Business

DraftKings reportedly getting $250 million investment from Disney

The fantasy sports contests run by DraftKings Inc. often last only a day, but it is increasingly clear that the business itself is no flash in the pan.

The Boston startup has secured a $250 million investment from the Walt Disney Co. — parent company of ESPN — that values the four-year-old business at about $900 million, according to a report in The Wall Street Journal.

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As a condition of the funding, DraftKings will spend more than $500 million to advertise on ESPN’s television and digital platforms in coming years, according to the report.

DraftKings declined to comment. Fortune magazine reported last month that the company was seeking to raise a new round of funding that would value it at $1 billion and that Disney was among the prospective investors.

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Prior investments in DraftKings have totaled $75 million, according to startup tracker CrunchBase. Notable backers include Atlas Venture, Redpoint Ventures, and GGV Capital.

DraftKings is one of the country’s biggest daily fantasy sports companies, with more than 1 million registered users. Last year it collected $304 million in contest entry fees, up from $45 million in 2013. A huge portion of the fees is recycled into prize payouts, which DraftKings says will total $1 billion this year.

Still, revenues in 2014 were $30 million.

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Earlier this week DraftKings announced a deal that made it the official daily fantasy game of Major League Baseball, and the company signed a sponsorship agreement with the Patriots last fall.

Fantasy sports sites allow users to role play as general managers, creating imaginary rosters made up of actual players. A fantasy football lineup might include a quarterback from the San Francisco 49ers, a receiver from the Dallas Cowboys, and a running back from the Buffalo Bills.

Points are awarded for on-field accomplishments in real games, such as yards gained and touchdowns scored. Fantasy sports contests typically last an entire season, but DraftKings and competitors like FanDuel have created a subcategory of short-term contests. Instead of drafting a roster of players and maintaining it from opening day until the season finale, DraftKings users can pick new players every day — LeBron James, Russell Westbrook, and Tim Duncan on one day and James Harden, Anthony Davis. and Chris Paul the next.

The rivalry between DraftKings and FanDuel is fierce, with the local entry playing catch-up. FanDuel claims on its website that it owns 80 percent of the market in one-day fantasy sports, and reported higher revenues and player fees in the fourth quarter of 2014 than DraftKings collected all year.

FanDuel has its own big-time institutional investors, including NBC, the NBA, and Comcast Ventures.

Many fantasy sports contests are free, but most on DraftKings and FanDuel require buy-ins and offer cash payouts for picking players who perform well in games.

More than 41 million people in the United States and Canada play fantasy sports, according to the Fantasy Sports Trade Association.

Callum Borchers can be reached at callum.borchers
@globe.com
. Follow him on Twitter @callumborchers.
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