Among the multiple setbacks suffered of late by DraftKings, one of the least surprising is that the fantasy-sports firm no longer possesses an exclusive advertising deal with ESPN.
Disney-owned ESPN “has gotten out early” of the agreement that made DraftKings the “official daily fantasy-sports offering” of ESPN, Yahoo Finance reported Tuesday. While Yahoo makes clear that the publication’s sources say it was ESPN executives who wanted out of the ad deal, a few other publications have suggested that DraftKings may have also sought an end to the partnership. What’s more likely is that someone at Disney finally woke up and questioned whether the company needed to get its family-friendly brand — home of Mickey Mouse and Tinker Bell — away from all the controversy dogging DraftKings.
Meanwhile, Twenty-First Century Fox, the company owned by Rupert Murdoch, marked down the company’s $160 million investment into DraftKings by a whopping 60-percent, according to a filing Monday with the Securities and Exchange Commission.
Fox said in the filing that executives made their decision based on “information concerning DraftKings’ current valuation in a recent financing transaction.”
DraftKings is a Boston-based organizer of fantasy-sports contests that pays cash prizes to winners. The firm, founded in 2012, argues the contests are skill-based and legal. A growing of number of state attorneys general, including those from Texas, Hawaii, New York, Illinois and Washington, say DraftKings’ is an illegal gambling operation and have outlawed the company’s contests.
Making matters worse are the accusations that some fantasy-sports contests are rigged. In October, a DraftKings’ employee won $350,000 in a contest at FanDuel, one of DraftKings’ top competitors. Questions arose about whether employees of the fantasy-sports companies were trading inside information or somehow gaming the system. The companies said no evidence of cheating was discovered but banned employees from participating anyway. Federal lawmakers have called for investigations into the contests and for greater oversight.
This is all a dramatic change of fortune for DraftKings. The deal to become the exclusive fantasy-sports network advertising on ESPN only kicked in on January 1. Fox invested the $160 million and acquired an 11-percent stake in DraftKings only last summer.
Where DraftKings goes from here is still unclear but the company reportedly is expanding into Europe, where the gambling laws are known for being a lot more lenient than in the United States.