How Barstool's Ex-CEO Built a Brand Amid Controversy

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0:32Bloomberg Audio Studios, podcasts, radio, news. Welcome back to The Deal. On today's episode, Erica Ayers-Badon, she's now the CEO of Food52. You knew her in her previous job as CEO of Barstool Sports. I did, and she's a master at turning around companies. I cannot wait to hear it, but she's a great leader, great communicator, and she's on to new things. Yeah, she has got massive ambitions. She's also deep into the world of lacrosse. She played in college and now she's on the board of the Premier Lacrosse League with our buddy Paul Rabel. So lots to talk to her about. Coming up, Erika Ayers-Badhan.

1:15The Bloomberg Sustainable Business Summit returns to Singapore on July 22nd. Our fifth annual Asia-Pacific Summit will explore how business and finance leaders are shaping the next phase of globalization by strengthening resilience and driving a multi-speed energy transition across Asia's diverse markets. Join us for solutions-driven discussions and networking opportunities. Thank you to our summit advisor, Bangkok Bank. Learn more at bloomberglive.com slash SBS dash Singapore. All right, my man, Erica Ayers-Badhan is here with us. You guys are all buddies. So I got to turn this over to you. You got to lead this one.

1:53This is strange. So thank Thank you, Jason. So Erica, we're so excited to have you. Obviously, we worked together a little bit with Barstool. I saw you firsthand how wonderful you led with the conviction and really how much success they had under your leadership and the growth was incredible. Now you're at Food 52. It feels like a big pivot. What is the through line for you? It's a great question. So thank you for having me. I sold Barstool twice in 2023. So we sold it to Penn National, and then we bought it back for Dave Portnoy for a dollar. Oh, we're going to talk about that. Come September 2023, I was like, I've done everything I came to do here.

2:36I couldn't have dreamed that we would have had two exits in a year, that the company would be back with Dave. I really felt good about that because I felt like Dave was always the right steward for Barstool, and I gave what I could give and the gift of the machine while I was there. And I felt that the greatest offense to what I had done for the past almost a decade would be to stay after I was creating. And I just felt like it was offensive to everything I sacrificed to build it, that I wanted to go find a new adventure and a place where I could start and try to build something again. And so that was really the pivot.

3:17I also felt like I had marketed to 18 to 24-year-old men for the better part of a decade. And I was like, I know how to do this. I was finding that I wasn't crazy stimulated by it. And I was writing a book at the time. And the last section of the book is, do you stay or do you go? And the point where you go is when things stop scaring you. And I felt that moving into the women's space and moving into home and lifestyle and manufacturing was sufficiently scary. And so I made the pivot. And I've never asked you this. How do you get an opportunity like Barstool? Does a headhunter call and say, Erica, I have a wild idea?

3:56How does that work? No. So it was actually funny. So when it was very random, it was by accident. So I was in Los Angeles and I worked in music. I had a startup in the music space trying to build really fan platforms around music artists. and we were raising money and we went to go see the Chernen Group. And I walked into the meeting and the Chernen Group were like, oh, hey, we just put money to this company you've never heard of. And I was like, well, what's the company? And they said, oh, it's Barstool Swartz. And I pulled up my phone and I was like, I lived in Boston when Dave started Barstool.

4:29I used to get, you know, I'd be hung over on the T and I would read the paper and I have the app and I'm like, here's everything that's right with it. Here's everything that's wrong with it. And my business partner was pissed because he was like, we should be focusing on raising money for us. But I really couldn't shake that conversation. I felt very jealous because I knew that they would probably find a white guy with an MBA and a vest and a buttoned down shirt. And that was not me. And I pursued that opportunity hard. I tried to find anyone I could to get connected to Dave. I finally got connected to Dave probably three months later.

5:07We met in a coffee shop in the West Village. And I pretty much was working for Barstool since that moment. But it didn't come, it was actually very interesting because they had interviewed, I think, probably 70-ish guys, 70, 75 guys or men for the job. And you could tell the recruiter was irritated by the time I showed up because the recruiter had done his part, you know, with showing candidates, showing candidates. He's like, I've delivered all these bros. I came out like 100%. And this chick walks in. And so that's how I got it. Wow. Did you have any idea what you were in for? No. No. You said something interesting a minute ago that I love, which is the gift of the machine.

5:48Was that what was in your mind, that that's what it needed? Because it was what? It was less than$5 million, right? Oh, it was less than$5 million. It was probably 14 people. They were based in Boston. Like it was, you know, when I remember my first summer there, there was no office. I worked in hotel lobbies and coffee shops. while Dave and I built the office, opened the office, we weren't sure who was on payroll. So speaking of that, you go from under 15 people, employees, you go from the sub 5 million in revenue. You probably don't even have a P &L. Barely, yeah. By the time you leave, you go from that to about$250 million of top line revenue.

6:29What were some of those drivers, the main drivers? Yeah, I mean, I think the quote unquote machine was what we were really good at is one is finding new platforms at the time of emergence. So podcasting was just starting to emerge around 2016, 2015, 14 to 16. And most of the big broadcasters weren't in it deeply because there was no money there. And we had no money and the cost of production for a podcast was very low. And so there was a low barrier of entry for us to make a lot of podcasts. So we started to make a lot of podcasts. And then, you know, a year later, Facebook Live and Twitter bought Periscope, and it was live streaming on the internet.

7:16We got into that. And so the machine, quote unquote, the machine is really, how do you find emergent platforms? How do you find programming that was authentic? I really felt that there's something with young men in particular that didn't want to be preached at or told. The whole notion of SportsCenter was dying, where you weren't going to wait until 11 o 'clock at night to see what happened today. You wanted the score and you wanted the opinion in the same conversation, in the same context. And what we built was the ability to clip that, post that, promote that, circulate it and monetize it. Well, and you also discovered this notion of creators at the core, right?

8:02I mean, and I mean, Portnoy, and we'll talk a bit about him, I'm sure, you know, at the center of that. But you also set about finding people, not just you found people and married them to platforms. Is that a fair? Yes, we found people and Dave is really gifted at this is the Dave, Gaz, like the core Barstool guys have very good eye for talent. And we were at a point where, you know, it's kind of pre the capital I influencer world that we live in now. But the alchemy of weirdos from, you know, somebody's railing about New Jersey transit. And next thing you know, you have Frank the Tank and you're putting Frank the Tank next to an Alex Rodriguez or Deion Sanders.

8:42And it's it's just weird. And so that was very captivating. Alex is like, confirmed. Yes. Yes. So we did a good job of discovering talent. And then we did a good job of setting a social norm inside the company of a high degree of productivity and a high volume of output. And we had a lot of at-bats. So because we had so many at-bats, it was easier for us to get a hit. So you had some at-bats. I mean, what was your impression? I just thought, first of all, I thought Erica was a great leader. You always come up with wild ideas with her, and she never said, no, that's not going to work. She always tried to figure out, like, okay, how do we think outside the box?

9:20How do we get to a yes? Let me think on that for a couple days, and she'll come back to you with really productive feedback. But, I mean, I was working with Dan, who's very, very talented, the cat. Yeah, the cat. He had an enormous audience. The brand is so big, Jason, that when I would go to colleges to give talks or whatever, or even walking here in the cities of New York, the people would be like, Barstool, Barstool. I was like, holy smokes, like not the Yankees, not this, not that. It was Barstool. So I knew the power then when I joined them. And so Erica, I want to go back to the Penn deal that you mentioned, because that sort of sits at the center in terms of the deal making that you guys did.

9:56So how does that all go down? So when I joined Barstool, the investors felt that we should be able to do, I want to say$25 million in revenue in four or five years. I think it was five years. We ended up doing$25 million of revenue in like two and a half years. So we, it just, we took off very, very fast. And that's mostly ad? Ads. Mostly ads and commerce. So, and t-shirts, right? Merchandise. But we then built a subscription business. We built a pay-per-view business. We were able to spin up businesses in a way that It was very fast because we were, I would say, reckless, but also highly entrepreneurial.

10:39But long story short, we knew that there were two outcomes. One was that a media company would buy Barstool Sports. And then when PASPA was repealed and gaming and gambling looked like it would scale in the U.S., that became very obvious that that was going to be the path. And so – This was the Supreme Court decision that basically allowed for – Allowed for states to regulate sports betting on a market-by-market basis. And prior to that, it was illegal across the country. I had always built the business to have optionality for either path. And it's kind of interesting. Like, you know, Dave was on Fox in September, and then the Good Morning Barstool show launched.

11:21Like, that was actually probably the right outcome for Barstool Sports is to find a media home. because the company has intrinsic media DNA. Penn came along. Penn needed a brand. They had a large regional casino footprint. They had infrastructure, and they had a lot of licenses. They had all the state licenses or most of the state licenses at the time. And so in that regard, we were a really, really good match versus a DraftKings or a FanDuel or an MGM. Those were companies we had worked for before. Those were companies we had supplied a lot of audience to. And the way I built to that or we built to that is, you know, in year one, we had five gambling partners.

12:07And in year two, we had two gambling partners. And in year three, we had one. So I tried to create more and more competition and a king making of who our partner was. And then by the time Penn came along, we had a very, very good case study and a very high volume of proof points of our ability to transact and our ability to drive customers for someone else. I think a lot of times in acquisitions, what the acquiree forgets about is that the acquirer wants customers. And you are a conduit to either acquiring, keeping, or upselling those customers. And we were very cognizant of that. Yeah, it seemed, and Jason and I were talking offline, like a dream.

12:50And I remember at the time, what a brilliant idea. You have the regional footprint with Vegas, and you have the bricks and mortar, and you guys have – With the brand. The brand, the gambling. And also, Penn wasn't cool. You guys made it cool, and you made it relevant. When you trade on something like that, educate us a little bit. Is it more top line? Is it a multiple of EBITDA, or just – how does that work? So we were a multiple of EBITDA. So we were lucky in that we had good EBITDA in the business. Most of it we reinvested for growth. We were also looked at on a multiple because we had a very healthy and growing ad business.

13:27And we were growing thousands of percents or hundreds of percents on an annual basis, really on every dimension. So if it was ad revenue, if it was audience growth, if it's downloads on podcasts, we were trading up and exponentially up year over year. Now, there was a discount because the brand was controversial and there was like, well, what about Barstool? What about, what about? So there was a discount to that. And the partnership, you know, in good ways and bad ways, you know, we never, Dave and I never set foot in a Penn Casino before we did the partnership. And I think we didn't know in some ways what we didn't know going into it.

14:11I think we brought a tremendous amount of value to Penn. You saw it in the stock price pop. You saw it in the audience. You saw it in the establishment of the brand. Ultimately, it wasn't a fit. When did you know it wasn't working? It was hard. It just was really... From the beginning. Yeah, like from the jump. And in fairness to Penn, they had state and government-controlled licenses. Like if your business is predicated on a government license, like you can't mess that up. Like you just think differently. You act differently. So that was really hard for us because we were more successful and most fulfilled the most audience we were getting.

14:55The more audience we got, the more eyeballs we got, the more people talked about Barstool, the more people looked at us or talked about us, the better off we were. Penn was like, could you guys just be quiet? People stop talking to you. which was so antithetical to how the company was built. The second piece of it was Penn is really a cash-driven business, right? So they collected, you know, they were collecting coins in casinos, right? And when you collect the cash every night and you count it, you have a high degree of predictability and you have a high degree of certainty around what your revenue is on a day-to-day basis.

15:31In the media business, as you all know, like, it doesn't work that way. So I felt personally I was spending a lot of time of predicting what the revenue one month from now was going to look like on any given Wednesday. And it just was like – it just was two really different beasts. If you have a mulligan, and in hindsight, Penn never happened. Yeah. Knowing what you know now, going back, what would be the ideal – maybe one or two companies would be the ideal buyer? Yeah, I think – you know, I'm so grateful that Penn did happen. It changed, you know, changed everyone's life. It freed Barstool up to go back to being privately owned, gave, you know, a huge reward to the investor.

16:13Like it was a win for, you know, most everyone in that equation. I think Fox is probably the right home for Barstool, like always was the right one, to be honest with you. There was a hot minute. We thought it was ESPN. And obviously that wasn't going to be ESPN after we had our 1 a.m. disastrous one-episode TV show. But I think Fox was right. I think DraftKings or FanDuel would have been probably a better fit with similar challenges to Penn. But I really do think from a media perspective it would have been Fox. Yeah. Yeah. And so, you know, you mentioned this a minute ago, the notion of being out there, the notion of being loud, even the notion of controversy to some extent was a feature, not a bug when it came to Barstool.

17:03That must have presented challenges for you as a CEO. How do you deal with that as a manager? You get very thick skin and, you know, Barstool, we were not in crisis, but we created crisis for other people in our business dealings, which was challenging. That was tiring. It was trial by fire, which was a really good business experience. Not much phases me in business at this point because we had so much happen. Varstle years are like dog years. So there was a lot that happened in that. But it was also So media is a really interesting business. And I mean, to take it to the obvious point, like there's controversy and then there's like Dave Portnoy controversy, you know, and obviously he's been accused of things that he's denied.

17:52You know, like how do you take that on as a CEO? Every day, everyone at Barstool starts with a blank page and the camera is on 24-7 and And most anyone where the camera is on 24-7 and your job is to make people laugh out of a blank page every day, you are going to step in it. Like that is a byproduct of the business. So the first is just the acknowledgement of this is the world we play in and this is the business we chose and the cause that we adopted. I think on the Dave piece of it, like I really loved working with Dave. Dave is truly brilliant. He's a brilliant business person. He has incredible instinct.

18:36He is very decisive. He also is confident enough to know what he doesn't know. And I worked with him for almost a decade and I trusted him. I truly trusted him on every level. And when things got tough and stuff was thrown at him, we talked a lot about it. And it's intimate and it's personal and it's just things people don't necessarily want to know about one another. But I also felt like he was super forthright with me. And I think he also is super forthright with his audience. And there's people who like that and there's people who don't like that. But I also felt like I had really partnered with a quality person who I was going to ride or die with in that.

19:28And so one of the things that I think we're both fascinated by is, and I've been listening to your podcast work, which is really good, in part because when you walked in, I felt like I knew you because it is a very authentic, It feels like representation of yourself. Is that just how you've always been? Or is an experience, is your professional experience, has it made you that way that you are transparent and open and like very comfortable with real talk? Oh, no. I think I've always been like that. I mean, I grew up in a locker room. So it's, you know, I think you're just like that. College athlete.

20:04Yeah, when you're in a locker room. And I love to work. So a locker room, Alex, is where like athletes get. Thank you. Thank you. Really? He's like, I had my own.

20:18I think I've always been very curious and I've always had a lot of energy. And I think Barstool made me more public than I would have ever been. I would not have gotten to this place on my own, I don't think. But I do feel that there is really a lack of management talent. There's a lack of authenticity. There's a lack of care for younger people at work and passion around being great at work. I think COVID kind of killed the management. It really killed management. You stopped getting feedback. You stopped meeting with people one-on-one. You stopped learning in the hallways. And I really believe that work is an apprenticeship.

21:03Anything I learned is because I apprenticed under great people. and to have a concept where I can talk about work, share work, laugh at work, ridicule and push people and confront things at work, I think is healthy. So Erica, you know, Jason and I were talking a little bit a couple of weeks ago about managing talent and you've had some tremendous talent come through Barstow. I mean, from Deion Sanders to Alex Cooper, Pat McAfee, and obviously Dan, Kat, if you had a do-over, is there anyone that you wish you could have kept if you thought a little bit more proactively? Or is this the nature of doing business and people just have to move on in the next?

21:44It's so funny because I think Dave and I always used to talk about it like an athlete contract, right, where you get a rookie and the rookie contract might not be great. Maybe it is great in a rare air and a few exceptions, but you get your first contract or your first gig if you're a regular person. And it's all about how you perform in that first term. And we were very good about ripping contracts up and creating new ones. And you saw that progression with Alex Cooper in particular because that was very public. But I don't know that there's anyone who got away. There were a lot of talent I'm glad we missed on, to be honest with you.

22:26like I'm more grateful for the people we passed on. I also think, you know, it's funny, I deal with this now at work, when a talent leaves, there's a feeling, I think a failure of like, oh, they got away or we shouldn't let them go. But it's really like, hey, they just graduated to something bigger and this place, we were very comfortable with Barstool being a springboard to go do other things. I think the world has changed where when you're out on your own in the cold, versus you're in a stable where there's constant promotion and cross promotion and instigation is very hard to make it. Well, that's very much like sports.

23:05I mean, contracts are up, they get expensive. The other part that you guys did really well is you had a great farm system and you had great scouting. 100%. The way that came from you and Dave. And there's always a new crop. There's always a new crop. And so how do you translate that? Because as I understand, I want you to bring us and our audience up to speed on what you're doing at Food 52 because clearly talent and content are clearly at the center of that. So what are the lessons you take? How do you approach that talent? It's food talent, essentially, rather than sports. So what's the playbook there?

23:36Talent is succession, right? So it's how do you think about who's at the top of their game now and how do you feed the next generation of that? And that could be if you're an accountant or an FP &A guy or you're a media person or you work in advertising or you work in manufacturing, whatever. It doesn't matter. You work in content. I really think about it that you've got to give talent every possible piece of ammunition you have. You have to offer something to them in the power of the parent brand. I think a lot of times, you know, you read about this with Unwell and the Alex Earl versus the Alex Cooper of it all.

24:17It's like, what is Unwell offering to other talent outside of Alex Cooper in Unwell? That's a big question. What's the value proposition? Why is someone part of this network versus another network? I think media people and media networks miss that. But so long as you give talent freedom, you have their back when they mess up, because if you're in the public eye and you're making content on a daily basis, you're going to mess up. and then three is the money shows up you can have then you can play yeah um but you always need to be thinking about who's the future you know who's the next generation how do you start competition is so healthy i mean you see this in sports like competition whether you're in a test kitchen at food 52 or you're a fellowship of creators in my world at home and life and food or you're part of Barstool is a great thing.

25:39We'll see you next time. Stockmovers today on Apple, Spotify, or anywhere else you listen. So you mentioned that you ran into the bar store opportunity by raising capital. And then it shifted to something else. So I'm going to do a little role play with you. My friend Jason here, he's a CIO. He runs a family office. And he has a lot of cash. Okay. And he's looking to invest. Can you give him a pitch on why he should invest and what exactly is Food52? Oh, absolutely. So Food 52 started around the same time as Glossier, and the whole era of the blog turns into a little shop, and the shop turns into a product, and the product turns into a movement, right?

26:25And Food 52 did this in the subject of table and home and food, really, food as the center of a well-lived life. What then happened is Food 52 started curating incredible products from all sorts of artisans all around the world and had a very particular aesthetic and a very elevated aesthetic. But also for the first time had a real vision for home cooks versus chefs or restaurateurs or professionals. It was really about serving the at-home cook. food media has exploded since that time. And what I really believe is that there's a couple things that make Food52 worthy of investments. If you want to give me money, I'll take it.

27:12He's got a lot of it. That's great. I love that. But essentially, when you think about home and you think about food and you think about table or decor or lighting or textiles or furniture, it doesn't matter. The internet eats the middleman, right? And so you're going to have the Amazons of the world or maybe a Target of the world, and you'd have a crate and barrel or a pottery barn. And then you're going to have things that are very boutique and bespoke. And the pieces in the middle aren't really going to exist. And what I think is very interesting about Food 52 is that if you create a content engine that surfaces artisans and makers and interior designers and stylists and fashionable women and you service and put products underneath that, you can create a whole ecosystem that has a lot of cachet, that has a lot of differentiation, that has a lot of aspiration and a lot of appeal.