Daily fantasy sports are seemingly becoming the juggernaut ready to take over sports — or at least the fantasy side of the events we watch.
It seems the landscape expands and shifts each week with news of potential investments or advertising deals feeding the beast. Last week, Yahoo! Sports entered the ring which had previously been dominated by two competitors, DraftKings and FanDuel.
Yet the brakes on this apparently unstoppable downhill roll were pumped just a bit when Disney announced that it was pulling out of its reported $250 million investment in DraftKings. As the New York Times‘ Richard Sandomir reports, Disney was apparently concerned that an association with a business that feels very close to gambling (“an adult product”) ran counter to its family-friendly image.
DraftKings still had a sponsorship agreement with ESPN, but that’s money that the company is spending, rather than funds it’s bringing in. The Disney deal falling through obviously left a significant hole in DraftKings’ finances, quite possibly also endangering its ability to follow through on its arrangement with ESPN.
However, it appeared that DraftKings had other investors lined up after Disney backed out. According to Sandomir’s report, Fox Sports is expected to pick up a significant portion of what Disney had previously committed to. If Fox Sports is indeed ready to invest, that would be a change in direction from what Jim Miller tweeted just over two weeks ago.
Don’t look now, but on heels of @ESPN withdraw, @FOXSports may be walking away from $150M investment in @DraftKings #fantasysports
— James Andrew Miller (@JimMiller) June 26, 2015
Judging from Sandomir’s more recent report, Fox Sports has apparently gotten over any skittishness about investing in DraftKings and likely doesn’t face the same “family-friendly” conflict Disney was wrestling with. It’s possible that by the time you read this, DraftKings and Fox Sports will have announced an agreement, as Sandomir wrote that the deal could be struck as soon as Tuesday (July 14).
What’s becoming increasingly clear, however, is that DraftKings really needs someone to step up and fill the major void left by Disney backing out of its deal. Without replacing those funds, while spending big cash on sponsorships such as the aforementioned ESPN agreement and a deal with Staples Center, the NY Times article implies that the company could run out of money by the fall.
“They’re burning money with their marketing spending and user-acquisition strategy,” Adam Krejcik, managing director at Eilers Research, told Sandomir, “and could run out of cash quickly.”
Does that essentially leave Fox Sports as DraftKings’ only hope in a fiercely competitive market? FanDuel is expected to announce on Tuesday that it’s raised $275 million in another round of venture capital funding, raising its total financing to $363 million and boosting the value of the company to $1 billion. That would certainly seem to position FanDuel as the industry leader in daily fantasy sports, unless DraftKings comes close to matching that investment.
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