The two largest daily fantasy sports companies, DraftKings and FanDuel, announced on Friday that they have agreed to merge into one company, if federal regulators will approve it. The merger was not a surprise, and was expected for weeks, but some of the details for planned leadership of the merged company were more eye-opening.
FanDuel launched in 2009 and is largely credited with creating the “daily” fantasy category, where users get to draft a new team of athletes every week (or more often) as opposed to just once at the beginning of a sport’s season. DraftKings did not launch until 2012, and in many ways followed FanDuel’s lead in building its own business. But it is Jason Robins, the DraftKings CEO, who will be CEO of the merged company, while FanDuel CEO Nigel Eccles will be chairman of the board.
But none of these management changes will happen until (and unless) the merger goes through, which the companies themselves do not expect to happen until the second half of 2017. Nothing will change in terms of user experience until then, either, and the companies are not saying what might change about the products after the merger.
Robins and Eccles have been rivals for the past three years, but merging has forced them to operate together, as a pair. On Friday afternoon, following the official announcement of their merger, Robins and Eccles spoke to Yahoo Finance by phone in a joint interview. It was the first day that the two had spoken to the press together.
“It actually hasn’t been that weird” to take business meetings and press calls with Eccles, his rival up until recently, Robins said. “I thought it would be, but it hasn’t. It actually feels very natural. The questions we’re being asked, either one of us could answer and the answer would sound very similar. And that’s what we’ve come to realize this year.”
Both executives say that the two companies have always been more similar than they are different; merging can offer more cost efficiency and a better chance at profitability. (Neither company is profitable yet.) By combining, “We will be able to compete in the seasonal market with ESPN and Yahoo,” Eccles said.
Some 57 million people play traditional season-long fantasy football, where users draft one team at the beginning of the NFL season and stick with that team for the whole year. Only an estimated 6 million people have tried the “daily” alternative that DraftKings, FanDuel, Yahoo (parent company of Yahoo Finance) and others offer.
“When we look at the 57 million fantasy players,” said Eccles, “we also look at the 220 million sports fans [in America], and we ask, how else can we engage these guys? I know that sports leagues like the NBA [an investor in FanDuel] are really excited about how they can use not just us but other fantasy products to get fans to engage with the NBA more. So it’s not just about daily fantasy sports, it’s sports technology and innovation in sports.”
In that spirit, Robins and Eccles argue that merging into one company is a big step not just for daily fantasy but for the entire, much larger fantasy sports industry, and its future, which could soon include lots of new and unique types of contests.
“If you looked at it up until a year ago, there was a ton of investment into the fantasy sports industry, it was booming like many industries haven’t seen, and all of a sudden it stopped,” said Robins. “And that was because of all the regulatory pressure. And what we realized is that this suddenly is bigger than DraftKings or FanDuel, this is about preserving fantasy sports. I grew up playing fantasy sports. To help create a framework that fantasy sports can grow and thrive in, it was bigger than either company. And as we went along, it’s not like we were the only voice at this table anyway. It was much bigger than us.”
It’s no accident that Robins and Eccles are framing it this way. They are preparing for potential antitrust challenges to their plan.
In their effort to get the merger approved by the FTC and DOJ (the two agencies that split duties on examining mergers), lawyers for the two companies will make the case that DraftKings and FanDuel operate in the much larger fantasy sports industry, not only the “daily” corner of it, and thus a combined company would not have an unfair market-share monopoly.
Some legal experts say they will not necessarily have an easy time making that case, because for now their core offering is daily fantasy sports contests, and together they own more than 96% of the daily fantasy sports market.
While Robins emerges as the overall leader of a combined company, he is happy to credit FanDuel as the category creator, and even acknowledges that his company looked to FanDuel for a lot of its ideas. “FanDuel really invented the product, daily fantasy sports,” he said. “They are clearly the ones who popularized it… By the time we came around, we were really just working off the template that they built. If it hadn’t been for them, I don’t know that we would have started the company.”
But Eccles, playing equally nicely on the first day of the engagement, admitted that while FanDuel came first, it eventually allowed DraftKings to gain on it. “What’s really impressed me about DraftKings is how they’ve driven innovation through a deep understanding of what customers wanted,” he said. “Some of the innovations they made, we actually resisted, and on a lot of occasions we were pretty wrong. Those were the right innovations for the industry.”
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Daniel Roberts is a writer at Yahoo Finance, covering sports business and technology. Follow him on Twitter at @readDanwrite. Sportsbook is our sports business video series.
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