Last week’s third-quarter results filing from 21st Century Fox has again failed to give any reasons for the sudden impairment of a US$160 million investment in a fantasy sports website by the company in mid-2015. That was the biggest share of a US$300 million investment in the sports fantasy company DraftKings. Included in Fox’s group were the Kraft group, which owns the New England Patriots NFL team, and Wellington Management, a huge Boston-based financial group.
Fox invested approximately US$160 million in cash for a minority equity interest in DraftKings, described by Fox as “leading operator of online fantasy games and contests”. But between then and early 2016 something hit the fan, forcing Fox to slash the value of its investment by more than half. That resulting impairment was close to 60% in the space just on seven months.
“Partnering with DraftKings, a clear leader in this field, is a great opportunity for us to capitalize on the growth of daily fantasy sports for the benefit of our viewers,” Fox Sports president and COO Eric Shanks said in a statement issued last July.
DraftKings, which launched in 2012, said at the time it would use the additional funding to continue building out web and mobile products, launch internationally and explore new opportunities for vertical expansion. But US media reports claimed that the quid pro quo for Fox was a reported US$250 million worth of advertising DraftKings committed to spending on Fox TV stations over the next three years. That made it an attractive deal for Fox.
Major sports such as baseball, soccer, ice hockey, Madison Square Garden and several private equity and other investors also have money in DraftKings.