DraftKings, UFC close to exclusive deal
New York Business Journal Online
February 10, 2015
Ultimate Fighting Championship and the daily fantasy sports startup DraftKings are close to announcing an exclusive sponsorship deal, a DraftKings investor and board observer said Monday.
If finalized, the UFC deal would be another small victory for DraftKings as it tries to close the gap with market-leading FanDuel Inc., a Scottish-borne startup that now operates from Union Square in Manhattan. Both operators see relationships with leagues and media outlets as key to building credibility and acquiring new customers in the nascent real-money, daily fantasy space.
Update, 6 p.m.: The UFC has confirmed a contract deal is imminent. Kevin Farlow, senior director of marketing partnerships, said the one-year deal involves prominent DraftKings signage at events, a large web presence and broadcast features designed to bring UFC fans to the fantasy site.
Colin Neville, vice president of the venture capital firm The Raine Group in NYC, first disclosed the pending UFC deal during a panel discussion hosted by the New York Venture Community: Sports group on Monday. The Raine Group participated in a $41 million Series C investment in DraftKings last August.
Neville did not elaborate, but said the deal would make DraftKings the daily fantasy provider of the UFC, indicating exclusivity. DraftKings officials declined to elaborate on Tuesday.
Even though the deal isn’t quite done, a verbal agreement paved the way for a DraftKings logo to be shown during UFC’s last pay-per-view event Jan. 31, Farlow said. He said an official announcement should come this week. “We’re just working back and forth on some red lines,” he said.
Financial terms were not disclosed.
Expanding beyond fantasy sports’ roots in football is crucial to both venture capital-backed DraftKings and FanDuel, as they seek to keep growing their market. Farlow would not say specifically if they negotiated with FanDuel for the rights. “We talked to many people in that category,” he said. (DraftKings and FanDuel control more than 90 percent of the market.)
In December, DraftKings became the first big operator to offer mixed-martial arts fantasy contests, and it also inked a deal with star fighter Jon Jonas as a spokesman.
DraftKings, which reported $30 million in revenue amid a rapid growth spurt last year, has partnerships with the National Hockey League, Major League Baseball and numerous individual teams and smaller leagues. FanDuel, roughly double DraftKings’ size with $57 million in revenue last year, has partnerships with the NBA (which is also an equity investor), the Brooklyn Nets and several other teams.
UFC is owned and operated by Zuffa LLC, an entity controlled by casino magnates Frank Feritta and Lorenzo Fertitta.
Neville said his firm may have underestimated the potential of daily fantasy sports, which involves real money wagering and a shortened, week-to-week version of traditional, season-long fantasy leagues. Despite heavy advertising throughout the football season to lure a mass market, DraftKings’s hard-core users are spending as much as ever on the site, he said.
“You look at the numbers and you can easily see this being a $20 billion market in not long at all,” Neville said.
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