Last updated: August 14, 2024
FanDuel has delivered a significant blow to rival DraftKings by refusing to implement a proposed surcharge, a move that could shift the competitive balance in the sports betting industry. As DraftsKings moves forward with the fee, FanDuel’s decision positions it as a more consumer-friendly option, potentially attracting bettors looking for better value.
Speaking about the groundbreaking decision that has shaken the foundations of the sports betting industry, FanDuel recently stated its willingness to decline a surcharge on successful bets. This aggressive positioning created differentiation between the main competitors, FanDuel and DraftKings, heightening the competition between these sports betting giants.
Over the years, both websites, FanDuel and DraftKings, have held the major market share of sports betting, alternating between which is on top of the other in rankings.
Many viewed the proposed surcharge—a ‘percent of take’ on winning bets where take is winnings plus stake—as a means of recouping these companies’ rising operating expenses, especially in states with high taxes on sports betting.
However, this move could upset bettors, who could lose earnings to the specified fee.
DraftKings initially raised the alarm that it was set on going through with the surcharge, seeking to apply the charges in significant states like Illinois, New York, Pennsylvania, and Vermont.
FanDuel, however, chose a rather opposite approach, rejecting the surcharge directly. This decision was positively received by bettors who believed that FanDuel was putting the consumer first instead of just focusing on the green.
It paid off immediately for FanDuel to reject the surcharge, knowing fully well that with the right strategy, more people would use the service. This shift of perception made people start to see FanDuel as the better choice for the consumer, and more loyal customers began to spread the word.
However, DraftKings drew the ire of its players for its proposed implementation of the surcharge, with many bettors fuming about the effect on their wins.
This decision by FanDuel to reject the surcharge could not have arrived at a worse time than this. Consumer attitudes become key market share indicators when competition in the sports betting market increases. The situation was immediately interpreted as an attempt by FanDuel to put itself at the service of the bettor – a company that has its back to the customer.
Contrary to expectations, DraftKings decided to reverse course on this issue by canceling the surcharge. The company mentioned that this change resulted from its decision to listen to its customers and adjust its policy accordingly.
The reversal applies to the previously targeted states of Illinois, New York, Pennsylvania, and Vermont. DraftKings will join FanDuel in not taxing winning sports bets.
This action was a reaction to FanDuel’s gambit – or an attempt to counter it – by DraftKings to regain the upper hand in the two companies’ competition. Hence, by withdrawing from the surcharge, DraftKings can minimize a negative impact on the company’s image and remain one of the key players in the market.
This is a good sign that the company can respond to customer feedback while showing FanDuel’s impact on a competitor.
What happened around the time of the surcharge debate is critical to developing a sports betting industry. First, it raises the role of consumer perception in managing organizational activity, especially in such a diverse and dynamic field as the gambling industry.
Companies that aim to deliver the best value to the customers and focus on establishing good relations with them will likely dominate the market shortly.
Secondly, this case shows that strategic flexibility and skill are valuable business model features. DraftKings’ willingness to change its strategic plan to address customer feedback indicates that even the big players must be ready to allow flexibility in their plans to retain the consumer base and market share.
Last but not least, the episode elaborates on the rivalry between the companies FanDuel and DraftKings. Since these two companies keep competing for supremacy, customers will witness more heightened promotional campaigns, new products and services, and increased efforts to meet the needs of betting customers.
The result of this rivalry will define the future of sports betting in the US and other parts of the world.
