Next On SportsCenter: DFS, As Disney And ESPN Bet $250mm On DraftKings

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ESPN DraftKings

A heavy hitter is about to join the daily fantasy sports industry, as Disney is investing a quarter of a billion dollars in DraftKings, according to media reports.

The news comes just weeks after rumors of a pending deal between Disney and DraftKings.

The details of the deal

Stories came out almost at the same time from the Wall Street Journal and Street & Smith’s SportsBusiness Daily Global Journal.

ESPN = linchpin

The most interesting part of the deal, aside from the investment itself, is the ESPN aspect of the relationship. From the WSJ story:

In return for Disney’s investment, DraftKings has committed to spend large sums of advertising dollars – just north of $500 million – on ESPN’s platforms in coming years, the people said. That provision is a major attraction of the deal for Disney.

FanDuel can continue to advertise on ESPN but won’t have the premium positions afforded to DraftKings.

Paired with information from the SBJ story — that the advertising commitment was for three years — that breaks down into roughly $167 million a year on television commercials and digital promotion. Any way you slice it, that’s a lot of money.

The deal will likely give DraftKings exclusive positioning next to ESPN’s fantasy content. ESPN currently caters its fantasy content mostly to seasonlong fantasy players, but one would imagine that this deal will lead ESPN to pushing more DFS content/strategy/advice in its programming and on its website.

ESPN/Disney also decided on its course of action in DFS with this move. While some thought ESPN might eventually launch its own DFS offering, they’ve hitched their wagon to DraftKings.

“No. 1, Disney was just kind of reluctant to get on board with anything that resembles gambling,” said Adam KrejcikManaging Director of Digital & Interactive Gaming at Eilers Research, an expert in the DFS space.

“Obviously they got over that part. No. 2, if they launched [DFS] themselves organically, in house, that creates a real issue for their ad side of things, where they had already been benefitting,” Krejcik continued.

“Seems like the ad side of things won out.”

Krejcik noted that the amount DraftKings will reportedly spend on ESPN this year likely eclipsed all ad spend by all fantasy sites last year. And that’s with nearly ubiquitous ads on ESPN television and radio already.

Ad buy aspect sparks dicussion

What does this mean for the rest of the DFS industry?


Will the Disney investment speed up FanDuel’s fundraising efforts? In February, there were reports that the site was looking for $100 million, and a valuation that would surpass a billion dollars. FanDuel still sits as the industry leader, but clearly DraftKings has designs on changing that, as soon as this year.

Other than another round of funding, do they make any changes? Krejcik says he could see them limiting their ESPN ad spend and look at other outlets (For example, NFL, MLB and NHL broadcasts, Fox Sports, regional sports networks, etc.) No matter what, it’s unlikely FanDuel stands pat.


There’s been a lot of change in a short period of time for DFS — Major League Baseball expanded its relationship with DraftKings this week.

While many will speculate on the NFL, the actions of others will probably not result in the league picking sides with DraftKings or FanDuel in the immediate future.

Amaya / PokerStars

The Disney investment likely takes the possibility of Amaya Gaming acquiring DraftKings off the table, after news this week that PokerStars would be launching DFS this year.

Krecjik also believes this could have an effect on PokerStars’ entrance into the daily fantasy sports sector.

“If they (PokerStars/Amaya) want to really get competitive in the U.S., the bar’s set, right?” Krejcik said. “You have to spend $150 million a year on sales and marketing. And that’s so much. That’s almost what they spent globally on PokerStars and Full Tilt. … If they are going to do that (get into the American DFS market) it’s going to be dilutive to their earnings.”

In the end, it represents another escalation in the battle between DraftKings and FanDuel for the hearts and minds of daily fantasy players.

“It’s going to be a full-on marketing war this year,” Krejcik said. “If this doesn’t drive mainstream awareness [of DFS], I am not sure what will.”

Money keeps pouring in

Despite the fact that DFS sites haven’t managed to turn a profit yet, that isn’t making investors shy away.

According to internal estimates from LegalSportsReport, the entire daily fantasy sports industry generated under $100 million in total revenue during 2014. According the bull case scenario from Eilers, total industry revenue could hit $2.5 billion by 2020.

Contrast those numbers with the $200mm+ in publicly-reported backing secured by DFS companies prior to today’s investment by Disney.

Photo by Rob Poetsch used under license CC BY 2.0.