Walt Disney (DIS, Financial) has been investing in the digital media market since a long time but this time it seems to be showing interest in the online fantasy sports business, as news sources have confirmed its latest bet on the fantasy sports site, DraftKings, which is a Boston-based startup site. It is being claimed that Walt Disney has agreed to invest about $250 million in DraftKings to improve its position further in the digital media industry. Let’s dig deeper and find out the facts that have been shared with regard to this deal which might turn into a reality in the days ahead.
A positive move for DraftKings
Founded in 2011, DraftKings allows its subscribers to play fantasy sports by paying real money as stake. In fact, it is one of the largest daily fantasy sports companies in the U.S., having more than 1 million users. However, the startup is hoping to improve its subscriber base further as users don’t have to pay any annual commitment fee for playing on the site, instead they pay real cash on a per day basis to play a fantasy game. One of the key products of the company is the 1-day gaming contest, which awards cash prizes to the winners.
Though there are other operators like Yahoo! Inc. (YHOO, Financial) and ESPN also operating similar contests for users, they usually have a season-linked commitment amount to be deposited by the user before they can play the games on their site. This makes DraftKings more lucrative from the user standpoint as they don’t need to pay any such amounts and can pay daily to play as per their convenience.
In fact, due to this advantage offered to users, DraftKings site earned more than $300 million as entry fees in 2014, up from $45 million in 2013. The major part of the fees earned is put back into prize payouts, which according to the site should total around $1 billion by the end of this year.
DraftKings has been facing the heat of competition from Comcast Corporation (CMCSA, Financial) backed rival, FanDuel Inc., lately. But now it expects to get an edge over the immediate contender after the deal with Disney goes through as its market value would grow to $900 million after the investment takes shape and would help it to gain a premium stand on ESPN platforms vis-Ă -vis its closest rival.
A huge push into the digital media space for Disney
As discussed earlier, Walt Disney has been investing heavily to make its position visible in the digital media space in the past years as well, and a notable investment has been already done last year when it acquired Maker Studios that was a major network partner for Google Inc.’s (GOOG, Financial) YouTube for $500 million.
In fact, this is the latest sign of Disney betting on its growth in digital media. It has been confirmed by the Wall Street Journal that, in return for Disney’s investment, DraftKings would be spending over $500 million on advertising on the Disney-owned ESPN platforms in the coming years. And such a provision appears to be a major attraction of the deal for Disney. And such a deal always gives a thumbs-up to a mass-media giant looking to grow in leaps and bounds in the digital space in the years ahead.
Also through this investment program, Disney would have 27% ownership on the fantasy operator’s site.
Last word
If the investment deal announced by the biggest entertainment empire in the world, Walt Disney, goes through in a smooth manner, it would stand to benefit both the parties in the deal. With consumer interest reaching new heights in the online fantasy industry, such an investment would aid Disney to create a niche for itself in the fantasy sports domain, while DraftKings would get a premium position when compared to its rivals in the industry. Let’s stay tuned to watch the impact of the investment on Walt Disney as well as DraftKings in the long run.
