FanDuel and DraftKings, the two biggest names in daily fantasy sports, are discussing the possibility of a merger. If it came to pass, and that’s a mighty big if, the deal would radically change the face of the daily fantasy sports market both in the US and abroad.
The deal, which has been reported on by multiple mainstream news outlets including ESPN.com and Bloomberg, would be music to the ears of the venture capitalists that have been supporting the companies. According to Bloomberg, those investors have been clamoring for such a deal for quite some time.
On its face, a daily fantasy sports mega merger makes a lot of sense. After all, the two companies spend a tremendous amount of money on advertising and new customer acquisition. Joining forces would cut those costs dramatically, leaving more money for investor profits.
Merging forces would also cut the two giants’ legal bills in half as they battle to remain legal in most US markets.
While the deal might reduce legal costs, it wouldn’t make the daily fantasy sports industry’s legal woes go away and it might even add a few new ones.
For example, there’s no indication that Commerce Department regulators would be keen on approving a merger between two companies whose combined market share comprises 95% of the US-facing daily fantasy sports market.
At the end of the day, merger talks between the two daily fantasy sports giants may be nothing more than a desperate act of survival. After all, both companies have seen their valuations cut in half since last fall’s data leak scandal.
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