Why Disney’s DraftKings Investment Deal Didn’t Happen: DFS An ‘Adult Product,’ Not A Good Fit

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A proposed deal for the Walt Disney Company to invest in daily fantasy sports giant DraftKings never happened because of concerns over DFS not fitting in with Disney’s brand, according to a report to the New York Times.

Disney and DFS don’t go together

In a story by the New York Times’ Richard Sandomir, DraftKings acknowledged that a proposed investment deal with Disney from this spring was discussed and never finalized.

Reports this spring had Disney investing half a billion dollars in DraftKings, while DraftKings would spend $250 million in media buys on ESPN platforms (ESPN is owned by Disney). The investment deal did not happen, but in June DraftKings did gain exclusive rights in the DFS space to advertise and be featured on ESPN properties.

In the story, Sandomir said Disney “grew skittish.” Sandomir talked with DraftKings CEO Jason Robins:

Disney emerged with concerns that it did not want to taint its well-crafted family image by owning a chunk of a company in a business that feels a little too close to gambling, but is protected by federal law as a game of skill. “The way they put it to me,” Robins said, “is that this is an adult product that doesn’t necessarily fit in with their brand.”

The deal that had been reported by the Wall Street Journal and Street & Smith’s in April was not the only deal ever on the table, according to Robins. His accounting of the negotiations make it sound less like a deal “fell through,” and instead the two sides simply settled on the advertising and marketing partnership.

“We were working hand in hand discussing all types of deals — equity, no equity, one year, multiyear, a whole host of options,” Robins said. “We went back and forth on various structures.”

While there had been plenty of rumors circulating about why the reported deal never happened, in the end it appears that Disney’s anti-gambling stance won out.

Other interesting notes from the NYT

There were also two other fascinating nuggets about the DFS industry in Sandomir’s report:

The takeaways? If all of this is true, it seems clear that ESPN will not be offering its own DFS product any time soon, but will be happy to profit from the daily fantasy sports market in terms of ad dollars from DraftKings.

Also, DraftKings hasn’t slowed its spending — today it signed what is likely a very expensive deal with Staples Center in Los Angeles — lending credence to the idea that a round of investment funding is on its way.