Daily fantasy sports operator DraftKings has reportedly received a $250m shot in the arm from Walt Disney Co, the parent company of sports media giant ESPN.
A possible tie-up between DraftKings and Disney was hinted at late last month. On Friday – a very Good Friday for the Boston-based DraftKings – the Wall Street Journal reported that Disney had pulled the trigger on the deal, giving the Mouseketeers up to a one-fifth stake in DraftKings. The deal would place a total value on DraftKings of around $900m.
Neither Disney nor DraftKings has yet to officially comment on the rumors. Sports Business Daily reported that the deal includes a commitment by DraftKings to spend slightly over $500m advertising its services on ESPN’s platforms over the next three years. In exchange, DraftKings would get exclusive use of much of ESPN’s fantasy content.
The news comes just one day after DraftKings announced it had expanded its partnership with Major League Baseball to become the league’s ‘official daily fantasy partner.’ Disney joins a host of venture capital firms that have placed a bet on DraftKings’ future success, including the Raine Group, Redpoint Ventures, GGV Capital and Atlas Venture.
DraftKings earned revenue of $40m in 2014, up exponentially from just $3m in 2013, and 2015 projections are in the $150m range. UK-based rival FanDuel reported revenue of $54m last year, up from $14m in 2013. Neither company has yet turned a profit. FanDuel claims to control 80% of the US daily fantasy sports business but the ESPN tie-up would presumably offer DraftKings the consumer visibility to at least partially close this gap.
Disney reportedly decided to back DraftKings following a “bake-off” in which the rival operators pitched their wares to senior ESPN execs. Part of DraftKings’ appeal turned out to be its lack of existing media tie-ins, whereas FanDuel counts both Comcast Ventures and NBC Sports Ventures among its investors.