Is Disney-DraftKings a Done Deal? $250M Reasons to Say “No Comment”

Disney appears to be making a bet with DraftKings, the Boston startup that lets users make fantasy sports bets on a daily, per-game basis.

The entertainment conglomerate’s wager is a little more substantial than a guess about a basketball or football player’s performance; Disney is investing $250 million in DraftKings and its digital media tool, according to a report by The Wall Street Journal.

In return for the investment, DraftKings has agreed to commit more than $500 million to spend on advertising on platforms of ESPN, the sports network owned by Disney, the Journal reported, citing people familiar with the situation. DraftKings operates in a sector that has been expanding, with companies such as FantasyHub, the Louisville, KY-based company that was selected by the 2015 Techstars Austin program, offering players a way to donate to charity and win cash prizes. DraftKings’ biggest rival, FanDuel, is backed by Comcast Ventures and NBC Sports Group, among others.

DraftKings had a busy 2014, making at least two acquisitions and landing a $41 million round of funding, after previously raising $35 million. The company’s investors include Atlas Venture, GGV Capital, and Redpoint Ventures. The Journal says the Disney investment values the company at $900 million.

DraftKings and ESPN both declined to comment on the report. A current investor in DraftKings, reached by e-mail, called the Journal report “not accurate.” The investor, who replied on condition of anonymity, did not clarify what was inaccurate or reply to follow-up messages.

Players using DraftKings pick players they think will perform the best on a daily or weekly basis, and can potentially win cash if they pick the athletes who do the best. That compares with traditional fantasy sports, where players manage a team of players over an entire season. The company’s “betting” is legal because fantasy sports are considered games of skill under federal law, DraftKings says.

David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at dholley@xconomy.com Follow @xconholley

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2 responses to “Is Disney-DraftKings a Done Deal? $250M Reasons to Say “No Comment””

  1. Fast Eddy says:

    This wasn’t an investment; it was a hold-up. ESPN, the 800 lb gorilla made a run at both companies with an outrageously bad deal. ESPN invests $250M for 25-30% of DraftKings and gets $500M back over 3 years! If DraftKings can’t meet the deal requirements, ESPN may well acquire controlling interest in the company. As a distant and desperate number two, DraftKings had little choice but to accept–or they would have been out of business. ESPN may be in for a big surprise when they discover how much money DraftKings actually loses with all their extreme overlays, a concept which most ordinary business analysts just don’t understand.

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