Fanatics Founder / Executive Chairman Michael Rubin attends the Fanatics Super Bowl Party at the College Football Hall of Fame on February 2, 2019 in Atlanta, Georgia.
Mike Coppola | Getty Images
Sports merchandising company Fanatics shocked the sports world last month after securing trading card rights to Major League Baseball, the National Football League and the National Basketball Association.
Most notably, Fanatics ‘deal with MLB ended a decade-long partnership with Topps and potentially ended Topps’ plans to enter into a SPAC with Mudrick Capital Acquisition Corp. II to go public. It also sent Topps owner and former Disney CEO Michael Eisner back to the drawing board to ponder the next step – if there is one. Panini, which has held the NFL trading card license since 2016 and the NBA license since 2009, will also lose the rights to Fanatics.
The series of deals underscores how Fanatics, under CEO Michael Rubin, plans to expand beyond sportswear into collectibles, sports betting and even broadcasting sports games. It has already attracted notable investors like Jay-Z to back its $ 18 billion private valuation ahead of an expected IPO.
Here you can find out how Fanatics landed the partnerships and what this means for the future of the company.
Fanatics add another piece to the puzzle
Rubin’s move ends historic sports partnerships that the NBA has already proven aren’t set in stone. Last May, the NBA dropped basketball maker Spalding, a partner for more than 30 years, and partnered with Wilson to make its basketballs. MLB took the next step when it joined in with trading card fanatics.
Sports leagues like Fanatics’ dig around its products, and the company is already affiliated with most leagues and teams to make soft and hard goods, including sports jerseys. The pandemic forced all leagues to review deals after significant losses in order to maximize profits. Fanatics also had to rethink their business as live sporting events were suspended at the start of the pandemic.
According to people familiar with Fanatics’ plans, the company considered expanding last summer to add more pillars to its operations. Fanatics already dominates vertical and e-commerce in sports, mostly with all of its MLB rights. But it also saw an opportunity in the trading card market.
Fanatics declined to comment on this story.
Topps trading cards are arranged for a photo in Richmond, Virginia.
Jay Paul | Bloomberg | Getty Images
The sports trading card business is expected to reach $ 98.7 billion by 2027, according to Verified Market Research. The sector was particularly active in 2021, with Babe Ruth’s classic baseball card setting a record. Even Luka Doncic’s rookie card set an auction record.
The introduction of trading cards is also in line with Fanatics’ plans to build its name in the NFT collector sector through Candy Digital. To secure the new deals, Fanatics provided the leagues and player unions with equity capital that is guaranteed to generate at least 1 billion US dollars in sales over the duration of the partnerships. Leagues have no equity in their current trading card company dealings.
Fanatics’ plan for the physical trading card space is to expand it by opening up the market to take greater advantage of it through direct offers to consumers, according to those familiar with the matter. For example, if collectors buy a trading card, they can insure, value, store and even offer the asset for sale or exchange on a marketplace – all through Fanatics. The company would likely charge transaction fees, and leagues will also get valuable data they crave.
Speculation on Wall Street suggests Fanatics will also try to buy one of the trading card companies. Panini is valued at $ 1.3 billion, according to PitchBook, and there are Upper Deck and Leaf Trading Cards companies from Texas.
Acquiring the competition would be akin to a takeover Fanatics completed in 2017 when they bought the licensed sports group from VF Corp for around $ 225 million. That deal included the Majestic Athletic brand and came right after Fanatics took over the MLB apparel rights from Majestic.
Robert Kraft, Jay-Z and Mike Rubin attend Michael Rubin’s Fanatics Super Bowl Party at the Loews Miami Beach Hotel on February 01, 2020 in Miami Beach, Florida.
Kevin Mazur | Getty Images
Still business on the table
Fanatics would also like to be present in the U.S. online gaming space through sports betting, valued at an estimated $ 40 billion, sources said.
The company made headlines after plans emerged to enter the New York sports betting market. Fanatics feels it can bring its 80 million user base tied to its sports merchandising company to a sports betting offering. If it works, Fanatics can lure Sportwetter to its platform and combine offers from its merchandise catalog as a reward for customer loyalty.
But fanatics have to buy an established sportsbook to enter the room.
Industry talks connected Fanatics and online casino operator Rush Street Interactive, which operates sports betting through its SugarHouse property. However, sources said CNBC Fanatics was not interested in the acquisition. Rush Street trades on the New York Stock Exchange under the ticker symbol RSI and has a market capitalization of $ 2.6 billion. Rush Street declined to comment.
It’s unclear who Fanatics is targeting, but it will have to show its hand on that front at some point as sports betting laws require.
Rubin’s company has made no secret of being a global powerhouse with various offers in the digital world. Fanatics wants to participate in sports media rights, games of chance, revised ticket models, memorabilia, NFTs and now also trading cards.
And while business goes on, an IPO awaits.
In sports betting circles it is not a question of whether but when fanatics will go public. Fanatics achieved its $ 18 billion valuation after raising additional funding. It also launches a China operation with investment entertainer Jay-Z. MLB and NFL were already partners, and SoftBank gave Fanatics money from its $ 93 billion Vision Fund.
Barrett Daniels, a partner at global accounting firm Deloitte, said companies similar to Fanatics’ positioning that close big deals typically go public sooner rather than later.
Daniels, who serves as Deloitte’s national IPO co-leader and heads the western region of SPAC, said companies mimicking Fanatics status are choosing to go public to “reward and share in that success” That’s a big driver and an important “piece of the puzzle.” And there are some companies that feel they are the dominant player in their field; they have to be public. “
Though an IPO might be involved, Daniels added that staying private is no longer as taboo as it used to be.
“You used to go public when you hit about a billion dollars, but these days there doesn’t seem to be a limit,” Daniels said. “Companies keep getting bigger in the private market and staying private. And there is still a lot of money in the private markets.”