Walt Disney Co has announced to invest $250 million in DraftKings to acquire 27% stake in the daily fantasy sports site. Business Finance News discusses implications if the deal goes through
Walt Disney Co (NYSE:DIS), one of the biggest entertainment empires in the world, has announced that it will be investing $250 million in the daily fantasy sports site, called DraftKings.
The investment from the Disney will raise the value of the sports site to $900 million. In return for its investment, Disney will have 27% ownership in DraftKings.
Recently, the online fantasy industry has seen rapid growth in consumer interest. The sites allow customers to choose their own teams, select real players, and the teams’ performance is based on each player’s real-life performance. However, DraftKings differs from the traditional fantasy games sites in two notable ways.
Firstly, most of the sites offer their services for free, relying on ad revenue for their income, while DraftKings takes real money from people to provide services. Secondly, it offers the prize daily, compared to other services, where customers have to wait for the whole season to end to win the prize.
Hence, customers can pay money to enter daily contests which are held on the site. The player who scores the best score will be paid the prize from the pool, which the site has gathered from all the participants, while keeping a certain percentage for itself. It offers weekly contests too.
DarftKings supports a wide range of sports, including the top favorite Major League Baseball, the National Football League, and the National Basketball Association.
A major concern raised regarding DraftKings is that it is often compared to gambling. While the company maintains that it is not similar to gambling as it is based on games which require talent, the distinction is quite blurry. The company is legal under the US and Canadian law, however it does not provides services in Arizona, Iowa, Louisiana, Montana, or Washington, because of their regulations prohibiting such prizes.
The investment from Walt Disney will be used by DraftKings for marketing, especially on the popular sports site, ESPN – also owned by Disney. The deal will provide support against its biggest competitor, FanDuel, which is currently leading the industry. FanDuel also advertises its services on ESPN, and shall continue to put its advertisements, however, now DraftKings will be given superior positions and ad spots, as reported by the Wall Street Journal.