Disney said today that it is investing $250 million in online fantasy sports startup DraftKings, according to a report citing confidential sources.
That investment creates a huge moment for the online fantasy sports business, which has been booming with lots of startups, plenty of investments, and a surge in customers as this hobby goes social and mobile.
The deal values the Boston company at $900 million, according to the Wall Street Journal. That means Disney would own roughly 27 percent of the company. With daily fantasy sports, fans can create and manage teams and put real money on the line. The pay off comes on a per game basis, rather than lasting for an entire season. The Journal said DraftKings and Disney — which also owns ESPN, the largest sports network in the world, declined comment. Fortune reported the two were in talks last month.
DraftKings has plenty of rivals, including FanDuel, which is backed in part by Comcast. DraftKings plans to spend $500 million on Disney’s ESPN advertising platforms in the coming years. DraftKings will get premium positions on ESPN. FanDuel can continue to advertise there, but it won’t have priority. Both companies spend a lot on user acquisition.
DraftKings’ previous investors include The Raine Group, Redpoint Ventures, GGV Capital and Atlas Venture. DraftKings says that its business is a game of skill, and so it is legal under U.S. and Canadian laws. But some say that’s a blurry line.
DraftKings offers cash prizes for contests in Major League Baseball, the National Football League and the National Basketball Association. DraftKings was founded in April 2012, and it is headed by Jason Robins, its CEO.