DraftKings-FanDuel Merger Follows Months Of Financial Troubles

FanDuel and DraftKings, two major online fantasy sports companies, merged this week. NPR's Rachel Martin talks to Mike Pesca of Slate about their financial difficulties.

RACHEL MARTIN, HOST:

Time now for sports.

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MARTIN: Two of the biggest names in fantasy sports have become one. DraftKings and FanDuel announced this past week that they have merged into one big old company. Mike Pesca hosts "The Gist" for Slate. He joins us now to tell us why this is going to affect my life. It's probably not, but it's still going to be an interesting thing to talk about. Hi, Mike.

MIKE PESCA, BYLINE: For the next three minutes it'll affect your life.

MARTIN: (Laughter) Sure. OK, so I do remember - you and I had a conversation, and I did remark about how I don't have ESPN on all the time. But every time I did, there were all these ads constantly from these two companies. And now they're one. How come?

PESCA: They took out more ads than McDonald's last year. I mean, they - their marketing push was so dramatic that it actually wound up affecting ESPN's stock - or Disney's stock - because there was a falloff this year.

MARTIN: Wow.

PESCA: So to explain how these things work, you know, back in the days of yore of the regular fantasy - fantasy classic - you'd draft the team with your friends, maybe in a league, and you hold those players all year. Well, daily fantasy, as the name implies, you can flit from player to player.

MARTIN: Every single day.

PESCA: There are no allegiances - every single day. It's like the Snapchat of fantasy. After your team plays that day, it disappears into the ether. And it's much more about gambling. I mean, it's about a lot of things, and you don't have to do it for high stakes.

But there is a huge turnover, and you can keep placing bets because most of this activity is for money. And this is how these sites made money or thought that they would make money, which is they got a little cut of every time someone went to draft Brandon LaFell.

MARTIN: OK, so - but this was not without controversy. I mean, they force - they faced legal problems, right? That's some of what's going on here.

PESCA: See, they - that is exactly true. And they didn't realize how many legal problems that they faced. So they kind of got ahead of their skis, to use a metaphor for a sport that I don't think you could gamble on on fantasy, daily fantasy.

MARTIN: (Laughter) Not yet.

PESCA: But they - yeah, they aggressively said, we think it's legal. They marketed the heck out of it. They put it in all these states. And then all these attorney generals say, you know, we have these things called laws and you guys can't do that. So in some states, it was pretty much legalized. In about 10 or 11 states, you still can't play.

And I say 10 or 11 because in Texas, for instance, big state, one of their - there was a decision that it can't be done. One of the states is a - one of the sites is abiding by that decision, one isn't. So what I'm saying, what this all adds up to, is a pretty chaotic situation, more chaotic than the billion-dollar valuation that was put on these companies.

MARTIN: Wow.

PESCA: But as anyone who, you know, drafted Cam Newton before Thursday night's game at top dollar, those values can go down when they're met with reality, I would say.

MARTIN: Is the real NFL affected by any of this at all?

PESCA: Absolutely. They partnered with teams. They've partnered with not the NFL, but they partnered with actual leagues. There was a lot of money riding on it, and it is a great tale of hubris. Don Van Natta of ESPN chronicled it well. And like I said, the - some of the - a drop-off of ratings overall, which can be seen in ESPN's stock, has got to be because of the guys who are just banging out their daily fantasy.

It's become much less popular. It might be illegal in places. And this, perhaps, is the last gasp effort for these two would-be great companies to join together and maybe make something out of their promising, if quasi-legal, venture.

MARTIN: My money is always on Mike Pesca. He hosts "The Gist." Thank you so much, Mike.

PESCA: It is and has been a great pleasure.

MARTIN: (Laughter) Talk to you later.

PESCA: You're welcome, Rachel.

MARTIN: OK, take care.

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