Disney acquired Fox’s stake in DraftKings despite Bob Iger’s comments about not facilitating gambling

It turns out that Disney is actually now involved in the business of gambling, at least in terms of holding a minority interest in a gambling company. Previously, Disney CEO Bob Iger, ESPN president Jimmy Pitaro, and ESPN vice presidents like Burke Magnus, Connor Schell, Mike Morrison, and Norby Williamson have all emphasized that their focus in the expanding sports gambling sector is on providing gambling-focused programming and information but not actually taking bets, in contrast to Fox’s plans to launch their own gambling app this fall.

However, as Dustin Gouker writes at Legal Sports Report, Disney has actually bought a significant interest in a company that does directly facilitate sports gambling; it turns out that they acquired Fox’s stake in DraftKings as part of the larger Disney-Fox deal.

One small part of the massive deal between the Walt Disney Company and 21st Century Fox included the stake in daily fantasy sports and sports betting company DraftKings, Legal Sports Report confirmed.

The interest in DraftKings — originally acquired by Fox as part of a funding round in 2015 — is now owned by Disney “through one of its subsidiaries,” a spokesperson for DraftKings told LSR.

That’s curious, considering how many Disney and ESPN executives have said that direct involvement in gambling wasn’t in the cards for them. In particular, Iger specifically said in February “I don’t see The Walt Disney Company, certainly in the near term, getting involved in the business of gambling, in effect, by facilitating gambling in any way,” and Pitaro made similar comments along those lines Monday. But, for the moment at least, they are involved in the business of gambling.

As Gouker notes, this coming through DraftKings is also interesting given the corporate history here. Back in 2015, Disney planned to invest $250 million in DraftKings (back when that company was still daily fantasy only; in addition to daily fantasy, it now operates actual betting on sports and more through its DraftKings Sportsbook app in New Jersey), but eventually backed away from that and only signed a deal that gave DraftKings exclusive daily fantasy advertising rights on ESPN. (Which, in the end, only lasted about eight months.) That led to DraftKings getting funding from a Fox-led group instead.

But Fox wound up writing down that investment by 60 percent in 2016. And while DraftKings’ revenue future certainly looks brighter now then it did three years ago, thanks to the expanded legalization of actual sports betting (not just daily fantasy) and to the company’s steps into that market, it’s interesting that a company like Fox that is diving into betting didn’t want to keep them. Perhaps Fox already had their $236 million investment in The Stars Group planned at that point and decided they were a better fit than DraftKings as a gambling partner for the long term. And maybe they decided it made sense to throw DraftKings into the wide-ranging Disney deal instead of trying to divest it separately.

Of course, that should be kept in mind on the Disney front too. That acquisition of Fox assets was a huge ($71.3 billion) deal, and the DraftKings stake was a very tiny part of that; it certainly wasn’t a key target for them. And it’s quite possible that Disney could wind up actually selling off that stake to someone else to stick with their decision to not get “involved in the business of gambling.” The Fox deal only closed in March, and Disney certainly hasn’t fully integrated everything it acquired yet; there may be a divestment coming. But for now at least, they’re more involved in gambling than they said they were going to be.

How much does that actually matter? It’s unclear. Some critics of sports gambling are already upset with Disney for their minor moves so far, including an ESPNEWS show and a partnership with Caesars for a Las Vegas studio (similar to Caesars’ deal with Turner and Bleacher Report for a separate studio at another casino) and as an odds supplier, so it’s not like the “We’ll cover it but not handle bets” approach satisfied them. And many of the people who don’t have a problem with sports gambling may be fine with ESPN’s parent company owning a stake in a betting company; that’s still less of an outright embrace of gambling than Fox launching a Fox-branded betting app, and even that Fox move hasn’t exactly provoked a ton of outrage.

So maybe Disney will hang on to DraftKings, and maybe they’ll wind up even making it bigger. If they do keep it, it will certainly be interesting to watch and see if there are any particular references to DraftKings on ESPN gambling coverage, or if more DraftKings ads wind up on ESPN’s platforms. And maybe none of that will wind up being a big deal. But it’s also quite possible to see Disney take some new heat here, especially after their leadership had so vocally said they didn’t want to be involved in the business of gambling, and maybe Disney won’t hold a DraftKings stake for all that long.

[Legal Sports Report]