The merger of DraftKings and FanDuel is not the only daily fantasy sports industry of note these days. People might assume that two companies which control 95% of the industry would close down competition, but ironically, it might encourage new competition.
Before the DraftKings and FanDuel merger talks, all the corporate sponsorship deals and investment capital in North America went to one or the other of the DFS companies. With the two joining forces, it might lead some leagues, teams, and investment groups into seeking other alternatives.
Paddy Power Buys DRAFT DFS Site
A case in point is the coming acquisition of DRAFT by Paddy Power, the Irish bookmaker and casino company. DRAFT is owned by Jeremy Levine, who has been in the daily fantasy sports business since 2008.
Though DRAFT is a smaller competitor, it gives Paddy Power-Betfair a footprint in the one-day fantasy sports industry. As online and mobile gaming operators look for new revenue streams, a DFS option looks like it could have synergy with traditional sports betting and virtual sports gambling.
It is a full acquisition of DRAFT daily fantasy sports, with $19 million up front and a total of $48 million over an undisclosed stipulated time. Jeremy Levine and his co-CEO, Jordan Fliegel, are going to stay on as salaried employees. Their job will be to continue to scale the business.
Jeremy Levin to Become Salaried Employee
Jeremy Levine, who sold StarStreet to DraftKings in 2014, will bring his previous experience with buyouts and business scaling to his new position. Levine said he expects to see the company grow from 10 to 20 employees fairly quickly, while the advertising budget is likely to increase 100 fold.
Paddy Power Betfair is planning for the long term. Breon Corcoran, the CEO of Paddy Power Betfair, said he expects to see a $20 million operating loss for DRAFT over the course of fiscal year 2017.
PokerStars’ Acquistion of Victiv
This is not the first time a major online gambling company has purchased an daily fantasy sports company. In 2015, PokerStars (Amaya) bought Victiv, one of the most successful second-tier DFS companies. PokerStars renamed the brand StarsDraft and planned to leverage its success in the online poker market to drive customers to DFS gaming.
Unfortunately, the acquisition of Texas-based Victiv came only 3 months before the Ethan Haskell scandal, which changed the face of the daily fantasy sports industry. As state attorney generals in New York, Nevada, Illinois, Michigan, Texas, and other states began to ban DFS gaming, the cost of lobbying and litigation became prohibitive for many operators. While PokerStars/Amaya had the capital to invest, it was not the business model the company expected.
Yahoo Fantasy Sports Daily
Around the same time, Yahoo! Fantasy Sports launched its own DFS brand, Yahoo Fantasy Sports Daily. Because the search engine had developed a 5 million member fantasy sports community, Yahoo did not plan a big rollout or advertising campaign. Caught up in the same industry troubles that PokerStars faced — and which caused the current DraftKings/FanDuel merger — Yahoo Fantasy Sports Daily never reached its potential.
Paddy Power’s DRAFT Strategy
The difference with the Paddy Power Betfair acquisition of DRAFT is the timing. Breon Corcoran walks into this deal with eyes wide open, knowing that challenges and being able to plan for a more realistic operation.
Another major difference is Paddy Power’s activity in the UK and European gaming market. DFS gaming is big business in the United Kingdom, where daily fantasy football (soccer) is the key niche. Players can field squads of individual EPL or La Liga players, without having to rely solely on the ever-changing regulatory framework of the American DFS industry.
