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Volume 24 No. 179
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ESPN Completes Deal With DraftKings, But Does Not Include Any Equity Investment

ESPN has completed a deal that makes Boston-based DraftKings the official daily fantasy company of the sports media giant, but it does not include an equity investment by ESPN or parent company Walt Disney Co. in DraftKings. The multiyear deal gives DraftKings an exclusive advertising presence within the fantasy category across ESPN platforms beginning in ’16, will integrate the company directly into ESPN programming and will mark the first-ever large-scale collaboration between a season-long fantasy product and a daily fantasy offering. Financial terms were not disclosed, but industry sources said prior reports of DraftKings making a mid-nine figure advertising commitment to ESPN were “way off.” Negotiations did occur earlier this year around an equity investment by ESPN and Walt Disney Co. in DraftKings, but the parties ultimately settled instead into an integrated partnership model. DraftKings continues to work on a Series D funding round that would greatly accelerate the company’s progress beyond a $41M Series C raised last year, though company officials declined to comment specifically on the status of that effort. “We talked about a lot of different potential deal structures with ESPN, but we’re very excited about the partnership we have put together,” said DraftKings co-Founder & CEO Jason Robins. “We think this is a huge milestone to catapult forward both the daily fantasy industry at large and DraftKings specifically. You’ve never before seen a true integration between daily fantasy and a season-long product, and we’re doing it with the No. 1 player in season-long fantasy. To have both a product integration and a meaningful programming component makes this very exciting for us. It’s not only a one-of-a-kind deal, but something that brings together daily fantasy and the power of the ESPN brand.”

ARMS RACE CONTINUES: DraftKings, projecting to quintuple revenue to more than $150M this year, remains locked in a fierce battle for market share with archrival FanDuel. The ESPN deal also extends a flurry of activity for the company in recent months that includes a large scale renewal with MLB and a new relationship with NASCAR. The deal immediately vaults DraftKings to among the top 10 of ESPN’s advertisers. “That’s a really significant thing,” said ESPN President of Global Sales & Marketing Ed Erhardt. “Daily fantasy is obviously a big new category in the space, and to have a big deal like this with a company like DraftKings, I’m really jazzed about it. … It’s almost like a new auto player has come into the market.” Erhardt declined to discuss ESPN’s shift away from the potential equity investment, but a network source said the move was “the best strategic decision for the company.”