MGT Acquires DraftDay
In a surprising and somewhat shocking move, MGT (Co-Owners of FanThrowDown) entered into an asset purchase agreement with the owners of DraftDay.com. MGT will pay $600,000 in cash and approximately 100,000 shares of common stock to acquire the DraftDay assets. DraftDay has been lagging behind the big three (FanDuel, DraftKings, and Draftstreet) since its inception and the player pool appeared to diminish greatly throughout the NFL football season. The NBA games appear to have dried up for the most part as well. DraftDay has tried to incorporate new and interesting takes on daily fantasy sports by offering snake style drafts and pick em leagues which has provided a slight boost in traffic. But in the traditional salary cap daily fantasy structure DraftDay has seen its clientele and game selection diminish greatly since its inception. The lack of a solid player base appears to be the result of DraftDay focusing on in game player experience instead of marketing itself to potential new players. The initial focus of Draftday always appeared to be improving the player experience which is great for existing players the issue is that existing players do not want to face stiff competition day in and day out. New players need to be added to the pool in order to ensure site growth and this does not appear to have been a focus or occur at Draftday.
Positive Outcomes
With this in mind, DraftDay does have some compelling niche offerings that make it unique and separate them from the rest of the daily fantasy sports sites. The live in game player projections are far and away the best in the industry. Once you are participating in a contest on DraftDay the in game experience is second to none. Their commitment to roll out new and unique game offerings also is a great benefit
to their loyal customers. The problem is that their loyal customers are stuck competing against each other as they lose out to the rake that they pay. DraftDay has lagged behind in bringing in new customers. The people that play on DraftDay tend to be veteran players who have participated on other sites as well. Until DraftDay can market itself to new customers and bring in new players to the daily fantasy sports industry, it will always lag behind the three bigger options.
Valuation
We obviously do not have all the specifics of the deal between MGT and Draftday but to see a figure of only $600,000 seems quite low and should be somewhat scary for the industry as a whole. If the 4th largest site can be purchased for such a small amount is that going to create issues with the industry as a whole? The site appears to be hemorrhaging cash with bloated expenses if this is the best deal that they can get than it seems to be a last ditch effort by the owners of DraftDay to hopefully turn the site around and make it into a profitable endeavor. Hopefully they are positioning themselves to market to lots of new players for the upcoming NFL football season. As we have said before on PlayPicks if a major fantasy football operating site like ESPN, Yahoo or NFL.com ever offered daily fantasy sports this would effectively kill off sites like DraftDay or FanThrowdown. The only sites that could potentially handle a move like that would be the big three of FanDuel, DraftKings, and Draftstreet. Very interesting times lay ahead for the daily fantasy sports industry. It is a game that we love and hope to see continue to prosper and grow well into the future.
