ESPN’s exclusive relationship with daily fantasy sports giant DraftKings is over reports Daniel Roberts of Yahoo! Finance.
The original advertising deal (reached on the heels of ESPN backing away from investing in Draftkings) – was announced last June came at the industry’s high point before the ground beneath them started cracking. The deal allowed DraftKings to become the official daily fantasy sports partner on all ESPN platforms and included content integrations on shows like SportsCenter. More importantly the partnership also blocked competitors from advertising on ESPN although that component only kicked into effect recently. The deal made DraftKings one of ESPN’s top 10 advertisers, as the DFS company put $200 million worth of ads into ESPN.
But what a difference eight months makes. The ad blitz was drew the ire of many sports fans and ESPN had to remove sponsored content from its regular programming after questions arose about competitive advantages employees had who also dabbled in playing daily fantasy.
With the rising cost of multiple legal battles playing out as DraftKings defends it’s legality, DraftKings was forced to back out of the once celebrated partnership.
A note on DraftKings and ESPN: don't conclude that ESPN wanted out due to industry controversy; it was DraftKings, due to cost. #DFS
— Daniel Roberts (@readDanwrite) February 9, 2016
DraftKings has endured a steady stream of bad news in recent months, as more states – including New York, Hawaii and Texas – are fighting the company in court, saying its services are illegal gambling, which has created a ripple effect of negative press, even causing payment processors to back out of dealings with the company and leagues thinking twice about their partnerships with the company.
ESPN may very well resell some, or most, of the ad inventory previously held by DraftKings. Much bigger blow to DK.
— Eric Fisher (@EricFisherSBJ) February 10, 2016
Sources tell Awful Announcing industry insiders were not all that surprised by the move as it has been rumored DraftKings had been selling off some of their committed ad buys to other advertisers at a discount, essentially losing money to NOT run ads.
Yahoo! Finance reports ESPN is already in talks with rival fantasy companies to sell ad space, which shouldn’t come as a surprise.
Today for DraftKings
– Comes out valuation took a huge haircut
– Partnership with ESPN done
– features on Frontline and 60 Minutes Sports
— Ben Koo (@bkoo) February 10, 2016
The news capped a pretty bad day for DraftKings as Fox (who opted to step in when Disney/ESPN bailed on investing) announced they were writing off a large component of their investment in DraftKings.
You have to wonder at this point how many more doses of bad news DraftKings can take before the company has to look at a distressed sale or maybe even something more drastic.