Home I Latest News I DraftKings/FanDuel Merger
Two of the biggest names in the trending Daily Fantasy Sports business, DraftKings and FanDuel, have failed to merge.
The two companies were pursuing a merger and negotiated for a long time, even announcing their plans in November 2016. However, recently the talks were put to a close.
In his official statement Mr. Jason Robins, CEO of DraftKings, said cancelling the deal was in the best interests of all sides involved – employees, investors, and DFS service users. Had the merge happened, Jason Robins would have become the CEO of the new company. The head of FanDuel, Nigel Eccles, would have been a chairman.
A few weeks preceding the news, in June 2017, the Federal Trade Comission forsaw the possibility of antitrust law violations and openly expressed their concern about the DraftKings/FanDuel Merger.
The FTC also threatened to file in federal court in order to block the two companies from joining forces.
Daily Fantasy Sports is a tough industry. Unlike traditional sports betting and gambling, it offers innovation, therefore it’s hard to be laid down in tradition-driven markets.
Sports fans in the UK for example, are more conservative and while considering DFS as being an interesting and funny option, they prefer using the old ways on a regular basis. Changing people’s habits takes a lot of time and effort.
It is a risky investment and many companies have failed. DraftKings and FanDuel are among the few leaders who have the financial and strategic capability to persist in the DFS market.
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A possible DraftKings/FanDuel merger could strengthen them further, creating a powerful entity to control about 90% of the US market, which is the biggest market in DFS.
DraftKings alone has a fanbase of more than 8 million players. Aparently the Federal Trade Comission didn’t like that and there is a reason. Companies of such scale are difficult to control.
If the merge hadn’t been called off, the newly-formed business giant would have saved a lot from advertising, the main cash-eater when it comes to real-money games of all sorts.
What is more, the two companies could have included more sports depending on the new markets they would explore.
The inevitable lawsuits and regulation battles following the merge though, would also draw a lot of resources and slow the growth of the new company. Nobody wanted that. Except the FTC.
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For now, DraftKings and FanDuel will move on as separate companies focused mainly on the DFS market. They will remain the biggest competitors and their rivalry would continue costing them a lot of money for advertising.
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