DraftKings + FanDuel = Merger of the Century?
Top Daily Fantasy Sports companies DraftKings and FanDuel have been seeking a merger for some time, but have faced opposition from federal lawmakers, who see the merger as a potential violation of anti-trust laws. With the two top companies forming a single entity, some fear that they’ll create a monopoly in an already limited field. While the Federal Trade Commission conducts hearings into whether or not this fear has any basis, we’ll review what we know about the potential fantasy sports merger of the century.
Anti-Trust Review By FTC
So do FanDuel and DraftKings make a monopoly? Well, it depends on how you view them. If you think that status should be judged based on the daily fantasy sports market and just the DFS market, then hell yeah, they’d be creating a bigger monopoly than Rockefeller had over standard oil. Together, they control roughly 90% of the DFS market. But both companies maintain that they should not be judged based on other DFS sites, but rather as a piece of the overall Fantasy Sports Market.
“We're a company that collectively has a little over 5 million customers in a fantasy sports base with almost 60 million total,” stated DraftKings Co-founder and CEO, Jason Robins. So comparatively, that’s what, roughly 8% of the market? If this is the case, they couldn’t really be considered a monopoly.
If the FTC gives merit to this idea, that they are part of the overall fantasy sports world, then FanDuel and DraftKings would be competing in a market with ESPN, Yahoo, and other big name season-long fantasy sports companies. Which is one of the reasons that they proposed the merger in the first place. “For us to ever hope to compete for those customers, we really felt this was something that was necessary.” Stated Robins.
In order to make sure that these companies aren’t taking over a market and violating federal anti-trust laws, the FTC will be looking into a number of things while they review this merger, namely the difference in daily fantasy sports and season-long fantasy sports, how a merger might negatively affect a player, and what ability other DFS sites have when it comes to competing in a market where these two companies are one.
Why Did The Want To Merge?
Rumors spread for years that the two companies were seeking a partnership, but it wasn’t until November 2016 that the CEO of FanDuel Nigel Eccles and Co-founder/CEO of DraftKing Jason Robins actually lent credence to the idea.
Aside from wanting to compete with companies like ESPN and Yahoo, both FanDuel and DraftKings CEOs felt that they would work better as a team. When so many states began to clarify their stance on DFS, the two went on a year-long tour of the country’s legislative bodies. After spending so much time together working towards a common goal, Eccles and Robins came to a conclusion that a merger was in the best interest for both sites.
“I can tell you what really kind of made it happen was when — and this is another reason why I wouldn’t really change the things that happened and the regulatory issues that occurred — that’s what really brought us together, ultimately.”
Since November, significant progress has been made on the merger, with the FTC already well into hearings on the topic. When asked what they thought of how the timeline was progressing, Eccles replied “Things are progressing as we expected…We’re engaging the FTC, they’re reviewing the transaction and that process is going well.”
If the merger were to go through, Eccles would become chairman of the new company, while Robins would take over as CEO. While there is no set time when the FTC will make their decision and there’s no way of knowing what decision they’ll make, Both Eccles and Robins are optimistic.
So, with all of that information swirling in your head, I know there’s just one question you’re dying to know the answer to: What will their new name be? FanKings? DaftDuel? Guess fans of California sports betting just have to wait and see.
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