Fantasy Aces announced that it has entered into a “binding letter of intent” to acquire the user database of Fantasy Feud.
The planned move comes just ahead of the NFL season and daily fantasy football, in which most DFS operators make the vast majority of their revenue.
The fact that Fantasy Feud parent company Gaming Nation appears to be shuttering its DFS platform does not come as a complete surprise. Feud has no active NFL contests, and Gaming Nation was not one of the initial applicants for a DFS license in New York.
Fantasy Aces earlier told Legal Sports Report that it applied for an NY license last week.
Details of the Aces-Feud deal
As part of the agreement, Aces will get access to 35,000 participants that used the Feud platform, some of which are not duplicated across the two sites. From the announcement on the deal:
For those unique user participants, the Corporation will pay Gaming Nation C$125.00 per participant. Gaming Nation will receive a cash payment of C$25,000, with the remainder of the purchase price being paid in common shares of the Corporation at a price per share based on the 20 day moving average of the shares on the transaction date.
The full value of the purchase will be revealed at a later date, when the deal is finalized.
The timeframe for Aces gaining access to the Feud user database is a variable. Both companies are publicly traded corporations on the TSX Venture Exchange (Feud is a part of Gaming Nation, Inc.) so the deal is contingent upon the approval of TSX.
The release also noted that Fantasy Aces “will become the DFS site recommended and endorsed by the other key daily fantasy properties controlled by Gaming Nation including Fantasy Guru, DFS Guru Elite, Pick Nation and 5050 Central.”
Beyond those revelations, details on the deal were scarce. Officials from Aces did not immediately respond to request for comment. An official with Fantasy Feud had no comment on Wednesday’s news.
A look at the economics of Fantasy Aces and Fantasy Feud
As publicly traded companies, Fantasy Aces and Fantasy Feud released their combined metrics for the first half of 2016:
- Gross revenue: US $1,150,932
- Prize payouts: US $12,114,948
- Contest entries: 1,384,320
More from Fantasy Aces:
A portion of the 35,000 user participants will have an immediate impact on the Corporation’s gross revenue and expanding user base. The remaining inactive users will be targets of marketing and promotional campaigns aimed at converting them to depositors and daily active users.
“This deal should prove to be extremely accretive to shareholders,” Tom Frisina, CEO of Fantasy Aces, said. “Not only does it provide us with all the positive points listed above, but the timing of the deal could not be better as we move in to the biggest quarter of the year, with NFL starting, followed by NBA and NHL, while MLB and PGA continue.
“With certain states finally announcing that DFS players are able to freely play, we expect the whole industry to expand dramatically over the next few years,” Frisina continued. “As a result of this transaction we could not be more excited to grab a bigger piece of what is becoming one of the biggest new industries in North America.”
The new battle for the pecking order in DFS
Yahoo remains a clear No. 3 among DFS operators, currently.
The resulting Aces-Feud platform may be the new No. 4 operator in the space, along with FantasyDraft, which is already operational in NY with a temporary permit.
A little more than a year ago, both Aces and Feud — before Yahoo’s DFS launch — were attempting to garner meaningful marketshare in what was then a rapidly growing industry. Gaming Nation, in June of last year, had big plans for the Feud platform upon acquiring it.
But that was before the increased media, legal and legislative scrutiny changed the dynamics for the DFS industry at large.
Not the last of DFS consolidation and contraction
It’s unlikely this will be the last time two DFS operators decide it is better to work together/merge/consolidate than go it alone. And contraction of sites is also on the table.
- Investment funding for DFS has largely dried up, at least for the time being.
- The cost of regulation being implemented in a variety of states — in terms of taxes, licensing fees and making changes to comply with new laws — is something that didn’t exist a year ago.
- Two insolvent sites have already been bailed out this year — Fantasy Hub (by DraftKings) and FantasyUp (by iTEAM Network).
There has long been chatter of FanDuel and DraftKings merging. But with the NFL season around the corner and the two sites moving ahead with their own plans independently, that may not happen in the short term.
Two other second-tier operators — DraftPot and DraftOps — seem to be the next candidates for acquisition or contraction:
- Neither has active NFL contests.
- Neither is known to have applied for a license in New York.
- DraftOps is actually using the argument that it is illegal in Minnesota to avoid paying money to an NHL franchise.
It’s not the first period of consolidation for DFS — DraftKings once acquired sites StarStreet and DraftStreet. But that came as the ascendant DraftKings attempted to wrest marketshare from early mover FanDuel, not the concerns of today’s DFS industry.