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Three Key Questions About Disney’s New Stake In DraftKings Sportsbook

DraftKings

The rapid pace of legal sports betting news makes it feel like Disney‘s acquisition of a stake in DraftKings happened years ago.

The deal, in fact, took place just in the past month as an offshoot of the massive Fox Bet tie-up with The Stars Group. The Legal Sports Report team examines the pressing questions about the Disney-DraftKings relationship:

Why did Disney take on this stake in DraftKings?

Dustin Gouker: I have heard a lot of rumors about the “why” of all this, and not sure I have the definitive answer. The range of opinions has been that ‘Disney/ESPN is all-in on sports betting‘ to ‘Fox forced Disney to take the stake as part of the larger deal.’

My current sense is Disney and ESPN did not take the DraftKings stake in the hopes of steamrolling the sports betting universe, and it was more of a moving part between two big companies.

Eric Ramsey: Owning a stake of a leading daily fantasy sports company probably seemed like a great idea at the time. Remember this deal started coming together long before the SCOTUS decision last May, before we knew that DraftKings was a full-blown gambling company.

I’m not sure it would have been an issue for Disney until DraftKings started booking sports bets and dealing online blackjack. Also, remember that the DraftKings component represents just a fraction of a percent of the $71 billion package.

Adam Candee: We have not seen all the details here but the educated guess is that the value proposition presented an opportunity too good for Disney/ESPN to pass up.

The arrow points up on major sports betting operators like DraftKings Sportsbook and FanDuel Sportsbook a year into widespread legal sports betting, not only in terms of valuation but also in regard to cultural acceptance.

We know the latter is the hangup for Disney regarding sports betting. It might just be a smart short-term/medium-term play to grab a valuable asset and see what it could be worth.

Is ESPN going to become a sports betting company?

Dustin: As I sit here, I believe Disney is sincere in saying it doesn’t want to be a bookmaker. Could that change? Sure. Should they be looking at becoming a bookmaker?

Yes, I would argue. Fox has already taken the stigma away from it. They are becoming a bookmaker while obviously having broadcast deals with pro sports leagues. But if ESPN really didn’t get the DK stake with larger plans in mind already, I don’t think the impetus is going to change in the short term.

Eric: Nah, there are just too many apparent conflicts. Disney has spent many millions of dollars fighting the expansion of gambling in Florida, including at least $15 million last year.

Would it suddenly start lobbying in favor of sports betting and online gambling? That would be in the best interests of DraftKings, and I just can’t see it coming from Disney. I think putting an ESPN studio inside of a sportsbook is the upper limit of its involvement, at least in the short term.

Adam: No. Disney chairman Bob Iger said clearly earlier this year that he doesn’t see his company facilitating sports betting. This acquisition is not on the scale to make me question the veracity of that statement.

Media tie-ups with sports betting operators are the deal du jour in the business right now and ESPN is jumping into the content side with both feet. Actually running a gambling operation is a much longer leap that appears unlikely.

What’s the most likely outcome?

  • Disney/ESPN buys DraftKings

  • Disney holds onto its investment

  • Disney sells its stake?

Dustin: I think 2 and 3 are most likely. But I think 1 is what they should be doing. The synergy of an ESPN Sportsbook powered by DraftKings or vice versa would simply be an amazing brand. If Disney holds onto the stake, I think the longer that happens the more attractive the opportunity becomes for ESPN. I also don’t think Disney is quite as against gambling as some think, making divesting not a necessity. I think a lot of their opposition in Florida is simply because they don’t want more competition for tourism dollars rather than some deep cultural need to stay away from gambling.

Eric: I agree about what Disney should do, but I have to believe it’ll divest itself of this stake. DraftKings is a bona fide gambling company nowadays, and Disney is not a fan of such adult activities — at least in its home state. Even if “BetESPN” is a possibility, I’m not sure DraftKings would be willing to forfeit its brand the way The Stars Group relinquished BetStars. Maybe a co-branded platform would fly, but I just can’t see it coming together.

Adam: In the medium term, my thought is ESPN holds the stake to see how the legal sports betting landscape develops over the next 12 to 24 months. We are in the infancy of this industry. This asset barely registers as an ink drop on Disney’s massive books so there’s no hurry for the company to act on it unless the right opportunity appears. I can’t see acquiring the stake to flip it immediately and I also can’t see Disney diving head-first into a DraftKings purchase, assuming the sides could even agree on terms.

Adam Candee
- Adam Candee is the managing editor of Legal Sports Report. He covers sports business and news from Las Vegas. Adam is a former editor and reporter at the Las Vegas Sun, Arizona Daily Sun and KLAS-TV. He can be reached at [email protected]
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