DraftKings, FanDuel drop merger plans

Share

FanDuel and DraftKings pay out about 90 percent of the money taken in for each contest and their revenue comes from keeping what remains.

FanDuel Ltd. and Draft Kings Inc., which control some 90% of the USA market for paid fantasy sports leagues, have called off their merger after the Federal Trade Commission pledged to block the combination.

"We have a growing customer base of almost 8 million, our revenue is growing over 30 percent year-over-year, and we are only just beginning to take our product overseas to the billions of global sports fans we have yet to even reach", Robins said.

DraftKings and FanDuel are not the only companies now operating under the daily fantasy model, which is a short-term/high-stakes alternative to the traditional season-long version of fantasy sports.

DraftKings chief executive Jason Robins said that in light of the developments, "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".

The two DFS sites announced a merger last November "to create a stronger entity that can focus on growing the fantasy sports market by developing new products and features, delivering enhanced user experiences, and creating an overall stronger fantasy sports community". DraftKings and FanDuel had argued that it is not just part of daily fantasy sports, but rather the broader category of fantasy sports.

More news: NASA's Solar Dynamics Observatory captures sunspot rotating towards Earth

The FTC was concerned a potential merged company could monopolize the daily paid fantasy sports market.

The Federal Trade Commission on June 19 sued to block the deal, and initially the fantasy sports sites had planned to challenge the FTC in court, a source with direct knowledge of their thinking said.

Both companies enjoyed rapid growth and success within the fantasy marketplace, providing consumers an alternative to season-long fantasy sports. They are the largest and second largest fantasy sports sites, respectively. Robins said DraftKings' revenue has grown almost 40 percent year over year, and he said the company could become profitable right now. He charged that they promoted illegal gambling, not games of skill.

"When we started talking to FanDuel it felt life-threatening", Robins told Bloomberg. But the FCC said that they don't provide a "meaningful substitute" for daily fantasy sports providers due to "limitations on number of entrants and several other issues".

According to an Axios report last month, DraftKings had a $92 million operating loss in 2016, while FanDuel lost tens of millions of dollars through the first 10 months of that year. Eccles told Recode he thinks FanDuel can break even next year.

Share