Last week’s merger between DFS giants DraftKings and FanDuel was the first major piece of consolidation in the fantasy sports arena. But what are the implications in Europe? Riccardo Mittiga, CEO of ASAP ITALIA and founder of DFS operation Sportito believes that there are huge opportunities now for a nimble operator.
SBC: DraftKings and FanDuel have finally merged – was this a necessary move from the two market leaders?
Riccardo Mittiga: This move has major benefits in terms of cost saving. Neither of the companies are profitable, and both have incurred heavy operating costs in the past year. Instead of fighting each other on marketing cost to acquire customers, they can now focus on investing more wisely. Moreover the two companies have been spending separately to obtain the same goal — explicit legalisation throughout the United States.
SBC: What are the implications for the rest of the industry? Both for the market and in terms of investment?
RM: This is a major opportunity for the industry, this merger (if approved by anti-trust) demonstrates that the market is much bigger than the current figures, and that DK and FD own a relevant share in only 1 region (US). At the moment the real losers are the companies that invested in DK and FD in the hope that one would emerge dominant, now the merger will see those investor holding a smaller share of a still “listing” company
SBC: Have the two firms made much of an impact in Europe anyway?
RM: The market in Europe for daily fantasy is still at early stage, there no front runners like in US and a large base of clients is still playing the season-long format. Europe is also very different from the US market as each country has his own preferences on sports and in order to succeed a product needs to address these local preferences.
At the moment neither FD and DK platforms, which are almost identical, are serving these needs. It is most likely that a European based competitor will be able to better serve the European customers
SBC: Do you foresee more consolidation as the industry tries to compete for marketing spend?
RM: Competing for marketing spend is the worst thing companies can do. Soon or later they will see their cash reserves empty and will have no money on hand to pay customers or vendors, in such a situation companies are destined to fail or, in the best case scenario, to be acquired.
SBC: Can the smaller, more nimble operators react to changing customer demand much faster in what is still a fledgling industry?
RM: Sure – working hard on customers’ needs, releasing great product, and protecting novice players is the way to succeed. The FD and DK merger is a good news for nimble operators because they can react more quickly to market needs, while a giant like the new FD+DK company will move more slowly. Welcome to a new David and Goliath story in modern times!