The June finalisation of Fanatics’ $475m acquisition of PointsBet’s sportsbook represented both a new beginning and the end of a tough fight for the online sports retail titan. (More on the exact valuation later). Fanatics had long sought to expand into the iGaming world, having performed market research and applied for a New York sports betting licence after the Empire State legalised online sports betting in the spring of 2021.
But when rebuffed by regulators in New York for one of the highly coveted initial sports betting licences, Fanatics pivoted and flexed its financial muscle. Fanatics has long been determined to enter the competitive – and still blossoming – US iGaming landscape as an operator. Landing PointsBet’s assets – $225m for the company, plus $250m to buy out its existing NBC Sports marketing deal – cost a mere drop in the bucket of Fanatics’ circa $31bn market capitalisation.
This coup may also have provided a blueprint – not an easy plan, but a plausible path – for disrupting a market of well-established brick-and-mortar gaming houses, and new-wave online gaming leaders to capture a sizable share of the legal betting market.
“Fanatics’ entry into the iGaming space will offer a compelling case study,” said Steve Carey, the COO and Co-Founder of The Game Day. “Both of how effectively such a highly established brand can sidestep traditional scaling inefficiencies, but also the means by which a disrupter brand with no historic iGaming credentials can continue to build meaningful traction among an informed audience.”
Fighting for a foundation
Fanatics CEO Michael Rubin’s endeavour remains one of the most recognisable company names among sports fans. Fanatics produces officially licensed team apparel and has partnerships with more than 900 athletic properties, per their website, and manages the team stores for the NFL, MLB, NBA, NHL, MLS and many others.
It felt a rare test, though, when DraftKings – a powerhouse in its own right – submitted a $195m bid for PointsBet at the reported ‘11th hour’ of the process. That late-stage move nearly shut Fanatics out of its quest to find its foundational product and built-in user base. DraftKings could’ve operated PointsBet, and its signature style of high-stakes ‘PointsBetting’ wagering, as aunique brand and alternative to the fixed-odds wagering and daily fantasy sports.
But instead of waiting even longer for licences to open, and for the bureaucratic process of assessing its application, Fanatics skipped the line. It went above and beyond to absorb the Australia-based sportsbook and its valuable licences in more than a dozen states. Plus, by acquiring PointsBet USA, Fanatics also squashed competition. PointsBet carries a modest 3.7% control of the US market share, according to the Australian Financial Review. But that share is large enough to siphon some profits away from the generally accepted ‘big four’: FanDuel, DraftKings, BetMGM and Caesars.
Wearing another hat
Some sportsbooks and online media companies have built brand awareness with unlicensed merchandise. Barstool Sportsbook, an online media brand who also dove into the gambling space with a fervent fan base and plenty of attitude, was perhaps the most prominent in the media, gambling and clothing space (before becoming ESPN Bet).
But Fanatics could easily start producing licensed versions of kitschy sports wears or even produce betting-related swag to sell online. Or it could offer FanCash or league-store credit to lure new subscribers, like how Caesars offered a free NBA Store or NFL Shop credit for new signups in 2021, to further differentiate itself.
With Fanatics in the game, don’t be surprised if an arms race ensues and creates further consolidation in the sports bettingspace. Caesars actually skipped the line as well with its purchase of William Hill US, which closed in August 2021. DraftKings and FanDuel likely will seek further properties to bring aboard; FanDuel already has with its rebrand of horseracing simulcastTVG in 2022.
Despite the fact online sports betting is a fledgling industry, and dozens of new states still have to either legalise or roll out thepractice, there have already been signs of fall-off in sportsbook competition. Flutter Entertainment and Fox announced the shuttering of their sportsbook, Fox Bet, on July 30 and that followed the 2022 closing of TwinSpires, a sportsbook founded byChurchill Downs which chose to focus on horse racing instead.
With Fanatics in the game, don’t be surprised if an arms race ensues and creates further consolidation in the sports betting space
When to pivot to stand out in iGaming
Objectively, few companies can take such a grandiose path at the moment, but the nearly 20-year-old Fanatics has built up long-term credibility and profitability through partnerships. Sports betting and affiliate companies of any size should recognise the need to differentiate themselves from the competition to thrive or survive in a rapidly expanding universe that may often seem redundant.
Product
Some entities have tried to build their product around high-priced influencers and notable media members who can attract sports fans and bettors to their sites and/or TV products. However, those moves often tend to enrich the individuals but don’t necessarily positively affect the payer’s bottom line. Bettors want to wager on a site they enjoy rather than Drew Brees’ “favourite.”
This need for pivoting also applies to product: Introducing new promotions and wager types like micro and live betting have been some of the most notable changes to the landscape of ways for customers to wager. It’s how FanDuel became the No. 1 sportsbook in America, in part through its creation of same-game parlays in 2018, which have since become the industry standard.
PointsBet was onto something with its PointsBetting system. Since the landscape is full of fixed-odds betting, empowering players to potentially earn more – with the caution of higher risk – when their preferred wager hits big adds a unique wrinkle to the sports-betting experience.
Yet, PointsBetting raises the concern of problem gambling since users may be required to lay out more than their initial stake if their wager is drastically wrong. The experience, which has been referred by experienced sports bettors as a “wild ride,” maybe too much for novices who may want to add some juice to an individual game without putting up their whole paycheck.
PointsBet does also offer fixed-odds betting, but it did not break out enough against competition. Thus, PointsBet’s decision-makers ultimately did not feel it could survive in the budding landscape, especially since its marketing efforts, which included former pro athletes like Shaquille O’Neal and Allen Iverson, proved too costly to sustain.
Community & Personalities
Another facet of the betting world that must rely on zagging when others zig is using unique voices or talents to connect with potential wagerers. Many sports fans have set their media-consumption habits, but those who soon will become legal bettorsnationwide will reshape how sports information is consumed.
At The Game Day, we have found success in promoting young, up-and-coming, in-house voices who know what modern sports fans and prospective bettors need. By having that talent produce podcasts and shortform video posted on social-media platforms fans are engaged with, we can grow a brand and have sustainable success even in the broad sphere of sports-betting affiliate sites and online sports media.
Similarly, Fanatics has a seamless way to fold under-21 audiences into its betting property. There should be a natural funnel from teenagers who previously purchased a hat or jersey from Fanatics to sign up for a sports-betting account on or around their 21st birthday.
The Future
It’s a unique time to be affiliated with sports. We’re watching leagues transition further away from ticket sales and from linear TVto online media. Sports gambling has been standing at the forefront of this revolution – and it’s only a matter of time until online sports betting is legal in all 50 states.
Fanatics couldn’t wait any longer to get into the online betting game. The enormous merch operation is making its own wagerthat its partnerships with sports leagues, retail reach and household name recognition are enough to drive new signups andloyal, devoted players to a sportsbook that may or may not have its name on it.
It’s also why the future of sports media, and sports writ large, is so hard to predict. But Fanatics boasts the economic foundation, industry cache and potential for consumer domination that will keep them in the discussion for the long haul. Beyond the monetary advantage that cannot be built instantly, entrepreneurs and companies of any size and experience should note Fanatics’ forward-thinking plans. Indeed, it serves as inspiration to position one’s self more strongly for success in the surging and ever-changing iGaming universe.
