Online gambling and sportsbetting giant Paddy Power Betfair is set to enter the daily fantasy sports market in the United States after agreeing a deal that will see it spend up to $48 million in order to acquire early-stage operator Draft.
Paddy Power Betfair explained that the deal will see it part with an initial cash expenditure of $19 million followed by up to $29 million over the next four years depending on the performance of its latest acquisition while Jeremy Levine and Jordan Fliegel are to remain as Co-Chief Executive Officers for Draft.
In order to maximize growth, Paddy Power Betfair additionally stated that it intends to make a “substantial marketing investment in the business” over the next few years that could see the Irish firm report an earnings before interest, tax, depreciation and amortization loss of approximately $20 million for 2017.
“We are excited to be bringing Draft into the group and to further increase our presence in the United States,” read a statement from Breon Corcoran, Chief Executive Officer for Dublin-based Paddy Power Betfair. “Draft has a differentiated product and we believe the business, with the support of our marketing and technology expertise, can take share in the fast-growing daily fantasy sports market.”
According to a report from American business magazine Forbes, Levine was responsible for selling daily fantasy sports provider StarStreet to giant rival DraftKings in 2014 and the 36-year-old stated that mobile-friendly Draft will now be able to expand beyond its current geographic footprint of 35 states.
“There are some states that have passed bills specifically legalizing [daily] fantasy [sports] that we are not in because of [the] cost of compliance that we will now go in,” Levine told Forbes. “Those states are Virginia, Indiana, Colorado and Missouri.”
Levine moreover reportedly told the magazine that an initial funding exercise in March of 2015 saw Draft secure about $3.5 million for marketing and development purposes but that the deal with Paddy Power Betfair will see the operator expand its advertising budget by roughly 100 times.
“I think [Paddy Power Betfair] saw our game and the kind of user experience and the team and realized we were in a really good position to quickly take market share,” Levine told Forbes. “Everyone else kind of offers the same salary cap game. We learned the downfalls of it and how hard it is for casual fans to win. Tens of millions of people want to play [daily] fantasy sports and many of them have realized they have little chance of winning with FanDuel and DraftKings and other salary cap games.”