Investor says value of DraftKings has tumbled 60%
Media conglomerate 21st Century Fox wrote down the value of its minority interest in DraftKings, one of the leading providers of daily fantasy sports games, by a whopping 60 percent, the latest sign that the industry's partners are becoming worried about its numerous legal challenges.
According to a filing with the Securities & Exchange Commission, the parent company of Fox News Channel and the 20th Century Fox film studio, invested $160 million in DraftKings during the six months ended December 31, 2015. DraftKings, which is based in Boston, also agreed to spend a minimum of $250 million on "media placements" on Fox properties through December 2017.
"As of December 31, 2015, based on information concerning DraftKings' current valuation in a recent financing transaction, the Company determined that a portion of its investment in DraftKings was impaired and recorded a loss of approximately $95 million," the filing says.
This represents a change in fortunes for the daily fantasy industry, whose surging popularity in recent years has attracted many outside investors. As CNN/Money noted, DraftKings and rival FanDuel raised about $300 million from last year in a funding round that valued each company at more than $1 billion.
Both DraftKings and 21st Century Fox declined to comment for this story. Madison Square Garden, the National Hockey League and Major League Baseball have also invested in DraftKings, as have Dallas Cowboys owner Jerry Jones and New England Patriots owner Robert Kraft. Comcast, Time Warner and CBS, the corporate parent of CBS MoneyWatch, all have investments in FanDuel.
The daily fantasy sports industry has come under fire in some states such as New York, Vermont and Illinois, whose attorneys general argue that the games constitute illegal gambling, a charge that the companies vehemently deny.
Meanwhile, bills to more tightly regulate the industry have been introduced in about a dozen states. Critics of the industry have argued that it provides few protections for consumers. The daily fantasy industry has said it supports regulation at the state level that isn't detrimental to its interests.
Pressure on the industry has heated up in recent weeks. Payment processor Vantiv announced earlier this month that it would stop accepting daily fantasy sports business at the end of the month. Citibank (C) is blocking transactions for daily fantasy players in New York.
Daily fantasy games are outlawed in Arizona, Iowa, Louisiana, Montana and Washington.
Editor's note: CBS has an investment in FanDuel of less than 1 percent of that company's value