With a decision on the legalization of sports betting looming, league sources told ESPN Major League Baseball and the NBA want to remain partners but shed ownership stakes in daily fantasy sports giants FanDuel(FD) and DraftKings(DK). No financial terms or other pertinent information has been released at this time.
MLB released a statement saying, “While we have initiated discussions regarding potential changes to the structure of our relationship, we look forward to continuing our valued partnership with DraftKings. MLB and DraftKings will continue to collaborate on innovative approaches to enhance the fan experience.”
NBA spokesman Mike Bass similarly added, “This space is evolving and we saw the need to take a fresh look at the structure of our relationship. FanDuel has been, and will remain, a great partner. We have simply modified some of the components of our partnership.”
FanDuel’s released a brief statement, “FanDuel and the NBA will remain close commercial partners.”
DraftKings spokesman went a little more in depth, “Major League Baseball was the first professional league to invest in DraftKings and their partnership over the last five years has been instrumental to our growth and success. Our ties to MLB are as strong as they have ever been.”
What are potential motives behind the NBA and MLB’s ownership exodus?
NBA arenas and MLB stadiums are donned with FD and DK advertisements. Don’t look for that to change anytime soon. Both entities are good for each other’s business as the NBA and MLB bring more DFS players to FD and DK, while FD and DK bring increased ratings to the NBA and MLB as DFS players watch games to see if their picks put them in the green.
With the stigma of sports betting and sports co-mingling nearly faded, the NBA and MLB have a great opportunity to form a direct partnership with sportsbooks. Through this partnership, each league can give daily fantasy sports, and sports betting, their own spin without FD or DK being the middleman.
Also, with the sports betting-NBA-MLB connection not too far off, it would raise red tape for the NBA and MLB own stakes in other sports betting businesses such as FD and DK. DK is openly trying to get into sports betting, while FD hasn’t made it’s plans known. With a failed merger between FD and DK further clouding the future of each entity, it’s no coincidence that the NBA and MLB are slowly distancing themselves from the DFS platforms.
The future of daily fantasy sports
The best-case scenario for FD and DK is to merge and become a daily fantasy giant. At the onset of both their existences, they both spent to much in advertising to try and out do each other. This spending led to severe debt with too little cash flow. DK reportedly tried to secure additional funding and failed, which may be what led to the failed merger talks.
A merger is worrying DFS players who enjoy the different platforms that FD and DK offer. Both sites have different amounts of players and positions which leads to different strategies for each site to be successful and win money. What will happen if FD and DK merge? Will the games offered remain unique or will they be lumped into one or the others style?
FD and DK have paved the way for other daily fantasy companies to enter the fold. By dealing with states that won’t allow residents to play and fighting federal regulation battles in Congress, FD and DK have removed a great deal of the red tape that made the industry hard for a start-up to enter. It is very possible that their progress could eventually be the undoing of both entities.