Sizzle/Fizzle

Amazon Sizzles, Apple Fizzles And A High Profile Merger Fizzle Before It Starts

Some partnerships seemed destined, perhaps even written in the stars — Romeo & Juliet, Tony & Maria or (of course) Kimye are all good examples. Then there are the things that look meant to be … but aren’t: Charles & Diana, Donald & Ivana, Brangelina all spring to mind.  

And, this week, despite all indications of being a Kimye in the making, it seems FanDuel and DraftKings will be more of a Brangelina situation after all: apparently a match made in heaven, but a merger that just wasn’t meant to be. Just about a year after the two fantasy football/sports-betting sites resolved to blend into a single entity, both firms confirmed to TechCrunch yesterday that the deal is formally off.  

Why? In four words, the Federal Trade Commission (FTC) — which about a month ago gave its official thumbs down to the merger on antitrust grounds. Specifically, the FTC threatened to take the issue to the courts and sue to stop the merger — first by filing that the commission will jointly appeal the Attorneys General in California and the District of Columbia, seeking a preliminary injunction to stop the deal.

The FTC complained that because DraftKings and FanDuel are each other’s largest competitors, their merger would create a single firm that “controls more than 90 percent of the U.S. market for paid daily fantasy sports contests.”  

That much market share, the FTC noted, violates Section 7 of the Clayton Act, which “prohibits mergers and acquisitions where the effect may be substantially to lessen competition, or to tend to create a monopoly.”

The two firms, after consideration, decided that this was a case where they could not fight the law and win — and have thus withdrawn the deal. Since the merger was never finalized, FanDuel and DraftKings will continue to operate as separate firms.

“FanDuel decided to merge with DraftKings last November, because we believed that this deal would have increased investment in growth and product development, thereby benefiting consumers and the greater sports entertainment industry. While our opinion has not changed, we have determined that it is in the best interest of our shareholders, customers, employees and partners to terminate the merger agreement and move forward as an independent company,” noted FanDuel CEO Nigel Eccles in a released statement.

DraftKings CEO Jason Robins was equally sanguine.

“We have a growing customer base of nearly eight million, our revenue is growing over 30 percent year over year and we are only just beginning to take our product overseas to the billions of international sports fans we have yet to even reach. Consequently, we believe it is in the best interests of our customers, employees and investors to terminate our agreement to merge with FanDuel and move forward as a separate company. This will allow us to singularly focus on our mission of providing the most innovative and engaging interactive sports experience imaginable, forever changing the way fans connect with teams and athletes worldwide.”

Despite the upbeat attitudes, the deal not going through will have costs for both. Fantasy sports betting exists in a legal grey area in many states, and both firms would have benefited from combining their lobbying efforts with the federal government for full legal recognition in 50 states.

The merger was also an opportunity for both firms to get a major cost center under control — the money they spend advertising against each other. According to reports, both firms have spent hundreds of millions during football season advertising their sight against the other’s. But firms, before the merger cancellation was announced, noted that continued spending in that manner was not a sustainable future plan.  

So will the ad-war between the high-stakes fantasy sights ease off this year even though the merger never happened? Stay tuned — the season starts soon than you think — and we’ll all know as soon as the first commercial break gets under way.

 

Sizzle:

European startups: Startups get validation when big investors put their money to work.  So it was this week when Samsung NEXT said its venture capital arm would raise $150 million for an investment fund targeting companies in the artificial intelligence space, along with the Internet of Things and the virtual reality space. NEXT has been around for four years and has invested in more than 60 companies, with 15 acquisitions under its belt. 

Amazon Prime Day: Good stats, indeed, for the annual Prime Day. The initial numbers show that the banner eCommerce event logged 6,000 orders per minute in the United States and a 20 percent increase in sales year over year. Those sales came from the 85 million Prime members among the company’s roster this year, as compared to 63 million last year. Prime numbers may have been confusing in high school math, but here they are the type of numbers that make retailers smile.

Trial Lawyers: Not the sizzle we want, but they get a boondoggle from arbitration rule “strike down” from the CFPB. Looks like clauses will no longer be as expansive as they once were, with arbitration as the mechanism by which legal and other disputes would be resolved. Some Republicans have already invoked the Congressional Review Act, or CRA, as a means to revoke the CFPB’s rule. But that may take a while.

Should the CFPB’s actions stand, the individual consumer can now band together with other consumers via class actions and seek their day in court — no matter how expensive it may be for them, or for the companies that are sued. That means higher costs and perhaps, even less innovation for financial services. Oh, and higher fees. Lawyers are happy, though. Group lawsuits, as noted by the CFPB, have delivered about $220 million annually in verdicts to about 6.8 million consumers. That’s about $32/consumer. Life-changing it is not — for consumers. For lawyers who pocket 20 or 30 percent of that, oh yeah.      

Fizzle:

Biometric Data: Nothing’s sacred in security, it seems. That extends to biometric data, which some believe to be virtually hack-proof. Yet Avanti, the kiosk POS vendor, said that data had been breached. Data compromised ran the gamut from credit cards to biometric information. Malware on the machines themselves may have been the way hackers made off with the information. High tech, high stakes.     

iPhone 8: Shipment forecasts keep coming down, spelling a bit of doom and gloom for the tech giant’s prospects for those once white-hot devices. BoA is the latest to lower its projections for the iPhone shipments. Analysts there have cut their forecasts by 11 million iPhones, with production delays contributing to the shortfall. The sell-siders joined a growing chorus of analysts on the Street warning that expectations may be too high for shipments near term.

Albertson’s IPO: It ain’t coming, reflecting the dual pressures of the grocery wars a la Amazon and the IPO jitters seen with other companies like Blue Apron. This is déjà vu all over again. The grocers had been looking to list on public markets two years ago, shelved those plans and has shelved them again. One path to Albertson’s growth had been the organics and natural foods market, which is now, of course, a bit more of an Amazon target. On Wall Street, investors tremble where Amazon dares to tread.

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