FANDUEL, DRAFTKINGS TELEGRAPHED THEIR MERGER FOR A WHILE

DraftKings FanDuel Merger

[Note: RotoExperts.com’s and SportsGrid.com’s parent company — Anthem Sports & Entertainment Corp.— is currently in litigation against DraftKings]

ESPN reports that a merger between daily fantasy sports heavyweights DraftKings and FanDuel has finally happened. But astute fantasy players could have seen this move telegraphed over the last few weeks, as the companies made some strategic moves that brought their philosophies more in lockstep with each other.

DRAFTKINGS DROPS LATE SWAP FOR NBA

On Oct. 13, DraftKings did away with their “late swap” practice for NBA contests. For DFS novices, this essentially allowed players to make changes to their lineups in games that had not started yet. The policy shift, which took place Oct. 18, was only announced for fantasy basketball, as football was mid-season. As of now, basketball is the only sport where late swaps are eliminated.

However, FanDuel never allowed late swaps, and the difference became a bit of a contentious point between the sides and their supporters — FanDuel apologists felt that the full lineup lock allowed for a fantasy player to relax and enjoy the results, instead of worrying over lineup changes and news-gathering. DraftKings loyalists argued that the late swap allowed more flexibility and rewarded the players who paid attention to breaking news and lineup changes throughout the night.

Regardless of the side one fell on, the move by DraftKings to drop the late swap may not show a full-hearted change in philosophy as much as it lines up the companies to have synergy in their rules.

FANDUEL INTRODUCES SOCCER

In June, an IPSOS poll commissioned by the Fantasy Sports Trade Association revealed that soccer is now the third-most popular fantasy sport, with an estimated 30 percent of fantasy sports players participating (up from 14 percent in 2012).

On Oct. 19, FanDuel launched games based around the English Premier League.

While this move fits FanDuel’s launch in the UK as well as its more conservative approach to DFS — there aren’t the same legal issues surrounding sports such as golf or NASCAR — it’s also an easy pickup from the stable of DraftKings’ offerings to get the companies more in line. If they do merge, having soccer helps to match up the companies’ interests and offerings.

FANDUEL SHUTTERS ALPHADRAFT

On Oct. 18, FanDuel announced that it would shutter fantasy eSports site AlphaDraft, which it had acquired in 2015.

While the move didn’t send shockwaves through the fantasy community — a similar site, Vulcun, shut down in early 2016 — it does consolidate most fantasy eSports onto the DraftKings site. If the two companies merge, there was no need for two eSports offerings, especially if FanDuel’s was operating outside of the FanDuel name.

Additionally, eSports did have some legal concern surrounding it, so if the companies do merge, FanDuel and DraftKings have successfully put all the “hot button” DFS offerings (PGA, NASCAR, MMA, eSports) off on one (ie — the DraftKings) side.

FANDUEL AND DRAFTKINGS ARE BOTH POSSIBLY SHORT ON CASH

On Oct. 23, the New York Times published a story about DraftKings and FanDuel nearing a settlement in a case the New York Attorney General brought against them related to false advertising claims.

In the story, two major points jumped out: FanDuel had laid off over 60 employees and sources close to the negotiations told the New York Times that the companies had asked to pay in installments.

The layoffs could have just been a result of dire financial straits, but they also could have been redundancies in positions that were no longer needed with a merge.

As far as the installment plan, with the companies pooling resources to fight legal challenges and hire lobbyists and PR professionals, it’s not a stretch to imagine them both facing the same financial issues. But putting this story out publicly also helps their case against being deemed a monopoly in a merger.

If they are in such bad shape financially, the companies can make a better case that the merger would “substantially lessen competition” — a major component involved in the FTC and DOJ ruling a merger as a monopoly.

With less cash comes fewer commercials and ads, and allows a company like Yahoo! — on the verge of being acquired by Verizon and widely recognized as the third-biggest DFS site— to bubble up as a legitimate competitor. Add in companies like Fantasy Aces, HotRoster, Fantasy Draft, Rosters, and more, and the tale of two bleeding behemoths who are just trying to survive through a merger helps to make a far stronger case than two companies once valued at $1-2 billion each combining for a mega-DFS monster that will eat up all the market.

Unconfirmed reports of installment settlement plans could be a cleverly-placed public story to further the narrative that the companies must merge to survive, not to corner the market and make more money than if operating separately.

FANDUEL ASKS MICHAEL RATHBURN HIS OPINION ABOUT GOLF…FOR A FEW BRIEF MINUTES

On Oct. 27, fantasy expert Michael Rathburn shared some tweets with his followers, with screenshots of an email he received from FanDuel. The emails were a survey, asking for his opinion on DFS golf.

Assume this was an out-of-date mailer — it still means FanDuel has been poking around with the idea of DFS golf. And that could be spurred on by wanting to line up both companies’ offerings.

UNANSWERED QUESTIONS ABOUT DRAFTKINGS/FANDUEL MERGER

There are still two major unanswered questions with the DraftKings/FanDuel merger:

1. WHAT DOES THE NEW COMPANY LOOK LIKE?

In September, SportsGrid’s David Gonos mused on the new name for a merged DraftKings and FanDuel. But, outside of nomenclature, there remain a myriad of questions of what the new company will look like:

-Will they become one single entity or remain separate games with separate rules under a larger umbrella?

-Will FanDuel acquiesce and offer PGA, NASCAR, and MMA games, or will DraftKings fall in line with the more conservative approach and eliminate some or all of those sports?

-This may sound minor, but which UI win out? There are FanDuel and DraftKings loyalists who are passionate about the format, look, and feel they prefer. The sites are almost literally night (DraftKings’ black-heavy background) and day (FanDuel’s white-heavy background).

2. WHAT HAPPENS IF THE MERGER IS BLOCKED?

For all the supposed money woes of the two companies, they still own a significant market share of players. The FTC or DOJ will have to determine what makes a monopoly in a game and field that is less than a decade old, facing significant future legal battles, and constantly making missteps with its handling of both government and judicial challenges.

If the merger is blocked, what becomes of the landscape? And will details of the merger publicly reveal one company being significantly healthier than the other, leading to a post-blocked world where players flock to the healthier of the two, leaving the other to fade away?

THE GREAT UNKNOWN

The future for DraftKings and FanDuel will change significantly in the coming days, weeks, and months, as their rapid ascent now faces a crossroads and possible brand overhaul.

Will this be good or bad  — or, simply, a necessity — for the industry? There won’t be an immediate answer by any means, but we can’t envision a world where DFS simply fades away.

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