Kyle Stanford June 13, 2016
DraftKings and FanDuel, two daily fantasy sports (DFS) platforms that exploded onto the scene with a barrage of online and TV marketing before the start of last year’s NFL season, are reportedly in talks about a merger. Each of the sites was valued at over $1 billion with its most recent private financing—DraftKings saw its value reach $2 billion with a $200 million investment in August. Combined they have raised almost $1 billion in funding, though the millions spent on advertising, the split of revenues and high costs of the legal battles may have become too much to bear separately.
A merger between the two has been long speculated. Such a move would consolidate competitors that offer largely the same service, as well as bring together a powerful group of investors, which includes large funds like Fidelity and Wellington Management, and sports leagues and networks like Fox Sports, MLB and the NHL. With in-person sports betting almost exclusively limited to Nevada, a state that has outlawed the daily fantasy sites, the sports leagues and networks backing DFS have a huge amount to gain if they can win the legal battle and get the sites available nationwide. A merger may help those investors use their collective influence more efficiently by fighting on the same team, so to speak.
DraftKings and FanDuel together already hold a large majority of the DFS market (it was estimated to be up to 95% in the past). That could also be a slight hold-up with regulators, especially with past market estimations that have pegged industry revenue to hit $10 billion by 2020.
Below are the financing and valuation histories of the companies, along with select investors of each: