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DraftKings Raises $300 Million, Promises to Spend Much of It With Fox Sports

DraftKings will spend $250 million on advertising with Fox Sports.

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Attention sports fans: Prepare to see a lot more DraftKings advertising over the next few years.

DraftKings, one of the top daily fantasy sports companies, has raised $300 million in new funding led by 21st Century Fox’s Fox Sports unit. The deal also calls for DraftKings to spend roughly $250 million on ads with the TV company over the next three years, according to sources familiar with the agreement.

The funding values DraftKings at more than $1.2 billion, according to multiple sources, and comes just two weeks after rival FanDuel raised $275 million.

It looks like a good deal for Fox, which invested around $150 million in DraftKings. It will get equity — roughly 11 percent of the company, these sources say — plus the $250 million in ad revenue in return. DraftKings CEO Jason Robins and Fox Sports President and COO Eric Shanks confirmed that an ad commitment is part of the deal, but declined to comment on the terms.

The agreement is similar to one DraftKings had in place with Disney and its ESPN brands late last month, which called for a $250 million investment from Disney in exchange for $500 million in ad spend from DraftKings. That deal fell apart at the last minute when top Disney execs got cold feet about associating their family-friendly brand with a pay-to-play fantasy sports website. The two sides settled on a revised, $250 million exclusive ad deal with ESPN instead. (The Fox deal is not exclusive, which means other fantasy sites like FanDuel could also advertise with Fox Sports.)

Those deals help explain why DraftKings raised a whopping $300 million. Altogether, it has committed $500 million in advertising over the next three years to two media partners. Before Monday, DraftKings had raised just $75 million with $30 million in revenue last year. In other words, it was nowhere close to covering those deals without its latest funding.

Robins says his first priority with the new funding is to bring on new customers. DraftKings is in a heated battle with rival FanDuel to attract fantasy sports gurus, and both companies are spending millions of dollars on exclusive team partnerships to get their brand in front of sports fans (and keep competitor brands locked out). Yahoo is also now in the mix.

Some industry insiders believe the expensive partnerships aren’t sustainable. But Robins says he isn’t concerned about spending too much money on marketing. “We have plenty of money to do what we want now,” he said. That includes an expansion into the U.K. later this year and an office in London, as well as common product and hiring expansions.

Robins says his ultimate goal is to make DraftKings and daily fantasy sports a permanent and natural companion to watching the real thing. “Our long-term vision is to make DraftKings and the sports themselves attached at the hip,” he said.

This is the very reason Fox invested. The more people play fantasy sports, the more they watch sports on TV, Shanks explained. Robins supported this argument. He claims that 80 percent of DraftKings users spend more time watching and reading about sports as a result of playing fantasy.

“The more people play, the more they consume our product on TV,” Shanks told Re/code, adding that he could see Fox creating content specifically around daily fantasy sports in the future.

This funding round includes a number of other investors, from VC firms like Atlas Ventures and the Raine Group to pro sports leagues like Major League Baseball, the National Hockey League and Major League Soccer. Sports ownership groups like the Kraft Group (New England Patriots) also invested.

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