In spite of CEO's previous comments against 'facilitating gambling'

Disney acquires stake in DraftKings

Back in 2015, Disney planned to invest $250 million in DraftKings but eventually backed away.
2019-05-23
Reading time 2:33 min
The interest in the fantasy sports contest provider—originally owned by Fox—has now been bought by the mass media and entertainment conglomerate. Disney has a controlling interest in ESPN, so this transaction has finally brought DraftKings and ESPN together after an investment deal between the companies got called off back in 2015.

"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," Disney CEO Bob Iger said in February.

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.

As reported by Awful Announcing, previously, Iger, and ESPN president Jimmy Pitaro have emphasized that their focus in the expanding sports gambling sector was 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, 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.

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.

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.

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