Global media behemoth Disney has thrown its weight behind Boston startup DraftKings, committing to a $250 million investment deal into the company for a 20% stake, according to industry insiders.
The partnership was first reported by the Wall Street Journal, which claimed that in return for the investment, DraftKings would agree to spend a whopping $500 million on advertisements to run on Disney-owned ESPN.
The marketing spend will take place over three years and will not preclude rival DFS sites like FanDuel from advertising on the network. DraftKings, however, will enjoy the most premium placements and will likely be heavily promoted aside the site’s popular play money fantasy games.
FanDuel, which counts the NBA as an exclusive partner, was reportedly given a chance to pitch its own proposal to Disney execs. But the fact that FanDuel already has media partners, including Comcast Ventures and NBC Sports Ventures, gave DraftKings the upper hand.
DraftKings, for its part, raised $41 million in Series C financing last summer from venture capital groups like The Raine Group, Atlas Ventures and Red Point Ventures. Neither DraftKings nor FanDuel have yet to turn a profit, and both are spending aggressively on marketing to woo new players.
Former ESPN executive Geoff Reiss was in a similar position 20 years ago when Disney bought Starwave, a site which would later be fashioned into ESPN.com. “An affiliation with ESPN is industry redefining,” he told the SportsBusinessDaily. “ESPN represents the largest and most consistent promotional platform in sports for daily fantasy. The only other kingmaker as far as this industry goes is the NFL.”
Indeed, with FanDuel allied with the NBA and DraftKings locking up exclusive partnerships with MLB, NHL and UFC, the NFL remains the last major league holdout.
Earlier this year, ESPN Executive Vice President of Digital and Print Media John Kosner was tasked with finding a place for the network inside the daily fantasy industry. He considered building his own DFS site from the ground up, along with an equity investment into a current player.
The Disney deal will further legitimize DraftKings, and daily fantasy sports as a whole, and will likely ramp up the spending war between the Boston startup and its competitors.