In a shocking move, daily fantasy sports giants DraftKings and FanDuel have announced that they have ended their plans to merge. DraftKings founder and chief executive Jason Robins issued a statement on the matter that said, “Today we formally terminated our merger with FanDuel and will withdraw litigation from the Federal Trade Commission (FTC). This means we will move forward as a separate company, which we believe is the best course in the interest of you – our customers and avid sports fans.”
Robins later added that the threat of a lengthy and expensive legal battle was a chief factor in the two companies deciding to abandon their plans to join forces. Last month, the FTC moved to block the merger between the two companies after citing monopoly concerns. Had the DraftKings and FanDuel been allowed to merge, the FTC says that the combined company would have held more than 90 percent of the American market for paid daily fantasy sports. That would effectively stifle the ability of other DFS companies to be successful.
Rather than fight the ruling, DraftKings and FanDuel decided it would be the best course of action to continue as solo entities.
Robins would go on to note that DraftKings is on more stable financial ground than it was when the merger was initially announced last November. He said that DraftKings’ revenue is up 40 percent from where it was at this point last year and that it is spending far less money on advertising.
Robins says that the decision to nix the merger was mutual. FanDuel’s CEO, Nigel Eccles, issued a statement that said, “We have determined that it is in the best interest of our shareholders, customers, employees, and partners to terminate the merger agreement and move forward as an independent company.”
DraftKings and FanDuel have each been around for the last several years, but they really burst onto the mainstream in 2015 when they both spent hundreds of millions of dollars in television and radio advertising. That new exposure helped grow the customer base on the respective sites, but it also helped fuel a massive state-by-state legal battle over whether the paid daily fantasy sports contests should even be legal in the first place.
The sites reportedly lost quite a bit of money thanks to the ensuing legal battles. The two decided to merge officially last fall when they determined it would be more fiscally responsible for taking on their legal troubles as a single entity. A merger would have also effectively cut the cost needed to advertise an ongoing competition between the two.
Robins says that DraftKings will continue to work with FanDuel in legal and regulatory battles. He also acknowledged that the merger would have presented several other issues, and the fact that they now no longer have to take that path is something of a relief.
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