DraftKings and FanDuel Announce Merger
On November 18, 2016, DraftKings and FanDuel officially announced their plans to merge, citing a shared vision between the two companies.
There are many reasons for DraftKings and FanDuel to team up, of course, including the unified fight in numerous legal battles, an accelerated timeline to profitability, a fresh effort to acquire new users and enhance the user experience, and a collaboration “to allow for further growth and innovation in the fantasy sports industry at large,” according to DraftKings.
There aren’t many details about the merger as of yet, but two major hurdles were recently cleared that resulted in the merger announcement.
The first issue was who would run the company. Financial terms have not been disclosed, but it has been decided that Jason Robins, CEO of DraftKings, will become the CEO of the new company, and FanDuel’s CEO, Nigel Eccles, will serve as Chairman of the Board.
Both sites will continue to operate separately through the 2017 NFL season. Next year, the proposed merger will have to be okayed by the U.S. Department of Justice and the Federal Trade Commission before it can take effect.
Of course, mounting legal fees have been an impetus to get this merger agreement finalized as well. Investors have pushed for the merger as a way to streamline resources and cut costs. On October 25, 2016, a settlement between FanDuel and DraftKings and the New York Attorney General was reached, which resulted in both FanDuel and DraftKings ponying up $6 million for engaging in false advertising.
The merger news brings up many questions for DFS players, some of which DraftKings attempted to answer in a statement sent to its players. A stronger fantasy sports community, new product development, and a more appealing user experience were all cited as major reasons for merging.
The recent “leagues mode” or “friends mode” is one such example of FanDuel and DraftKings attempting to branch out into the season-long fantasy sports realm and attract new sports fans. The DK Live App is the most fantasy-centric app in existence and is proof that DraftKings has already been working towards these stated goals. Even eliminating late swap in NBA encourages daily fantasy players to watch the games and step away from their computers in the evenings.
DraftKings has stated that it’s business as usual for consumers. FanDuel and DraftKings will operate as separate sites until the merger closes, which is expected to happen in the second half of 2017.
Obviously, with different scoring rules and categories, pricing algorithms, roster spots, and even the sports offered, we as DFS players can’t be sure what the merged product will look like. FanDuel and DraftKings seem to be making a push into the general fantasy sports market with this announcement. Five million combined users play on FanDuel and DraftKings, but 57 million fantasy sports players exist overall in the U.S. and Canada, according to the Fantasy Sports Trade Association. The commission fees, or “rake,” charged by the site is another concern for players. Recent rake hikes haven’t gone unnoticed by savvy DFS players who have the RotoGrinders extension installed, and DraftKings has stated that they don’t plan to substantially raise prices and will remain competitive with other DFS sites to retain players.
It will be interesting to see how the other daily fantasy sports companies are affected by this merger as well as what will happen to the existing partnerships that FanDuel and DraftKings have with many pro sports teams.
Feel free to comment below with your thoughts, and be sure to listen to Dan Back’s podcast on this topic if you haven’t already.