“The Most Rewarding Sportsbook”: Analyzing Fanatics Inc.’s Diversification into the Sports Betting Industry

This report was written for MBA 700: Strategic Management in a Global Business Environment, the capstone of Providence College's MBA program. A PDF version of this report is viewable here.

Executive Summary

Fanatics Sportsbook is an online sports betting platform owned and operated by American e-commerce company Fanatics Inc. This report intends to analyze and critique Fanatics’ recent venture. Fanatics’ history, main selling points, and sportsbook are briefly introduced and discussed. Subsequently, the paper provides possible reasons for Fanatics Sportsbook’s creation, specifically the success of the online sports betting industry and the unique incentives Fanatics offers. Potential outcomes, including an increased consumer base and a struggle to keep up with competitors, are analyzed in-depth. The report concludes with the author’s thoughts on Fanatics Sportsbook and recommendations to make sure the sportsbook is viable long-term.

Introduction

Fanatics Inc. is an American e-commerce company that specializes in sports apparel and memorabilia. Acquired by current CEO Michael Rubin (who gained e-commerce experience through ownership of a previous site, GSI Commerce) in 2011, Fanatics has grown into a behemoth in the sports merchandise space (Fanatics Inc., n.d.). Holding licensing agreements with countless sports leagues and teams, Fanatics sells branded merchandise like jerseys, t-shirts, hats, and collectibles. It also manufactures the on-field uniforms for Major League Baseball (M.L.B.) and the National Hockey League (N.H.L.) (Axson, 2024; Wyshynski, 2023). As of December 2022, Fanatics has an overall valuation of $31 billion (Fanatics Inc, 2022).

In August 2023, subsidiary Fanatics Betting and Gaming (F.B.G.) announced the release of Fanatics Sportsbook, marketed as “the most rewarding sportsbook” (Fanatics Inc, 2023). Like its many competitors, the platform allows users to legally wager on sporting events. When logging into the mobile app or desktop website, users are met with a list of sports leagues, a search bar to look up “teams, players, and events,” and a list of featured events (Exhibit 1). According to F.B.G.’s FanCash Terms (Fanatics Sportsbook, 2023), as much as 5% of user-placed wagers are converted to FanCash, Fanatics’ cash back rewards currency, which can be used on additional wagers (known as “bonus bets”) or purchases on Fanatics’ e-commerce site.

Exhibit 1: Screenshot of Fanatics Sportsbook mobile homepage, June 25, 2024

Analysis

Part I: Strategic Rationale

Given its focus on sports, Fanatics likely responded to the profits made by gambling companies in the wake of the Murphy v. National Collegiate Athletic Association Supreme Court case. In 2018, the court struck down the Professional and Amateur Sports Protection Act of 1992, which prevented states from legalizing sports betting (Murphy v. National Collegiate Athletic Assn., 2018). Since then, 38 states (plus Washington D.C. and Puerto Rico) have passed legislation allowing legal sports betting to take place (Waters, 2024). In 2023, $119.84 billion was wagered legally on sports (Reynolds, 2024). Fanatics, despite not launching a sportsbook right after the Murphy decision, likely monitored the situation closely and decided that the revenue opportunity was too lucrative to ignore.

Given the company’s experience in e-commerce, a venture into sports betting does not seem to align with Fanatics’ business. Yet Fanatics offers a unique incentive that its competitors cannot: FanCash. Whereas many sportsbooks merely offer users bonus bets, Fanatics Sportsbook’s users have the option to purchase merchandise on Fanatics with FanCash accumulated through the sportsbook (Fanatics Sportsbook, 2023). This benefit sets Fanatics apart from its competitors; users who value discounts on Fanatics may be incentivized to use Fanatics Sportsbook.

Exhibit 2: S.W.O.T. analysis of Fanatics Sportsbook

STRENGTHS	OPPORTUNITIES
·         Existing intellectual property and partnerships ·         FanCash rewards ·         Applicable experience in e-commerce ·         Strong company valuation	·         Expansion as states legalize sports betting ·         Partnerships with leagues and teams ·         Option to wager on emerging sports ·         Acquisition of competitors
WEAKNESSES	THREATS
·         No previous sportsbook experience ·         Expenses from new investment ·         Late arrival to market ·         Risk of diverting resources from e-commerce	·         Oversaturated market ·         Public perception of sports betting ·         Government regulation ·         Problem gambling

Part II: Potential Outcomes

Positive Outcomes

• Value proposition lures and retains new users – Because of FanCash, Fanatics Sportsbook can position itself differently than competing sportsbooks. Consumers, regardless of whether or not they’ve used a sportsbook before, may be intrigued by Fanatics Sportsbook’s overall value and create an account. Should users find its benefits worthwhile, they will be inclined to continue using the sportsbook.

• Word-of-mouth and sponsorship opportunities increase awareness of Fanatics’ brand – Fans of professional and collegiate teams likely know of Fanatics, and Fanatics Sportsbook should increase consumers’ knowledge of the company. Moreover, teams and leagues have partnered with gambling companies since Murphy, providing valuable revenue and exposure for both sides. F.B.G. can leverage these opportunities to continue increasing awareness of Fanatics Sportsbook. As a result, Fanatics can increase its bottom line through increased sportsbook and e-commerce spending.

Negative Outcomes

• Fanatics cannot compete in an oversaturated market – Numerous companies have experienced a gold rush since the Murphy decision, resulting in a crowded market. While established companies have commanding market shares, most notably FanDuel (39.3%) and DraftKings (34.1%) (Fisher, 2023), not all sportsbooks have been as successful. In fact, companies like FuboTV, Wynn Resorts, and Fox Sports launched and later shut down sportsbooks because they could not compete with industry behemoths (Dixon, 2023). If F.B.G. fails to grow its market share and attract enough consumers to keep the sportsbook profitable, the diversification’s long-term viability will be questioned by stakeholders.

• Fanatics’ reputation declines – Despite its success, Fanatics is not beloved by all consumers. Fans regularly criticize the company for poor product quality, and Fanatics recently made headlines when M.L.B. fans and players panned the league’s redesigned uniforms, which are manufactured by Fanatics (but designed by Nike) (Axson, 2024). Moreover, sports betting is not universally beloved; many consumers see it as addictive and exploitive. Some individuals may view Fanatics as a sellout for this diversification, and a poorly-designed betting app could hamper the company’s reputation even more.
  

Conclusion

To this writer, F.B.G. has a better chance of long-term success than not. Fanatics is already well-known in the sports industry, and its existing intellectual property should increase fans’ willingness to try Fanatics Sportsbook. Additionally, FanCash is a critical incentive that other sportsbooks do not offer; since there is more to F.B.G.’s rewards program than bonus bets, it should fare better than startups which lack differentiation points. Despite these advantages, F.B.G. must contend with a market swamped with competitors, so the most pressing challenge will be maintaining and expanding its market share.

Recommendations

This writer recommends a three-step process to maintain F.B.G.’s competitive edge:

1. Emphasize the “Fanatics” in Fanatics Sportsbook – A major reason why users sign up for Fanatics Sportsbook is knowledge of the Fanatics brand. As a result, F.B.G. should leverage its parent company’s name as much as possible. Continuous use of the Fanatics logo in commercials and sponsorships will further ingrain the sportsbook (and Fanatics as a whole) in consumers’ minds. Furthermore, Fanatics should lure users with enticing FanCash benefits, such as a recent promotion where new users could earn $150 in FanCash after placing a $50 bet (Eaton, 2023).

2. Give Fanatics Betting & Gambling space from Fanatics retail – While it is important for the e-commerce site and sportsbook to coexist, the latter should be led by people who have experience in the gaming industry. Although this venture is new for Fanatics, leadership from the e-commerce side should place full trust in F.B.G. and give the members of the gaming team space to do their jobs. F.B.G. employees should not feel like they are being micromanaged, as this could hinder the sportsbook’s growth.

3. Increase Fanatics Sportsbook’s edge through investments and acquisitions – Advanced technology has outsized influence in online sports betting. Artificial intelligence can be used to set odds, prevent match fixing, and tailor user experiences (Sahota, 2024). Fanatics must be willing to invest in its infrastructure to keep pace with the rest of the industry. Furthermore, Fanatics can acquire the assets of struggling sportsbooks to increase its user base and improve its technology.

References

Axson, S. (2024, March 2). CEO says Fanatics is ‘getting the (expletive) kicked out of us’ in MLB jersey controversy. USA Today. https://www.usatoday.com/story/sports/mlb/2024/03/02/fanatics-michael-rubin-says-company-unfairly-blamed-for-hated-mlb-uniforms/72818846007/

Dixon, E. (2023, September 21). ‘We can’t think of anything that’s moved this quickly’: What’s the state of the US sports betting market in 2023? SportsPro. https://www.sportspromedia.com/insights/analysis/us-sports-betting-market-2023-legal-states-revenue-handle-aga-fanduel-draftkings-nfl/

Eaton, S. (2023, September 16). Fanatics Sportsbook Promo Code: Get a Free Jersey from Fanatics. OddsChecker. Retrieved June 28, 2024 from https://www.oddschecker.com/us/insight/football/nfl/20230916-fanatics-sportsbook-promo-code-get-a-free-jersey-from-fanatics

Fanatics Debuts The Most Rewarding Sportsbook. (2023, August 16). Fanatics Inc. https://www.fanaticsinc.com/press-releases/fanatics-debuts-the-most-rewarding-sportsbook

FBG’s FanCash Program Terms. (2023, December 15). Fanatics Sportsbook. Retrieved June 28, 2024 from https://sportsbook.fanatics.com/legal/tn/fancash-program-terms/

Fisher, E. (2023, October 22). DraftKings Takes Market Share Lead In U.S. Online Gambling. Front Office Sports. https://frontofficesports.com/draftkings-takes-market-share-lead-in-u-s-online-gambling/

History. (n.d.). Fanatics Inc. Retrieved June 28, 2024, from https://www.fanaticsinc.com/history

Murphy v. National Collegiate Athletic Assn., 584 U. S. 30-31 (2018). https://www.supremecourt.gov/opinions/17pdf/16-476_dbfi.pdf

Reynolds, M. (2024, February 21). American Gaming Association: Legal sports betting hits record revenue in 2023. S&P Global. https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/american-gaming-association-legal-sports-betting-hits-record-revenue-in-2023-80522087

Sahota, N. (2024, February 11). The Game Changer: How AI Is Transforming The World Of Sports Gambling. Forbes. https://www.forbes.com/sites/neilsahota/2024/02/11/the-game-changer-how-ai-is-transforming-the-world-of-sports-gambling/

THE WALL STREET JOURNAL: Fanatics Hits $31 Billion Valuation in Latest Funding Round. (2022, December 6). Fanatics Inc. https://www.fanaticsinc.com/news/the-wall-street-journal-fanatics-hits-31-billion-valuation-in-latest-funding-round

Waters, M. (2024, June 14). Legislative Tracker: Sports Betting. Legal Sports Report. Retrieved June 28, 2024 from https://www.legalsportsreport.com/sportsbetting-bill-tracker/

Wyshynski, G. (2023, March 21). Everything you need to know about the NHL-Fanatics jersey deal. ESPN. https://www.espn.com/nhl/story/_/id/35906901/everything-need-know-nhl-fanatics-jersey-deal