After months of rumors, FanDuel and DraftKings have formerly announced that they have reached a merger agreement that will unite the two largest daily fantasy sports sites. The deal has yet to officially close but players on both sites will likely not notice any significant changes for months.
Why is FanDuel and DraftKings Merging?
Ever since the daily fantasy sports industry started to come under significant pressure last year, there have been whispers of DraftKings and FanDuel joining forces. Over this time period, DFS growth has slowed down. As more states push new laws, it has proven to be more expensive to operate in the new regulatory environment. Other smaller sites — such as FantasyAces and FantasyFeud — have also seen consolidation as a result of regulation.
As states have regulated DFS, the sites have faced larger licensing costs. Virginia alone requires a $500k license to operate in the state legally. As a result of the merger press release FanDuel and DraftKings stated that the combined company can now “accelerate work with government officials to continue to seek legal clarify to enable the continued growth of the industry.”
Essentially, the merger will allow the new company to operate more efficiently and cost-effective way as they work to expand the industry.
How Will the Merger Affect Players?
At this point, you will notice little change in their FanDuel and DraftKings experiences. So if you like one site over the other, your playing experience wont be impacted — at least for now. Specifically, FanDuel has stated the existing seasons of NFL, NBA and NHL will be unaffected by the merger. This means it’s “business as usual” for players on DraftKings and FanDuel.
In addition, FanDuel reiterated that the deal will not have any impact on current contests, prizes and offerings. FanDuel live events also will continue as planned. This includes the World Fantasy Football Championship and Playboy Championship, which have already been announced.
Players in Texas are particularly interested in what happens with the merger. The state is currently accepted by DraftKings but not FanDuel. This question and many others remains unanswered at this point, but should be given more clarity over the coming months.
When Will We Start to See Changes?
Judging from the press release, one can make an assumption that players will not notice any significant changes until next spring – possibly before the 2017 MLB season and likely before the 2017 NFL season. After that FanDuel and DraftKings promise to “bring the best of each platform to better serve [players].”
There is reason to believe that the sites will eventually merge into a unified platform at some point, possibly after a deal officially closes sometime in 2017.
The companies appear to be leaving all options on the table, however; but DraftKings has stated they envision the merger will lead to a “stronger, more sustainable entity that can focus on growth, product development, delivering enhanced user experiences and creating an overall stronger fantasy sports community.”
Combining a player pool seems to be an eventuality, where the overwhelming huge prize pools will further separate the company from competitors and grow interest in FanDuel/DraftKings. Other questions such as branding also appear to be up in the air.
What Can Players Expect from the Merger?
A close comparison can perhaps be made in the online poker world when Amaya Gaming (owner of PokerStars) purchased Full Tilt Poker in 2014. Both sites operated independently initially but ultimately merged player pools. Each of the brands still exist, but the Full Tilt software has been axed in favor of PokerStars. A few promotions remain of the old Full TIlt.
The merger has led some to question whether the new company would create a monopoly. The deal will need to be approved by the Federal Trade Commission before finalizing. While the new company would overwhelmingly be the largest DFS company, there would be still face competition from sites like FantasyDraft, Yahoo and FantasyAces. The company would also see indirect competition from traditional fantasy sports products from Yahoo and ESPN.
DraftKings has stated they do not intend to raise rake because of less competition, however, despite recent rake increases by both sites. “The merger will not affect our obvious incentive to continue growing the DFS space through guaranteed prize pools and attractive commission levels.”
With so many questions still to be answered and business as usual at both sites, players are best served to wait for new developments before drawing conclusions of this deal.