Fantasy Sports Giant DraftKings Cuts Back on Sponsorships amidst Legal Turbulence
The second largest daily fantasy sports site, DraftKings, has been making an effort to curb their spending and has withdrawn many of their major eSports sponsorships, possibly due to emerging financial constraints amidst the legal warfare they are facing all over the country.
While experts cannot seem to agree on the label eSports should be given and whether or not they qualify as ‘actual sporting activity, their appeal continues to grow globally. In 2015, eSports ventures have received large injections of funds, provided in part by fantasy betting and gambling sites and mainly from traditions sports sites trying to capture a slice of the electronic market for the first time.
After the acquisition of the sites DraftStreet and StarStreet in 2014, fantasy sports forerunner, DraftKings, decided to spend their money on sponsorship of major eSports organisations. When eSports gained primetime television slots, Draftkings decided to enter the eSports arena, which at the time was the fastest growing spectator sport and entertainment genre for the young adult male audience of the country. In September 2015, the site launched their very own electronic games, centred around the League of Legends World Championship via sponsorship of six major eSports companies – compLexity Gaming, SK Gaming, CLOUD9, Counter Logic Gaming, Team SoloMid and Mousesports. This multi-million dollar deal was brokered by sports management agency WME|IMG.
However, sources have disclosed that the DFS site, in the year 2016, has pulled back from many partnerships; DraftKings has dropped sponsorship from all six of the eSports teams. Their logo has been removed from their websites and team jerseys. Additionally, DraftKings have also dropped advertising campaigns for several NFL and NBA events; on top of reigning back on television advertisement budgets.
It is yet to be disclosed why the sponsorships have been withdrawn and budgets cut but the timing suggests that it may be due to the strain it in the operator’s finances. DraftKings could have been hit with unexpected expenses when they ran into legal issues; they have been aggressively campaigning for legalisation of their site but several states did not agree with their plea; they have lost their petitions and Nevada, Illinois, New York, Arizona, Iowa, Louisiana, Montana, and Texas, where it has been recently ruled that daily fantasy sites are illegal gambling.
Although DraftKings entered the eSports space with a lot of vigour last year, they were not the only fantasy betting site to try their hand at electronic gaming; Startups Alphadraft, Unikrn, and Vulcun introduced various types of offerings, geared specifically for eSports in 2015.
While AlphaDraft’s finances seem unaffected by the legal disturbance, they were acquired by dominant global DFS operator, Fanduel, last September. Unikrn is still crawling ahead but both Vulcan and Fanduel have had to adopt some major changes; while both the companies have had to downsize their staff, Vulcan decided to make drastic changes to their business model and stop offering paid fantasy service. ESports startup, Vulcan, was going from strength to strength, offering players the opportunity to procure eight figure winnings from their paid fantasy contests. However, with so many states declaring fantasy sports to be illegal gambling, they have decided to only run contests surrounding their own currency from now on.
While sources in close association with DraftKings have disclosed the details of their financial position, the operator is yet to officially confirm any of their claims. Read our posts on how DraftKings cuts also Affiliate Marketing Spendings.