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Volume 23 No. 28
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New Business Model of the Decade: Fanatics

Michael Rubin’s company is projecting sales of $3.2 billion in 2020.
Photo: getty images

The concept of sports licensing “verticality” — in which a single entity would control retailing and manufacturing while servicing wholesale and retail clients — was quietly discussed for decades. However, none of the largest rights holders, nor their biggest licensees, had the appetite to risk a new model.

Enter Michael Rubin, who brought sporting-goods acumen gained from years on the retail and wholesale sides of the business. He also brought capital and access to even more funding from having sold GSI Commerce to eBay for $2.4 billion in 2011. And he had the advantage of the steady rise of e-commerce and its impact on brick-and-mortar sporting goods stores.

Fanatics was disrupting a sleepy sports-licensing business. Rubin built Fanatics by purchasing GSI’s consumer-facing businesses back from eBay, building both a consumer e-commerce giant and a back-end business that quickly won the right to administer nearly every league’s e-commerce, along with teams eager to integrate online stakes with their traditional team retail.

Fanatics later added a memorabilia company, as well as competitors FansEdge and Kitbag, and built a business servicing venue sales. It added manufacturing through the acquisition of VF Group’s licensing business, including the Majestic brand.

50 million

Amount of licensed products Fanatics expects to sell in 2019.

In 2017 Fanatics was valued at $4.5 billion. In a market where under-capitalization was the norm, Fanatics’ scale and promise allowed it to attract funding and build scale that was unprecedented in sports licensing.

Fanatics’ influence across leagues and team ownership also grew exponentially. It signed long-term deals with the leagues, while attracting large investments from some of the very bodies granting it rights, including the NFL, NFLPA, MLB, MLS and the NHL.

Outside of the licensors which own the IP that are sports licensing’s crown jewels, Fanatics over the decade became the most prominent and influential company in sports licensing. It will sell more than 50 million pieces of licensed products this year. Projected sales for 2020 are $3.2 billion.

Questions remain about the long-term viability of the Fanatics model, if only because it’s unprecedented. Industry watchers also question whether Fanatics is a long-term play or a precursor to a flip. Rubin insists he’s in it for the long haul, and that even with 8,000 employees claims his company has the sensibilities of “a $3.2 billion startup.”

“Nothing about this hasn’t been harder than I thought,” he said, “but starting out, I knew that anyone competing in this business without a new model would be eviscerated — that hasn’t changed.”