© Nikki Richter for The Wall Street Journal
Fanatics Inc. Late to the sports betting game. His managing director says he has a strong hand.
On Monday, the sporting goods company plans to launch its first gaming program in Tennessee and Ohio, years after others entered the growing market.
The competition is tough. FanDuel Group, DraftKings Inc. And BetMGM owns approximately 85% of the US sports betting market.
When it comes to sports betting, fans admit it’s lagging behind, but say its database of 95 million existing customers worldwide is a big plus. The company connects players to a rewards program for merchandise, autograph sets, and discounts on athletes and games.
The sportsbook expansion explores executive Michael Rubin’s all-sports merchandise vision, including sports team gear, autographed memorabilia and business cards.
“No other company has thought about giving hundreds of millions of sports fans a place to do what they want digitally for so long,” Rubin said. “Buy items, buy and trade collectibles, play sports. Watch live sports over time, buy tickets from us.”
Private equity firm Fanatics has announced plans to invest $1 billion in its new sports betting division. Initially, only Fanatics customers will have access to the game software. The goal is to add sportsbooks in Massachusetts and Maryland by June and operate in 12 states each season. Football is open to the general public. The company announced that international projects will also be implemented.
Mr. Rubin said he wants Fanatics to be the best sports betting company in the world within 10 years. He expects the betting segment to become profitable by 2025 or 2026.
Mr. Rubin, who grew up in the Philadelphia area, started as an entrepreneur selling garden seeds at age 8, then branched out into furniture and snow removal businesses. At age 12, he started a skating business in his parents’ basement, which eventually became a skate equipment store. After his first semester, he left Villanova University and transferred to other institutions to focus on his business.
In the year In 2011, Mr. Rubin sold GSI, an e-commerce company, to eBay Inc. for $2.4 billion, earning $150 million from the deal. eBay has acquired GSI’s three consumer stores. One of those companies was Fanatics.
Mr. Rubin, now 50, has a big presence in the sports world and posts on social media about hanging out with athletes and celebrities. Fanatics will spend $31 billion in 2021, up from $18 billion in 2021, the spokesperson said. This year, the company is expected to fulfill 62 million direct-to-consumer orders.
With Sportsbook, Fanatics wants to offer a gambling app that feels more like Spotify and less like a Vegas sportsbook. According to executives, the app offers bets based on customers’ favorite teams and betting preferences, similar to offers based on the music streaming app’s listening history.
Customers receive up to 5% of their bets in the form of prize dollars, which the company calls FanCash. Rewards can be used to purchase Fanatic products or access games or athletic dating experiences.
Leveraging an existing user base to build an online sports betting business is nothing new. According to JMP Securities gaming analyst Jordan Bender, casino companies that offer online betting have their own customer pools and offer rewards such as free nights at a casino hotel.
However, not every customer who buys a T-shirt or hat from the company wants to play with Fanatics, Bender said. “What is your exact general addressable market in this database?” he said.
In sports betting and entertainment MTV, food delivery app DoorDash Inc. Fanatic’s betting and gaming division operates world leaders and has integrated the bike stock company with consumer brands such as Lemon.
The group was led by former Fanduel CEO Matt King during the early years of fierce competition for market share.
Mr King said other sports punters saw casual and shy punters as useless customers. But Fanatics is building a business model where every user can make a profit without having to spend a lot of money to get customers in the first place, he said.
Over the past five years, new states have poured billions from major gaming companies in the race to open up online sports betting. It is legal in 27 states and the District of Columbia.
Rubin said the company will offer bets to customers in states where Fanatics operates sportsbooks. The company said it will target customers who are or will be sports experts.
“We don’t want to give away something that nobody wants,” Rubin said.
Extremists have already cornered the market. Fanatics bought Topps trading card company for $500 million last year after securing the exclusive trading card deal for professional baseball.
Last year, Mr. Rubin sold his stake in the company that owns the Philadelphia 76ers of the National Basketball Association and the New Jersey Devils of the National Hockey League. He cited a potential conflict of interest with the Fanatics trading card business and sports betting business, which has contracts with thousands of athletes.
In January, Fanatics launched its first retail sports betting site at FedExField, the NFL stadium in Maryland, home of the Washington Chiefs.
In many ways, the Fanatics brand and Mr. Ruby’s extravagant lifestyle are marketing opportunities in the betting world.
The company says it has studied what VIP contestants with big bucks are looking for in rewards. The first option was to attend the Fanatics’ annual Super Bowl party, which is often reported on social media and includes stars and performances from this year’s rapper, Meek Mill.
“There’s not a high-quality player who doesn’t want to be at this party,” Rubin said.
Email Catherine Sayer at [email protected]
