be misplaced if one actually listens to women who work for the company (such as its CEO, Nardini, or the women who host another popular Barstool “show” called Chicks in the Office). Apparently, ESPN wanted everything Barstool brings to the table, without the perceived “baggage” that comes with it. While Barstool’s content isn’t for everyone (which is exactly the point), it is undeniable that Barstool consistently cranks out original content that appeals to a commercially significant audience, something its larger competitors are struggling to do.
Indeed, Barstool draws millions of unique visitors to its site through a variety of platforms, including its proprietary app, its YouTube Channel, its podcasts and its vast social media presence (branded at both the corporate level as well as further downstream through its many prominent personalities). The company generates many millions of unique page-views a month through its targeted blog posts and self-produced video shorts (for example, its weekly vlog called Stool Scenes, which provides its followers an all-access view of life inside the company; and its irreverent animated shorts, appropriately named Barstool Shorts, which are often used to provide a self-deprecating, yet biting commentary on the latest controversies involving the company). Most recently, in November 2017, the company announced its acquisition of a concept called Rough & Rowdy, a sort of backwoods fight-club under which Barstool will promote and sell premium pay-per-view redneck brawls. Less than a week later, Portnoy announced that Barstool would partner with SiriusXM to launch its own 24-7 channel, thus capitalizing on the remarkable success of Barstool Radio, its daily radio show on the satellite radio platform.
Put simply, Barstool is generating seemingly profitable content with enterprise-level production quality, delivered in bite sized mobile packages, at a relatively low cost per click. Meanwhile, the company’s much larger competitors (with their enormous budgets and legions of staff) spend a lot more money, and take a lot more time, to produce content that consistently misses the mark. This trend of disruption is an earmark of the new economy, and is something each of us can use to our advantage.
Key Takeaways for Growth Company Entrepreneurs
Again, whether you like the company or not, Barstool’s rapid growth and commercial success is undeniable. While the company is still relatively small, Barstool is in a hyper-growth phase and is on pace to become an absolute giant in the sports/entertainment industry. Moreover, the Barstool model is emblematic of a new kind of entertainment company, one that produces short pieces in real time, which can be experienced by its loyal followers on-demand, and on any device. When compared to their larger competitors, with their bloated payrolls and teams of people who spend months producing high-budget programs that no one watches, it’s not hard to see why the Barstools of the world are eating their lunch.
More importantly, for purposes of this blog, the Barstool story perfectly illustrates three critical reminders for every growth-company entrepreneur:
- Be Authentic. Barstool doesn’t want to lead the world in esoteric, progressive sports journalism, a fact that drives self-important sports journalists (who would do anything for a fraction of Barstool’s audience) crazy. Put simply, Barstool feeds a rapidly growing demand for genuine, sometimes politically incorrect, “takes” on sports that are delivered by people who don’t take themselves or the sports they cover too seriously. Barstool knows exactly who its audience is and works maniacally to deliver the content that its audience wants. By being authentic and real, Barstool generates absolute loyalty from its customers, who not only consume the content as fast as it can be produced, but they are also highly engaged, which is demonstrated most importantly through purchases of Barstool-branded merchandise and the products and services of Barstool’s advertisers. Perhaps more importantly, because Barstool is unapologetically authentic to its brand, it attracts up-and-coming talent (everyone from highly talented college-aged people to former professional athletes looking to leverage their name recognition into a new career), each of whom want to join the “pirate ship” and be part of a movement. Barstool’s ability to have its pick of very talented people allows the company to remain ahead of the curve when it comes to producing cutting edge content. The lessons here for growth company entrepreneurs are very simple: be who you are and be really good at what you do; know your customers better than they know themselves; and nurture an authentic company culture that acts as a magnet for talent, which in turn will allow you to deliver remarkable experiences for your customers.
- Utilize Guerilla Tactics to Outmaneuver (and Out-Innovate) Larger Competitors. If Barstool had set out to play the Sports Illustrated, Sporting News or ESPNs of the world at their own game, we probably would not know anything about them today. Instead, in addition to remaining authentic to who they are, Barstool consistently leverages guerilla tactics and uses its relatively small size to its advantage by moving much faster than its competitors. Unlike the “big dogs” in their industry, the decision-makers at Barstool don’t have to go through multiple layers of management to get things done. Instead, they trust their judgment about what their audience will find compelling and they take chances with new, edgy content (and merchandise) to meet that demand. By moving quickly, they don’t just capitalize on trends – they actually play an influential role in defining those trends. While there are certainly risks inherent in taking on the role of innovator, the rewards are well worth it. Just as Barstool is able to outmaneuver its much larger competitors that are trapped in bureaucratic morass, as growth companies we can outflank our larger competitors by moving fast to deliver exactly what our customers want, exactly the way they want it. This happens with technology all the time, where much smaller companies with only a fraction of the resources develop enterprise level solutions in a short period of time, thus solving problems that much larger companies spend millions of dollars and many years trying to solve.
- Grow the Right Way. Portnoy has exhibited commendable restraint and consistency as he has scaled Barstool from self-published newsletter to hot internet property. First, while he certainly could have jumped the first time an investor offered him money, instead he waited until the company had reached a point where it could benefit from a partner that brought more than cash to the table – specifically, the team at The Chernin Group, which brought deep expertise in the media, entertainment and technology industries. Second, Barstool has been strategic in the way it has acquired and developed talent. In the early days, Portnoy used the Barstool brand as currency to attract disparate bloggers from a wide array of cities and universities with the promise that together they would grow a massive following. This certainly came with risk (for example, the inability to control content), but it was an elegant way to achieve scale with limited resources. Likewise, while he could have resisted anything that had the potential to dilute his control of the company, instead he acknowledged the need to bring in higher level talent (most notably, Erica Nardini in the role of CEO) who could help him take the company to the next level. Third, while much of Barstool’s growth has been organic in nature, the company has dipped its toe in the M&A waters by acquiring smaller internet and entertainment properties that allow Barstool to diversify its audience and platform. These decisions illustrate the tremendous value of being strategic during the scale-up phase. The allure of investor dollars is enticing, but before giving up equity we must ensure that the investor brings something to the table that would be difficult (either due to time, lack of expertise or scale) to replicate independently. Likewise, while growing the team, it is incredibly important to ensure that we hire people who understand and reflect the company’s culture, particularly during periods of hyper-growth. Finally, we must be open to adding high level talent and pursuing strategic acquisitions to augment (and super-charge) organic growth.
Barstool Sports is a controversial company that has made a lot of news recently, both good and bad. Putting aside the debate regarding whether Barstool’s content is brilliant or, rather, illustrative of a cultural race to the bottom (or a little bit of both), the company presents a fascinating business case study. Like many new businesses, Barstool was founded by an entrepreneur who wasn’t cut out for the traditional corporate world, so he carved out a niche of his own. Barstool has tackled many of the issues faced by other growth companies, and in doing so has illustrated three important reminders: Be Authentic, Use Guerilla Tactics to Outmaneuver and Out-Innovate Competitors and Grow the Right Way. It will be very interesting to observe how Portnoy, Nardini and the rest of the Barstool team manage these and other issues as they continue to scale the company.