♣️ The Company Set to Control All Sports

Fanatics is buying properties to win that Atlantic City board game

Fanatics. The company you’re probably not all too familiar with but if you googled, “sports apparel” or “sports jersey”, their official site would fill up the entire first page on Google…after 3 sponsored links at the top, of course. You’ve heard of the Nike’s, the Adidas’, and the Under Armour’s of the world, but today we’re going to hit on Fanatics as a company. What’s their history? How have they been able to dominate the sports merchandise industry? How are they evolving to become a new-age monopoly? And what does the future hold for this massive company?

What is Fanatics?

• Fanatics is an exclusive licensed retailer of merchandise for almost every major professional sports league in the US, including the MLB, NBA, NFL, NHL, MLS, NASCAR, and Formula 1.

• The CEO of Fanatics, Michael Rubin, purchased the company back in 2011 when he was then the CEO of GSI Commerce for ~$280 million.

• Since then, they have gone through multiple rounds of funding with a new $700 million round led by Clearlake Capital Group in late 2022, pushing its value to $31 billion — see Table 1 (cha-ching!).

• Within the last year, Fanatics has used that capital to boost their mergers and acquisitions activity throughout the platform. Below are a few of their recent moves (fair warning: these guys are busy 🤓):

  • In January 2022, they expanded into the collectables business with a $500 million purchase of Topps.

  • In February 2022, they purchased a 75% stake in clothing brand Mitchell & Ness for $250 million. The remaining 25% is apart of a celebrity ownership group including: Jay-Z, Lebron James, Kevin Durant, Kevin Hart, Joel Embiid, Meek Mill, Chris Paul, Scooter Braun, etc.

  • Later that summer, they agreed to a long-term partnership with Nike to manufacture NCAA fan apparel, which will include schools such as: Ohio State, Clemson, Georgia, Oregon, Penn State, etc.

  • In March 2023, they announced a 10-year agreement with the NHL, beginning in the 2024-25 season, to become the authentic outfitter of on-ice uniforms and supplier of authentic jerseys at retail.

  • In July 2023, they agreed to buy PointBet’s US assets for $225 million after originally offering $150 million after DraftKings tried to come in and crash the party. This deal gives Fanatics access to 15 states to operate betting and gaming.

What makes Fanatics so good at what they do?

• Long story short: they pride themselves as an e-commerce to apparel business (i.e. they pump out merchandise!)

  • For example: the Kansas City Chiefs won the Super Bowl a couple weeks ago, and the second Mecole Hardman caught the game winning touchdown in OT, Fanatics had Super Bowl Championship apparel ready to order and ship ASAP!

  • You could say they’re the Amazon Prime of sports apparel. And you wouldn’t be the first one to make that comparison 😉.

• Fanatics saw a gap in the market that was completely underutilized, and they deserve their flowers 💐. They realized the licensed sports merchandise industry was lagging as…

  • 1) Apparel companies were poorly positioned to meet the accompanying fan demand as teams, players, etc. gained popularity throughout a season.

  • 2) Leagues were doing more to reach fans directly in areas like ticketing and social media, but lagging when it came to selling goods.

• Even though Fanatics’ bread and butter comes from the e-commerce and apparel side, they continue to make moves to become a “one-stop shop” for all things sports — as seen from their recent acquisitions with collectibles, gaming, sports betting, etc. (and investors are really enjoying that…like a lot 🤑)

So how is Fanatics giving off those “monopoly” vibes?

• We know, we know. We threw out the M-word. Google would be so proud 😉. But seriously, Fanatics has done everything in it’s power to completely corner the licensing sports merchandise market — and in turn, it looks to do the same when it comes to sports trading cards.

  • Fanatics reportedly has a customer database upwards of 80 million consumers and $19 per customer acquisition cost (lower than ~$500 per customer for most gaming companies) — the company has also mentioned they have about 16 data attributes per customer (i.e. this gives Fanatics thousands of possibilities to understand each customer’s purchasing behavior).   

• Because of their extensive customer base as well as their long-term exclusive licenses with nearly every major U.S. professional sports league and their player associations, it’s no wonder why calling them a monopoly is not too farfetched.

  • Panini America (a collectible company and main competitor to Topps) alleged Fanatics created a monopoly within the trading card industry.

  • One of the main reasons, Fanatics is starting separate 10+ year licensee card deals with both the NFL and NBA in 2026 (they already agreed to a deal with the MLB in 2022). They are essentially cornering the market more so competition is even harder...and for a longer period of time 🫣.

What’s in store for the future of Fanatics?

• All the other stuff is fun, but gaming trumps all: Getting into gaming and sports betting is no joke. It’s exactly why Michael Rubin sold his 10% personal ownership stake in the parent company of the Philadelphia 76ers and New Jersey Devils in October 2022. But what sets Fanatics apart from other gaming companies is they can use their low cost in the e-commerce space to bring in new customers and then leverage sports betting while consumers are within Fanatics’ ecosystem. They’re clearly not first-movers in this industry, but it’ll be interesting to see where they stack up against the competition.

• Quality needs to be on display: It’s no secret Fanatics found a hole in the market when it comes to speedy sports apparel. But when speed is at the forefront, quality diminishes. When Fanatics took over the NHL uniform partner from Adidas, fans were pissed. Why? Because Fanatics has continued to show their customers that quality is not their #1 priority. When it comes to faded shirts, misspelled jerseys, and bad stitching, Fanatics has dropped the ball many, many times. The real question becomes will they change their ways now that they’re a uniform partner of a major sports league? We can only hope…

• Bring on the media: When we think about a one-stop shop for sports, what’re we missing? Oh yeah that’s right, the topic we talk about all the time, media rights and live sports! With Fanatics’ $31 billion valuation, they’re already worth more than each of Fox, Warner Bros. Discovery, and Paramount. With linear TV down in the dumps and their customer base growing by the day, who’s to say in the next 5-10 years they won’t partner with one of these media companies to show games that can be easily viewed on their platform.

• And how about ticketing, while we’re at it: It would essentially be the new-age King Kong vs. Godzilla. Fanatics vs. Ticketmaster. Because god knows, Ticketmaster needs some competition in their lives. Ticketmaster is valued at around $20 billion, which means Fanatics could stack up nicely if they wanted to fight for some market share. The problem: not overextending itself into too many businesses (but omg, Fanatics, this is one thing we’re rooting for you to get involved with!).

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Quick Hitters

• 📺 We went through the skinny sports bundle the other week. However, things now are getting a little spicier. FuboTV is suing ESPN, Fox, and Warner Bros. Discovery over their new streaming venture. They’re alleging the trio won’t let FuboTV carry a small bundle of channels that plan to be incorporated into the new service. We’ll see if this has any legs but, apparently, both the NFL and NBA were caught off guard when this joint venture was announced — maybe these leagues will end up joining the suit if they don’t like what they see?

• ⚾️ Washington Nationals ownership, Mark Lerner and his family, have officially decided they are no longer entertaining offers for the sale of all or part of their team. This is after they were kicking the tires on a potential sale in the beginning of 2022. The Nationals have a current estimated value of $2 billion, but decided to pull back after their potential buyer, David Rubenstein, went ahead and bought the Baltimore Orioles instead.

• 🤩 I don’t know why you would have watched, but if you missed it, the NBA All-Star Game was terrible. The East beat the West 211-186 and was filled with lackadaisical play, no defense, and no incentives for anyone. But don’t you worry! The game saw a 14% increase in viewership with 5.5 million viewers. Why you might ask? Well, the 2023 All-Star Game was only shown on two networks (TNT and TBS). This year, that number jumped to 4 networks as TruTV and Bleacher Report TV joined the party, which likely led to the spike in viewership. But don’t look at the numbers too hard, the game is still broken and unwatchable.

• 👙 Messi’s home has a sponsor! Inter Miami CF signed a two-year stadium naming rights deal with JPMorgan Chase for their current home in Fort Lauderdale, FL. The terms of the deal were not disclosed, however, Inter Miami’s Chief Business Officer said the club’s sponsorship revenue was $27 million last season and is expected to double in 2024. This will be Chase’s first stadium naming rights deal in professional soccer — they also have stadium naming rights with the Golden State Warriors and Arizona Diamondbacks.