FanDuel and DraftKings in merger talks, reports claim
Negotiations between DFS giants prompted by shared regulatory and financial headwinds
 
The two largest daily fantasy sports (DFS) operators in the world FanDuel and DraftKings are in early-stage merger talks, according to media reports.
News source Bloomberg yesterday reported that talks were at a relatively early stage and could easily fall through, while it is still unknown whether a merger would be permitted by US competition authorities since a combined operator would control at least 90% of the market.
Likewise, FastFantasy CEO Joe Brennan questioned the economics behind such a deal, suggesting that DraftKings may be negotiating out of necessity.
âRumours about DK’s financial health would lead most to believe that this is a buyout by FanDuel, not a merger,â Brennan told EGR. âFanDuel has a solid spine in its backing by Comcast, and has arguably better handled the headwinds over the last yearâ.
âYou can see why FanDuel would make this transaction, as they probably are attracted to the notion of a monolith in the sector, much like Facebook or Google. But the two DFS firms likely share a very high percentage of players, for which both have paid enormous acquisition costs. Paying twice for the same players by acquiring a largely redundant database seems like an inefficient transaction,â added Brennan.
DraftKings and FanDuel both declined requests for comment from EGR but DraftKings said the rumours had existed for as long as the companies had been around, while a FanDuel spokesperson said the story was âcomplete speculationâ.
Both companies are struggling financially following regulatory crackdowns around the US and dwindling cash reserves.
A merger would help reduce a number of costs, including lobbying and advertising. The two firms are estimated to have spent more than a quarter of a billion dollars on advertising during the 2015 NFL season, but have since seen flat-lining traffic to their websites.
The rumoured talks come against a backdrop of an ongoing legislative process in New York, which could prove vital to the future viability of both companies. The two legislative houses in New York have agreed upon the language of a bill to regulate DFS, but now only have two days to approve it before the end of the legislative session on 16 June.
Only seven states have so far enacted DFS regulation.