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MAJOR STORM BREWING BETWEEN FANTASY SPORTS GIANTS: FANDUEL VS. DRAFTKINGS

Saturday, March 15, 2014   (0 Comments)
Posted by: Meg Van Petten
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Published on Forbes.com (3/13/14)

Written by Darren Heitner

FanDuel’s lawyers are currently drafting a demand letter to be sent to its main daily fantasy sports competitor DraftKings.  The demand letter will explain FanDuel’s displeasure with DraftKings’ advertisements, specifically the language contained within those ads that reference the company’s dominance within the rapidly expanding daily fantasy gaming sector of a larger fantasy sports industry.  Current plans involve the inclusion of a firm deadline by which DraftKings must take down what FanDuelbelieves to be false and/or misleading information contained within said advertisements.  The alternative will be the filing of a lawsuit.

In the past, daily fantasy sports games have had to respond toquestions concerning the legality of their services.  Now, two of the largest daily fantasy sports operators may be involved in a fight surrounding claims made about their positioning within the highly competitive sector.

According to a document signed by FanDuel Inc. CEO Nigel Eccles and received by FORBES, FanDuel’s lifetime registrations from 2009 through December 2013 was 768,728 and the service’s lifetime unique depositors (users who have made at least one deposit on the site) during that time was 288,449.  FanDuel’s 2013 revenue (entry fees minus prizes) for the month of December was $2,840,309.  Based on these numbers and a claimed “really good idea of where they are in comparison with us,” FanDuel is ready to take action against DraftKings for advertisements that include language like “DraftKings is the #1 destination for daily fantasy sports on the internet.”

DraftKings claims to be the #1 destination for daily fantasy sports on the internet. Screenshot from its homepage.

DraftKings claims to be the #1 destination for daily fantasy sports on the internet. Screenshot from its homepage.

“We are not just saying you should take this down; we are saying you really need to take this down or we’ll sue you,” said an executive at FanDuel to FORBES.

FanDuel says that it has had people taking snapshot after snapshot of DraftKings’ lobby, which is open to the public.  It claims that it can get a sufficient estimate within a few percentage points of key statistics about DraftKings’ user base from those screenshots alone.

“We have a really good idea of where they are in comparison with us,” said the FanDuel executive.  ”They say they are neck and neck, and sometimes larger than us.  As the space gets larger and larger, we can’t have an entity saying it is the leader when it is not.”

Femi Wasserman, Vice President at DraftKings, Inc. seems to be confused as to what FanDuel’s claim may be.  ”We typically use verbiage that says ‘a leading provider,’ so I’m not sure what FanDuel is reacting to,” said Wasserman to FORBES.  ”We would have to know more about what is driving the concern, so we have no comment until such time as we have more information.”

Of little dispute is the influx of capital that the competitors have received in the past year.  It may have just been a matter of time before a legal dispute between the juggernauts erupted, with both operators fiercely fighting for the #1 spot in daily fantasy gaming.  In January 2013, FanDuel raised $11 million in Series C financing led by Comcast CMCSA +0.36% Ventures.  Later that year, DraftKings announced the closing of a $24 million Series B round of funding led by Redpoint Ventures.

FanDuel has taken notice of DraftKings’ exorbitant raise of capital and its use of same.  It believes that DraftKings has spent about $12 million in advertising last year, with the majority of its spend focused on the NFL season.  FanDuel is 100% positive that DraftKings spent at least double what FanDuel spent on TV advertising in 2013.  Yet, FanDuel is also convinced that there exists a wide gap between the two daily fantasy sports operators.

“They know they’re not close to us, but they won’t want to release numbers,” explained the FanDuel executive.  ”Perception is something people pay attention to.  It is something Nigel [Eccles] wants to tackle.”  FanDuel’s CEO has thus put his attorneys to work.  If DraftKings does not comply with FanDuel’s demands, then we may witness a heavyweight fight between daily fantasy sports giants.

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