Fantasy sports rivals DraftKings and FanDuel to merge

Devlin D’Zmura, a tending news manager at DraftKings, works on his laptop at the company’s offices in Boston in September 2015. (AP Photo/Stephan Savoia)
Devlin D’Zmura, a tending news manager at DraftKings, works on his laptop at the company’s offices in Boston in September 2015. (AP Photo/Stephan Savoia)

BOSTON (AP) — Daily fantasy sports rivals DraftKings and FanDuel have agreed to merge after months of speculation and increasing regulatory scrutiny.

The two companies made the announcement Friday, saying the combined organization would be able to reduce costs as they work to become profitable and battle with regulators across the country to remain legal.

While long-term plans are unclear as the deal is finalized, the joint plans appear to change little about how daily fantasy sports players use the sites and play the game.

(Editor’s note: Hawaii residents are banned from playing daily fantasy sports.)

The companies have each raised millions of dollars through investors and sponsorship deals, but state attorneys general, lawmakers and regulators have questioned whether their online games – in which players pick teams of real life athletes and vie for cash and other prizes based on how those athletes do in actual games – amount to illegal sports betting.

Company executives told The Associated Press Friday that the merger, which still requires federal approval, would help them more effectively lobby policymakers for standard regulations for the relatively new industry, which grew out of the traditional season-long fantasy sports competitions played by millions of Americans.

DraftKings CEO Jason Robins, who will take over as chief executive of the combined company, says the costly legal war each company had faced in states across the country showed how much of a “common vision” and “common goal” the two companies shared.

Robins and FanDuel CEO Nigel Eccles, who will serve as board chairman, also played down concerns raised by analysts about whether the merger might run afoul of federal antitrust laws.

The deal, which has been rumored for months, pairs two companies that represent about 90 percent of the daily fantasy sports market.

Spokespersons for the Federal Trade Commission, which would oversee the deal, didn’t immediately comment Friday.

But Robins and Eccles argued their companies remain relatively small players in the broader fantasy sports industry, where the likes of ESPN, Yahoo and other larger companies dominate.

“We’re a company that collectively has a little over 5 million customers in a fantasy sports base with almost 60 million total,” Robins said. “For us to ever hope to compete for those customers, we really felt this was something that was necessary.”

Eccles said the merger would also help rather than restrict competition in daily fantasy sports. By pushing more effectively for regulatory clarity around the games, he said, the companies can help bring back investor confidence in the industry.

“This is actually very good for all operators,” Eccles said.

The two executives also said the merger would help the companies develop better products – like offering more varied contests, developing loyalty programs and improving their website features – though they declined to elaborate on those plans.

How the merger works on a practical level is still to be determined. Financial terms were not disclosed Friday.

But company officials say it will be business as usual for the most part while the deal is being finalized, which could take months.

The companies will retain their respective headquarters – DraftKings in Boston and FanDuel in New York. They’ll also keep their separate brand names, operations and game platforms at least through the 2017 NFL season.

The companies also say they don’t expect the merger to impact any of their existing partnership deals, which includes agreements with dozens of sports leagues and teams in the U.S. and overseas.

And they’ve assured players that they intend to keep their commission fees “competitive” and don’t intend to raise prices substantially.

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