Every business is it’s own little ecosystem of connected points. If one of those points or stakeholders is disrupted it creates a ripple effect that a lot of business units end up feeling. Sometimes even seemingly unconnected groups can be affected as well. DraftKings and FanDuel were all the rage two to three years ago. Now it is being reported that the companies have close to no cash on hand. The only way to save both companies is to merge. They offer the same services anyway, why not have the best from both companies try and save one than let both die, or one win.
DraftKings and FanDuel have a touch point at almost every piece of the sports business world. They are fan facing and can increase fan engagement which could lead to more television viewers. Both companies are huge in the sponsorship/partnership realm. They have deals with almost every team and most of the major leagues — it’s amazing the NFL didn’t have a deal with either, it’s one of the leagues biggest PR successes in recent memory. The companies work with players associations, have endorsement deals with NFL, NBA, and MLB stars. If that isn’t enough some of sports biggest owners actually invested their money with the start-ups. At the time it looked like nothing could go wrong.
We don’t need to go over what went wrong. We’ve reviewed that ad nauseam. The real issue is what happens next. The companies are obviously fighting to stay afloat. Articles coming from Deadspin and the New York Times are going to scare a lot of people. Those articles will cause current users to take out all of their cash in their accounts, or stop people from registering. Investors have probably given up on turning a profit at this point. The millions in returns aren’t happening any time soon. Teams and leagues don’t want to be associated with failing companies, and they also like to get paid. The daily fantasy sites will have an issue with that if the New York Times and Deadspin posts are correct.
Maybe the expectation that daily fantasy can be targeted at everyone just wasn’t the correct assumption. Maybe these companies aren’t billion or hundred million dollar companies. Maybe they are smaller. There’s nothing wrong with that. It’s not what was pitched during investment meetings for seed and venture funding, but reality is setting in.
These DFS companies need to merge, take a step back, and then figure out what success really is. Success could be servicing a small/niche rabid fanbase. It could be hosting personal weekly games with friends. It’s probably not million dollar payouts. It’s probably not being a billion dollar unicorn company. We know this because of what has happened in the market, courts, government and everywhere else this DFS drama has played. The market and situations are not what they thought it was. We know that from all that ad nauseam talk.