The big news in the daily fantasy sports industry is Disney’s reported plans to invest $250 million in DraftKings. The investment values DraftKings at about $900 million, according to the WSJ.
The partnership makes perfect sense from a business point of view. Disney is the majority-owner of ESPN, the largest sports network in the world. The deal includes exclusive advertising placement over the next three years, giving DraftKings a distinct advantage over FanDuel, its biggest competitor.
There is little doubt that Disney is getting a great deal. Its investment will be doubled through advertising spends over the next three years. In exchange, the company gets equity in DraftKings.
Investment shines light on Disney’s past anti-gambling positions
Disney has been an outspoken opponent of gambling expansion in Florida.
Specifically, Disney is currently fighting expansion of gambling in Miami that would allow Las Vegas-style casinos. Genting and Las Vegas Sands are among the companies pushing for large gaming resorts in South Florida.
The company has been successful in preventing that expansion, as well as keeping all forms of gambling out of Orange County, including racino poker rooms and tribal casinos.
Disney acquired Marvel in 2009. At the time, Marvel characters were common on lottery tickets and slot machines. Disney chose to phase these licensing agreements out as they expired. Disney is also unique in that its cruise ships do not offer casinos on board.
The company has taken the position that Florida should be known as a family destination, including its resorts and beaches. Casino expansion proponents accuse Disney of attempting to protect its business interests.
Genting plans on opening the largest casino in the county in Miami if it gets licensed. The Malaysian casino company has already acquired much of the land. Plans include a 750,000 square foot convention center, space that would compete directly with Disney in the Florida market.
Disney entering the daily fantasy sports segment may give gaming proponents the ammunition needed to show the Disney position as being inconsistent when it comes to gaming. For those outside the industry, it can be difficult to distinguish daily fantasy sports from other types of online games played for real money.
A recent decision by Major League Baseball, which acquired a stake in DraftKings in 2013, banned players from participating in daily fantasy sports action under its gambling guidelines described under Rule 21. While the league did not go so far as to declare the games gambling, the decision was made to avoid any conflict of interest.
Or maybe that was about something else all along…
One clear difference between fantasy sports and Florida land-based casinos is that fantasy sports do not compete directly with Disney’s tourism business. A casino resort developing 750,000 square feet of convention space in Dade County would.
Fantasy sports have two distinctions that separate it from other forms of cash games. While there is some luck involved, skill is a predominate factor. This gives the top 20 percent of players an advantage over the field. This does little to help the other 80 percent that will discover their chances of winning are about the same as playing a house casino game. Fantasy sports also receive an exemption under the UIGEA.
DraftKings is well-positioned to enter any future regulated sports betting industry. This would further complicate the antigambling position taken by Disney in other sectors.
Disney declined to comment for this article.
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