Among other efforts to diversify its offerings, daily fantasy sports site DraftKings might have to merge with its biggest competitor to survive a dip in NFL viewership and an expensive settlement with the state of New York.
Just days after last week's settlement with the state over false advertising claims--for which DraftKings and FanDuel will each pay $6 million--rumors are ramping back up that the two companies are in talks to merge. Though not denying the rumors, DraftKings said through a spokesperson "there can be no assurances at this time that any discussion about a combination would result in an agreement or merger."
It's been a tough year for Boston-based DraftKings and New York's FanDuel, whose business models rely on facilitating daily contests between sports fans' fantasy teams for a variety of professional sports. New York State legalized the practice in August, but it was only the eighth state to do so. And both companies' reputations have suffered over claims they falsely advertised fans' chances of winning big cash after an investigation found that 90 percent of DraftKings' customers actually lost money in the 2013-2014 season.
A merger would be the latest in a series of survival strategies employed by DraftKings. The company, which was valued at $2 billion in August 2015 and has raised $600 million in funding, is in the process of diversifying what it offers sports fans, illustrating a move away from a fantasy sports platform toward content and experiences.
In early 2016, DraftKings launched in the United Kingdom and says it has plans to expand within the European Union. The company's new app, DraftKings Live, is a sports news aggregator that works with the fantasy platform to inform fans how trades, injuries and even players' Twitter feeds will affect their performance. And the Bucket List is a way to reward fans with non cash prizes, like a VIP experience at Game Two of the World Series or a chance to meet Tiger Woods and play a round of gold at Shadow Creek Golf Course in Las Vegas.
One upside of expensive legal battles--first over the legalization of daily fantasy sports, and then over advertising claims--was that it pushed the DraftKings name further into the mainstream. In previous years the company poured millions of dollars into advertising for that purpose, but this year, DraftKings planned to cut their ad buys by more than a quarter, CEO Jason Robins told the Wall Street Journal. Plus, if rumors of a reported merger prove to be true, the companies could soon be operating under a different name--and no doubt they don't want to waste any more money on advertising that could soon be unusable.