Impacts of the Aborted FanDuel-DraftKings Union
The fallout from the failed merger between two Daily Fantasy Sports (DFS) providers is beginning to reveal its consequences. FanDuel has declared that it will put its UK offerings on hold indefinitely. This potential retreat to the domestic market for the industry could be precipitated by intervention from US antitrust authorities.
The merger plans of these US companies surfaced in November 2016. This announcement followed intense competition marked by significant advertising spend and occasional price wars. The goal was to break free from this negative cycle through a merger. They also sought to collaborate on licensing and international expansion. However, the merger plans were scuppered mid-July 2017 after the FTC filed a lawsuit, forcing the CEOs of FanDuel and DraftKings to call off the deal. Analysts opine that both companies are non-profitable and dependent on continuous growth and new investors.
It remains doubtful whether the companies can fund further expansion following the merger debacle, particularly in the case of FanDuel. They only launched their UK platform in August 2016 after a year of development. Just under a year later, this offering has been put on hold. While a return is anticipated, the US market and the NFL season will take precedence. FanDuel-UK provided no explanation for this step, but speculation suggests overwhelming cost pressures and insufficient demand outside their home market.
DFS are most popular in the US. FanDuel claims to have over 50 million active players. Together, FanDuel and DraftKings would have commanded a market share of over 95%. Given the already-tapped market in the US, growth potential is dwindling. Without a merger, the companies will continue to sponsor ads and promotions to attract customers from rivals. It's unclear if the DFS leviathans suffering losses today will still be able to push their international expansion in this environment.
Positive implications for consumers
Continued competition in the DFS market is good news for customers, especially in regions where the companies will continue operations. Additionally, those interested in virtual sports management are likely to gain from a vibrant, competitive global market. The probable monopoly of DraftKings/FanDuel could've resulted in less enticing offers.
The aborted merger is favorable for start-ups in the DFS sector. The growth of US firms will be impeded, creating room for other countries to develop their own DFS market. The German legal situation for DFS has yet to be settled, but Comunio and Fanteam are among several providers poised to enter the German market.
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Source: www.onlinecasinosdeutschland.com
