Top DFS Sites decide, ‘If you can’t beat em, join ’em!’

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DFS BettingToday’s industrial market is filled with competition. Pick any business, and you’ll likely find two juggernauts leading the way. In mobile technology, it’s iOS vs. Android. In eMerchanting, it’s Amazon vs. eBay. Even the toothpaste industry has Crest vs Colgate. In Daily Fantasy Sports, we have the two leading DFS betting giants, DraftKings vs. FanDuel.

For the last few years, these DFS sites have competed directly against one another to be the top fantasy-based, real money sports betting operators in the world. While their operations were aimed solely towards the US and Canada for a long time, they both branched out into the UK market last year, each seeking eventual global domination.

According to ESPN, DraftKings and FanDuel spent more than $750 million combined on television ads, encouraging DFS betting enthusiasts to choose one operation over the other. It was a grueling, no-holds-barred campaign from both directions. And I must say, it did work, attracting an estimated 56 million users to their DFS sites from North America alone.

But as is often the case with huge companies in a dead heat for first place, we’ve learned that the two largest fantasy-based real money sports betting companies are now about to merge.

If You Can’t Beat ‘Em, Join ‘Em!

DFS Sites DraftKings and FanDuel Agree to MergeThat’s right – it’s Serius and XM satellite radio all over again. DraftKings and FanDuel have already negotiated the terms of a merger. All that’s left now is that pivotal moment when government regulators stamp their seal of approval on the deal.

That’s expected to happen in the coming months, lining the DFS sites up to finalize the merger shortly into the second half of 2017; probably just in time for kick-off of the next NFL season.

Being relatively equal in size, the merger will see both companies splitting their responsibilities right down the middle.

Jason Robins, current CEO of DraftKings, will maintain his role, becoming the new CEO of the merged brand. Nigel Eccles, current CEO of FanDuel, will hop into the seat of Board Chairman. And, to keep it fair, each operator will get three seats on the new company board.

“This merger will help advance our goal of building a transformational global sports entertainment platform,” said Robins in a press release commenting the intended merger.

Eccles was equally enthusiast about the deal on ESPN.com. “Being able to combine DraftKings and FanDuel presents a tremendous opportunity for us to further innovate and disrupt the sports industry.”

“Disrupt”? Wait Just A Darn Minute…

Did Eccles really use the word, “disrupt”, to describe the DFS sites’ merger? Yes, he did, and that’s exactly what government regulators could be thinking, too.

You see, in order for a merger to be approved, it must not create a monopoly that would devastate other businesses operating in the same industry. And that could pose a huge problem for these real money sports betting aficionados.

But assuming the merger is approved – and it probably will be, just as Serius/XM was – it begs to question how punters will be effected.

As Kevin McGuire of The Comeback pointed out: “Reducing competition… could be dangerous for the consumer… there’s less incentive to keep prices (in this case, the portion of the fantasy pot taken by the company) down when there’s the perception that the player has nowhere else to play.”

“Commission Will Absolutely Not Increase”

In response to growing concern among the DFS betting community, Robins told ESPN on Friday, “The commission will absolutely not increase as a result of this merger.

“We always try to balance what’s the right commission rate to make the games fun and exciting and make everyone feel like they have a chance to win and also to create a healthy profitable company. And those are the same objectives that will exist post-merger,” he said. “We’re not foolish enough to think that we can raise commission to a level that players will just accept.”

Yeah, well, Richard Nixon said, ‘I am not a crook!‘, and George Bush senior said, ‘Read my lips – No new taxes!

There are no guarantees as to what will or won’t happen if/when DraftKings and FanDuel become one. But if we use the example of Serius/XM just once more, it’s worth noting that company did not issue a price hike following it’s 2008 merger until 2011, and that was based solely on inflation.

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