The winds of change buffeted the recent Sports Licensing Show so forcefully that just months after the Chicago Cubs World Series title yielded record sales, the most basic questions about the structure and dynamics of the business were a paramount concern.
Several factors are redefining sports licensing as never before. Fanatics’ aggressive and ongoing aggregation of rights has allowed it to gain unprecedented power. There’s continued fallout, as e-commerce steals share from traditional retail. The growing popularity of e-commerce has sparked an intensifying battle between rights holders and their licensees, as leagues try to restrict distribution to specific e-commerce sites, especially those administered or controlled by Fanatics.
Add to those dynamics the continuing implosion of the traditional sporting-goods channel. Over the past year or so, sporting-goods retailers seeking bankruptcy protection, or disappearing entirely, included former powers The Sports Authority, Golfsmith, City Sports and Vestis Retail Group, parent of Eastern Mountain Sports, Bob’s Stores and Sports Chalet.
Across retail, competing with e-commerce has been a grim struggle. Macy’s and Sears have been shuttering hundreds of stores. “Pure play” apparel retailers, including The Limited, Aeropostale and Pacific Sunwear, all sought Chapter 11 protection and have closed hundreds of locations. Those remaining are left trying to determine the ideal “omnichannel” mix of online and offline sales.
“Changes at retail have produced an unrelenting pressure,” said Brian Jennings, longtime licensing chief at the NHL, which, along with the NBA, is changing uniform licensees this fall. “Brick-and-mortar retail is being redefined and so is the sports licensing business model.”
 |
It’s all fun and games for fans of the World Series champs, who have licensed pool tables (Imperial) and cornhole boards (Wild Sports) to choose from.
Photos by: TERRY LEFTON / STAFF
|
Compounding the pressures of the retail squeeze is Fanatics’ unprecedented efforts rolling up sports licensing rights, reminiscent of the Hunt brothers’ attempt to corner the silver market.
Fanatics’ impressive accumulation of team and league licensing rights over the past few years has transformed what was sports’ e-commerce provider of choice into an unrivaled licensing powerhouse. Fanatics’ long-term agreements now include the NBA, Major League Baseball and NHL replica jersey rights. Later this year, its new NFLPA rights will make Fanatics the biggest seller of NFL-player-identified merchandise.
Fanatics has long held rights to administer e-commerce for every major U.S. pro sports league, along with the PGA Tour, and more than 200 pro and college teams. Fanatics also operates brick-and-mortar event retail for many properties, including NASCAR and the Kentucky Derby, along with ISC’s motorsports tracks.
Add up all those rights and it means that Fanatics is now inarguably the most far-reaching force across domestic sports licensing, and possibly the most influential. That’s before it takes on non-apparel licensed goods. And at least within sports licensing circles, Fanatics is singularly advanced in mobile e-commerce.
“Fanatics is a game changer for all of us,” said Ross Auerbach, president and CEO at blanket and bedding specialist The Northwest Co., which recently signed a five-year exclusive deal with MLB, adding to a growing list of exclusive deals it has with other licensors, including the NFL, NHL and University of Texas.
Fanatics’ amalgamation of league and team rights has transformed the company from simply an e-commerce provider into a buyer, seller and manufacturer of licensed goods. Word at the show was that Fanatics was close to expanding its manufacturing capacity by acquiring VF’s Majestic licensed sports unit. (Neither Fanatics nor VF would comment.) Majestic is the brand Fanatics is replacing (along with Under Armour) as MLB’s lead apparel licensee in 2020, a three-year gap that would disappear if the acquisition is completed.
Even before that purported acquisition, Fanatics now competes with and sells to the same companies — and it has the added leverage of equity investments from MLB, along with the NFL and NHL, leagues with which it also has licensing rights.
With the full impact of those powerful changes still unknown, no one in Vegas was willing to bet on what form the $18.2 billion domestic sports licensing business will take when the show reconvenes next year.
“I’ve seen more change in this business over the past 30 months than there’s been in the past 30 years,” said Steven D’Angelo, a principal at cap and apparel licensee ’47 Brand. With expanded rights across all leagues, D’Angelo was nonetheless feeling bullish. “We’re projecting 25 percent growth for 2017,” he said, “but I don’t think many people on this floor are saying that.”
Added VF Licensed Sports Group President Mike Pardini, “There’s been enough change in the market that everyone is looking to adapt. But regardless of the (retail) channel, it’s still about the chase business, so that’s what we’re hanging our hat on.”
After the Cubs World Series bonanza, few licensees were complaining. For example, Rico Industries sold more than 100,000 Cubs championship “W” flags and supplied the one presented to President Obama during the team’s White House visit this month.
As for Fanatics’ industry impact? “It’s an unclear picture,” said Rico President Cary Schack. “As we move forward, I could see cases where we’re the manufacturer (for Fanatics) instead of the licensee.”
For an industry tightly bound by long-standing relationships, and accustomed to being tightly delineated by exacting contracts and royalty rates, the unknown is anathema. The biggest indefinite until now was determining which team was going to win an upcoming championship. Now, the future is murky.
“We’re witnessing an industry makeover in which the only certainty is that things will look a lot different, so hold on,” said WinCraft President and CEO John Killen, adding that the recent sales of large collegiate licensing agencies, like CLC to IMG, IMG to WME, Learfield to Atairos, and Fermata Partners to CAA, has also amplified licensing activity within the college sector to unprecedented levels.
Concomitant with Fanatics’ growing clout with the leagues it licenses from has been an increasing insistence on control over licensees’ internet distribution rights. Especially with MLB licensees, there’s a growing insistence that licensed products be sold online within Fanatics “Pure Play” licensed sports sites, which include MLB.com, Fanatics.com and Fansedge.com. Principally, Fanatics hopes to prevent licensees from selling on Amazon, the e-commerce king. It’s an exclusive as important to Fanatics as any, but one that has been difficult for it and the leagues to enforce.
“Brick-and-mortar is in a total free fall, so these changes in (internet) distribution with leagues, driven by Fanatics, have us all concerned,” said Gene Smith of UPI Marketing, noting that his company’s line of NFL-licensed fantasy products is selling 20 times better on Amazon than on Fanatics. “We shouldn’t get pigeonholed into selling on any one site.”
With sports licensing’s principal retail distribution points sluggish at best, as the online retail channel grows, the problem of online exclusivities will only get more nettlesome.
“It’s a tightrope walk for all of us,” said Northwest’s Auerbach, citing retail statistics that showed Amazon captured more than 36.9 percent of online holiday shopping during Nov. 1-Dec. 16. Best Buy was a distant second at 3.9 percent. “Amazon is a destination,” Auerbach said. “Fanatics has websites.”
“Internet Retailer” ranked Fanatics 38th in its most recent ranking of the top 500 e-commerce sites, making it the top e-commerce sports site but well behind large brick-and-mortar retailer sites such as Wal-Mart and Target.
 |
With the Cowboys, Steelers and Packers out, retailers see sales from the Patriots-Falcons Super Bowl coming in on the low side.
|
“Fanatics has built quite a business model, but it’s very controversial to those who aren’t Fanatics,” said Marty Brochstein, senior vice president of industry relations and information for the International Licensing Industry Merchandisers Association. “Only time will tell how that model plays out.”
> LICENSE TO SELL: New England-Atlanta was not the Super Bowl matchup licensees and retailers were hoping for. After the Dallas Cowboys’ early exit, the consensus was that the legacy teams — Pittsburgh and Green Bay — would have produced the most sales. Despite, or perhaps because of, their four championships in 15 years, the Patriots have not had a vibrant championship market for sales. “The Patriots have won too much, and Atlanta is a (licensing) market that has never really proved itself,” said Memory Co. owner Charles Sizemore, adding that an Oakland-Dallas Super Bowl would have been his top preference.
“If there’s a problem with any team that keeps winning,” said Pro Football Hall of Fame Chief Administrative Officer Steve Strawbridge, “it’s that their fan base often has enough in their closets already.”
> JUST IN TIME: Maybe you can go home again. Longtime sports watch licensee Adam Pennington has bought his Game Time brand back, nearly seven years after selling it to Geneva Watch Group. Artinian is the new timepiece company, under which Game Time will be a brand. Along with selling off existing inventory at the show, Pennington was showcasing a new line. It will hit retail in June, with 14 models, ranging from $15 kids digital timepieces to a smart watch with a $170 suggested retail price compatible with Android and Apple, which can be used for phone calls, email, etc. They’ll be available with every league’s IP except the NBA, which has a large sponsorship/licensing deal with Tissot.
> SALES MONSTER? At NASCAR, the hope is that the Cup series’ new title sponsorship with Monster Energy signed in December will help, er, energize sales of licensed products, particularly at distribution points where Monster is sold, like chain drug, grocery and convenience stores.
“This should help us reach a whole new demo,” said Paul Sparrow, NASCAR managing director of team properties, projecting that there will be 10 times more products with the new NASCAR series mark as last season. “Reaching a younger, more urban audience is a massive opportunity.”
At tracks, Monster will have a 20-by-20-foot section of licensed and co-branded products from the likes of Antigua, WinCraft and New Era. “The (new) series mark is almost like having a new driver,” Sparrow said. NASCAR also expects a boost from fan favorite Dale Earnhardt Jr.’s return. Junior missed half of last season due to concussions.
> BOYS IN BLUE: While no longer the rocket that it was in November and December, most licensees expect the Cubs sales surge to continue at least a bit longer. “Maybe into spring training, but then it’s done,” said Jay Wilcox, president of Boelter Brands, which sold more than 800,000 units of Cubs drinkware and holiday ornaments.
 |
Not enough snow in Green Bay? How about an inflatable (Boelter).
Photo by: TERRY LEFTON / STAFF
|
Interestingly enough, many said that if the Cowboys had made it to the Super Bowl for the first time in 21 years, those sales could have rivaled the Cubs.
“From what we were hearing from retailers, a Cowboys hot market might have been bigger than the Cubs,” said Wincraft’s Killen.
> SHOW-ING OFF: New products at the show catching our eye included Boelter’s 8-foot-tall inflatable snowman, which comes with a light inside and will be available in September with every league’s logos for $130. Licensed cornhole game king Wild Sports has added a battery-powered Bluetooth speaker and lights to its latest tailgate toss game. Suggested retail price is a substantial $350, but what price can you put on being able to play music or answer your phone while tossing a beanbag? … Winner of our ongoing “never saw a logo on that before” search was the InstaCrate collapsible storage box with the pro logo of your choice. Available in May for around $30 from Fabrique Innovations.
Terry Lefton can be reached at tlefton@sportsbusinessjournal.com.
