After years of being bitter rivals, Fan Duel and Draft Kings decided to become an unstoppable force by merging into one company. The two daily fantasy sports giants made the decision in November, but in less than one year’s time the Federal Trade Commission reviewed their proposal and, in June filed to stop the merger because according to them, the combined company would control more than 90 percent of the United States market for paid daily fantasy sports contests.
“FanDuel decided to merge with DraftKings last November because we believed that this deal would have increased investment in growth and product development thereby benefiting consumers and the greater sports entertainment industry,” FanDuel CEO Nigel Eccles said in a statement on June 13.
This is the latest legal battle that the companies have lost as they have faced regulatory challenges in several states. Believe it or not, according to legal filings, neither company has been able to reach profitability since their births. The FTC estimated costs for the companies could have been as much as $12-15 million had they chose to continue to pursue the case, neither company could afford to take on the risk.
How could we forget the year of the DFS ad, 2015? Both companies went crazy advertising on every court and scoreboard in America, running commercials during every sporting event known to mankind, totaling a combined $1.5 million. That frivolous spending didn’t last because, in 2016, both companies pulled back the reigns on their budgets, FanDuel ad spending went down a whopping 96.5% from 2015 to 2016 and DraftKings’ ad spending went down 70.8%.
In response to the FTC suit, both companies defended their position saying, it would not result in higher prices for customers and that regulators were pursuing “an unnecessarily rigid and uninformed application of the antitrust laws.”
DraftKings CEO Jason Robins released a statement announcing the merger’s termination saying that it was in the best interest of both parties.
“We believe it is in the best interests of our customers, employees, and investors to terminate our agreement to merge with FanDuel and move forward as a separate company,” Robins said.
The decision could be a huge blow to both companies as a dozen states and counting have passed regulations on Daily Fantasy Sports. According to Daniel Barbarisi, author of “Dueling With Kings,” a book about the industry’s rise and fall, the stronger of the two companies is Draft Kings.
“Through the merger process, DraftKings operated as if the merger was no guarantee. It raised money and continued to push the envelope and grow the brand,” Barbarisi told the New York Times. “FanDuel didn’t raise money, and its new initiatives weren’t as aggressive. That has left DraftKings in the stronger position now that the time to play nice is over, and they have to compete for market share again.”
It seems that both sites have loyal fantasy players that opt to stick to one brand or another. No matter which brand you like more, you have to be worried if you are a DFS player. If your state is in the process of trying to ban Daily Fantasy Sports, contact your representatives and let them know what a mistake that is.
We cannot predict the future but the fact the NFL is nearing its return bodes well for a resurgence for the two companies. Fantasy players around the globe are counting on it.