Fanatics takes a shot
Fanatics, the sports licensing industry’s 800-pound gorilla, has signed a deal granting it wide-ranging merchandising rights for Activision Blizzard’s Overwatch League, the second-largest global esports property.
Under the deal, Fanatics becomes master licensee and worldwide retailer for the esports league, which caught the sports business world’s attention during its launch season with several big-dollar sponsorships and a major rights deal with Twitch. The second season will start Feb. 14 with 20 teams, including eight expansion franchises.
Fanatics’ move into competitive gaming will be closely watched by the nascent esports industry, which has long eyed apparel as a tantalizing but challenging revenue stream. Fanatics’ infrastructure is crucial to a league that’s still less than two years old but is already operating on three continents.
“What they really do is allow us to scale this on a global basis quite quickly, to get fan gear to all our teams around the world,” said Brandon Snow, chief revenue officer of Activision Blizzard Esports Leagues.
Fanatics’ rights include manufacturing and distribution across wholesale and retail for e-commerce and brick-and-mortar locations. Notably, it excludes South Korea and China, the most developed esports markets that are home to five OWL teams, though Fanatics could acquire those rights in a later deal.
“To be clear, they’re manufacturing products that can be anywhere in the world, but if you go to those markets you just may have to import them,” Snow said.
So far, OWL and team sales have been largely through e-commerce. Previously, licensing and merchandising was handled in-house by Activision Blizzard.
A Fanatics-run dedicated site, shop.overwatchleague.com, is slated to be operating by mid-January, with around 20 SKUs for each of the league’s teams, a number that’s expected to double before the end of the season next summer. Overwatch League merchandise also will be available on Fanatics.com early next year.
There’s a whole bunch of money to lose in merchandise if you don’t know what you’re doing or if you don’t do it right. And this prevents that to a great, great degree.
The Overwatch League adds to the lengthy list of sports properties for which Fanatics has comprehensive and long-term merchandising and e-commerce rights, including all four major U.S. stick-and-ball leagues; more than 150 colleges, universities and collegiate conferences; and dozens of pro teams. Financial terms and the exact duration of the multiyear deal are not known, but it includes an option for both sides to re-evaluate the relationship, Snow said.
“We’re looking to use everything we’ve learned and built across [traditional] sports into every area of merchandising for them,” said Ross Tannenbaum, Fanatics head of special projects, who spearheaded the deal.
Activision Blizzard issued an RFP for the deal earlier this year. It’s not known who else responded, but interest quickly coalesced around Fanatics.
Venue rights included in the deal will see Fanatics handling merch sales at the Blizzard Arena in Burbank, Calif., at the league’s all-star game and grand finals.
Intellectual property in the deal includes team and player rights. Accordingly, Tannenbaum sees a parallel to traditional sports, where name-and-number jerseys are a top-selling item.
Fanatics expects to increase the number of fanwear SKUs and eventually fill in with lifestyle products and collectibles. Licensing rights for gaming peripherals were retained by Activision Blizzard.
“We believe we can grow the product categories they are in by tenfold, and the worldwide launch of this should allow us to grow retail sales by five or six times what it was in their first year,” Tannenbaum said.
For a concept still trying to break into the mainstream, Snow said, the branding and legitimacy offered by a mass merchandise operation is nearly as important as revenue.
“We’re very bullish on [sales projections],” he said. “But second is marketing. Obviously we want people walking around in Overwatch League jerseys.”
There are some carve-outs in the lifestyle category for teams that want to sign other licensees to make products with local appeal, but OWL will “certainly work with Fanatics to help identify them,” Snow said. Two team executives said they were waiting for further explanation on the exact terms of those exceptions.
Some teams have already moved in this area — New York Excelsior, the club owned by the Wilpon family’s Sterling.VC, has run pop-up stores with gear from Undefeated and Nike.
“We just wanted to make sure we could retain enough flexibility that we’re able to deliver against the country or local market needs effectively,” Snow said.
Kevin Chou, chair and co-owner of Gen.G Esports, the owners of the Seoul Dynasty OWL franchise, acknowledged the teams are giving up some freedom in the leaguewide rights deal. But left to their own devices, teams would be much slower to develop a merchandise business, he said.
“I don’t know if anyone knows how this will compare to the economics that a team can get,” Chou said, “but I’m really excited about trying something new, and being able to compare to what else is happening in the industry.”
For the Dallas Fuel, the team owned by Team Envy, the Fanatics-OWL deal takes a major operational challenge off its plate, said Mark Coughlin, a director and head of marketing and revenue.
“There’s a whole bunch of money to lose in merchandise if you don’t know what you’re doing or if you don’t do it right,” Coughlin said. “And this prevents that to a great, great degree.”
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