What If…DraftKings & FanDuel Merged?
This past June, DraftKings CEO Jason Robins told USA Today a merger between his company and FanDuel was a “very interesting idea.” The two companies today control almost 95% of the Daily Fantasy Sports (DFS) marketplace. From several POVs, this makes too much sense not to eventually happen. Here’s why:
- * Shareholder value – Why split the pie when a combined entity would own the space? Currently both are unprofitable companies that may not be able to coexist in the long-term.
- * Similar offerings – There are subtle distinctions between the games both currently offer, yet combining them would not be difficult.
- * Cost efficiencies – A pairing would bring more effective use of marketing/advertising dollars as well as a reduction in legal and lobbying costs.
- * Similar partnerships – Both companies have struck functionally similar endorsement deals with professional sports leagues and other key stakeholders.
- * Legal Issues – As referenced above, FanDuel and DraftKings are already joined at the hip through their ongoing legal battles against regulation of DFS as unlawful gambling. Their interests are also mostly aligned across lobbying efforts in Congress.
All that said, a merger would raise certain antitrust concerns to ensure consumers are not adversely impacted by anti-competitive business behaviors. This could show up in areas such as game pricing, winner payouts and/or forms of innovation that ordinarily occur when there are two or more material players in the market. Given a combined entity would control the market as it is currently defined, other companies that are already struggling to compete (or might consider launching a competitive product) would be even more adversely impacted. The other major concern is a merger would likely result in streamlined operations meaning people will lose their jobs as positions become redundant.
So while merger discussions make a great deal of sense, it’s also clear there are issues to be resolved in a space that continues to evolve rapidly. Stay tuned…
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