By Barry Janoff
November 18, 2016: Following months of speculation and more than a year of legal, financial, logistical and marketing challenges, FanDuel and DraftKings, the most active players in the daily fantasy sports category, said they would merge their operations to "allow for further growth and innovation in the fantasy sports industry at large."
By combining and streamlining resources, FanDuel and DraftKings "can work more efficiently and economically with state government officials to develop a standard regulatory framework for the industry. This will not only enhance the long-term growth prospects and improve sustainability for the combined company, but also make it easier for other players to enter and thrive in the market."
Fantasy sports participation in North America has reached 57.4-million players according to the Fantasy Sports Trade Assn.
FanDuel and DraftKings have about 5.5 million registered users combined, according to industry analysts, who said that an unknown number of people are registered at both.
The two firms spent a combined $500 million on advertising in 2015 — including almost $120 million in September to coincide with the start of the NFL season — according to industry analysts.
But ad spend was dramatically curtailed — including a drop of some 90% alone in September 2016 to coincide with the start of the NFL season, according to industry analysts — to focus on such potentially career-ending issues as government regulation, claims of misleading advertising and misappropriation of inside information, as well as legal battles regarding whether or not DFS was gambling.
Several state Attorneys General required that both companies cease operations within their respective states over the past two years, including New York, which filed a lawsuit against both firms that forced them to stop offering paid daily fantasy sports contests within the state from late March until a settlement was reached in late October.
Both companies late last year said that employees would be permanently prohibited from participation in any public daily fantasy games for money,” including their respective companies. That followed the disclosure that an employee from DraftKings had won $350,000 playing DFS on FanDuel, which led to both legal and public outcry.
The merger faces Federal regulations and approval, which if granted would allow the deal to be finalized in early 2017.
At that point, DraftKings CEO Jason Robins would become CEO of the new company and FanDuel CEO Nigel Eccles would become chairman. Other operational and organizational details would be "finalized and announced at closing," they said.
Until that point, FanDuel and DraftKings would remain "separate and operational through the 2017 NFL season while the deal is finalized (and) will continue to operate under their respective brand names for the foreseeable future."
"Our consumers are at the core of everything we do and we have always been passionate about providing the best possible experiences for them."
"(We) are merging 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, all aimed at creating a more diverse, exciting and appealing experience for fantasy sports players and sports fans generally," both sides said in a statement posted to their respective Web sites.
Both FanDuel and DraftKings said the move is not expected to have "any impact on our existing partnerships."
New York-based FanDuel, founded in 2009, has official alliances that include the NBA, 16 NBA teams and 15 NFL teams.
Its investors include investors including Google Capital, Time Warner/Turner Sports, Shamrock Capital, NBC Sports Ventures and Comcast Ventures.
DraftKings, founded in Boston in 2012, has official deals that include MLB, NHL, Nascar, MLS and UFC. ESPN signed a deal with DraftKings in June 2015, but the official alliance was reconstructed this past February.
In August, FanDuel unveiled several changes, including a user Bill of Rights and Governance page, "so every player is aware of their rights and understands exactly what to expect when playing FanDuel contests"; a new logo, redesigned Web site and a marketing campaign ("Sports Rich") that "focuses on all the enriching emotional experiences associated with sports."
"The past year has been tumultuous for this industry but FanDuel has emerged stronger than ever and we are ready to lead the industry forward," Eccles said at the time. "The new FanDuel brand reflects our commitment to transparency, innovation and enhancing the user experience. We are confident it will showcase what we have to offer to all sports fans."
Of the merger, FanDuel and DraftKings said, "Once integrated after closing, we envision this merger will create a stronger, more sustainable entity that can focus on growth, product development, delivering enhanced user experiences and creating an overall stronger fantasy sports community."
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