SBD/June 16, 2015/Marketing and Sponsorship

Fanatics Signs Unprecedented 17-Year Deal To Run MLB's Online Licensed-Product Business

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Fanatics under this agreement will buy and own inventory for MLB sites
MLB has signed a massive deal with Fanatics under which the sports retail specialist will run all facets of the league's licensed-product e-commerce business through the '33 season. The unprecedented 17-year-deal, which starts next season, expands and extends an existing relationship under which Fanatics has been doing order fulfillment for the e-stores on MLB.com and its team sites. Sources said that there are targets and renewal options along the way to the maximum 17-year-terms. Fanatics and MLB have been business partners since '03. Under the new agreement, Fanatics will buy and own inventory for MLB sites and perform merchandising and marketing under the aegis of MLB. Industry reaction was centered on the unprecedented length of the deal, which is “longer than any MLB deal, except for maybe some office leases," said a source. Another source said, “None of us know what the Internet will be like in five years, much less 17. But clearly an agreement of this size and length is something Fanatics can take to the bank and leverage." Fanatics Exec VP/Business Affairs Gary Gertzog and MLB Exec VP/Commerce & Sponsorship Noah Garden were said to be the principal architects of the deal. Garden said the deal with Fanatics had been discussed conceptually for years, but really began to take shape over the last six months. Garden: "Collectively, we’ll service fans with a broader assortment across all of our access points and do so with a company we consider to be world-class." As of presstime, Fanatics declined comment on the deal.

NEW PATH: Across sports licensing, properties have been looking for new models, seeking to grow in a business starved for better margins. New "vertical" models are being explored, where a licensor would assume or share some of the risks -- and potentially enjoy the upside -- associated with manufacturing and warehousing licensed sports products. A source said the MLB-Fanatics deal has a "vertical component" involving apparel rights, but would not offer details. Sources said that Fanatics, which also operates e-commerce for the NFL, NBA, NHL, NASCAR, PGA Tour and hundreds of team sites, has been pitching deals of a similar size, scope and length to nearly every large league this year. However, this is the first one to be consummated. What will effectively be an outsourcing of some of MLB's licensing department comes as part of the new regime under MLB President of Business & Media Bob Bowman, and also comes after the dismissal in February of MLB Senior VP/Licensing Howard Smith, who headed league licensing for 17 years.
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