DraftKings, FanDuel agree to merger
By Rakin Azfar
November 21, 2016
The two daily fantasy sports companies have reached a merger agreement
Daily fantasy sports platforms FanDuel and DraftKings announced on Friday that they have agreed to a merger that would create a giant within an industry under serious scrutiny from regulatory entities.
Many of the ramifications of the deal are not entirely clear to the consumer as of yet, in part due to the tentative nature of the transaction: the merger is still technically pending approval from regulatory bodies, despite news of the deal echoing throughout business circles for some months now. As for users of DraftKingss and FanDuels respective apps, the company assures that their experiences will not change drastically, at least for the time being.
In terms of branding, FanDuel and DraftKings will continue to operate under their respective brand names for the foreseeable future, said a source close to the merger.
The merger, while unsurprising, will prove to be an important chapter in the trajectory of the nascent daily fantasy sports arena, and could affect the development (or lack thereof) of the space by leaving little to no room for competitors to flourish.
According to the parties involved, the merger mainly comes down to money: a press release cites operational efficiencies and costs savings as among the primary impetuses for the merger. And considering the lukewarm reception that the industry overall has had with legal and regulatory bodies, the prescience of the move is already apparent; beside cutting operational costs, a unified face in the sector would also reduce lobbying costs, and would be a more difficult entity to dismantle by any administrative measure.
As a combined company, FanDuel and DraftKings will have an accelerated path to profitability, which will enable them to develop new products and features that would take longer to roll out as individual companies, the source said. The combined company expects to accelerate innovation to deliver more products and features to consumers and provide more contests, more social connectivity and a better overall user experience.
The industry as a whole faced a series of setbacks in the past year. Both companies were plagued by a number of highly publicized class action lawsuits stemming from accusations of negligence, fraud and false advertising.
Their troubles were then compounded by a series of probes from multiple states that claimed DraftKings and FanDuel violated state gambling laws concerning online gambling platforms.
The companies would eventually cease operations in multiple states.
The companies primarily rely on contests for engagement
Future of an industry
Considering the plethora of factors weighing on not only the future of DraftKings and FanDuel but also the sector they belong to, it will be difficult for even the most astute of analysts to predict where the future will take them. And this merger, which can prove either to be the harbinger of a monopoly or a bulwark against the companies challenges, equally confounds any conjecture.
In the meantime, the both brands await regulatory clearance, keeping mum on the tremors that could threaten even the most intimidating edifice.
Executives and board members from either side have kept the lines of communication open for many years about the possibility of combining the two companies to achieve certain operational and innovation synergies, the source said. DraftKings and FanDuel cannot comment on ongoing legal proceedings, however, there are many factors that led to the decision to combine.
The companies see considerable benefits for our customers and partners, and are confident others will see the benefits and opportunities as well.