The Newest Sports Betting Business

Huddle Up is a daily newsletter that breaks down the business and money behind sports. If you would like to join more than 46,000 other professional athletes, executives, and casual fans that receive it directly in their inbox each morning, subscribe now.

Hey friends,

Online sports-merchandise retailer Fanatics is expanding aggressively.

After raising $325 million from a diverse group of investors last week, including Jay-Z, Major League Baseball, SoftBank’s Vision Fund, and private equity giant Silver Lake, the 25-year old company run by Michael Rubin is now valued at $18 billion — up from $4.5 billion a year ago.

Now, they have their sights set on an even bigger prize — sports betting.

Fanatics reportedly plans to use the $325 million they raised last week to expand into other verticals — sports betting, media, NFTs, etc. — with Jay-Z (legal name Shawn Carter) set to join the board of Fanatics Betting and Gaming as Vice Chairman.

The new entity housed within Fanatics has already applied for a gaming license in New York, and the NY Gaming Commission is set to approve at least two of the six groups that have applied by December.

Rubin has also hired former FanDuel CEO Matt King, to explore and potentially run new business ventures within sports betting, iGaming, and media.

We could talk about the politics behind gaming licenses or the technology powering each of these sportsbooks on the backend, but truthfully, this seems like a no-brainer for Fanatics.

They already do $3.5 billion in annual revenue through exclusive merchandise licensing deals with essentially every major professional sports league, including the NFL, NBA, MLB, NHL, MLS, Premier League, and hundreds of universities across the country.

That merchandise business is important for several reasons. Obviously, $3.5 billion in annual revenue is massive, but that’s not what drives the $18 billion valuation and attracts legendary investors like SoftBank’s Masa Son. The potential to become the biggest sports commerce platform in the world is.

In addition to making the NFL and MLB hundreds of millions of dollars as equity investors in their business, Fanatics has built up one of the largest customer databases in sports. For example, they currently have the marketing capabilities to target more than 80 million sports fans and are on pace to grow that number to 150 million by 2028.

That 100 to 150 million-plus database of potential customers will allow Fanatics to scale their sports gambling operation at a much faster & significantly cheaper pace than their competitors.

DraftKings is making the transition soon, but currently, not a single sportsbook in the United States operates on an in-house, proprietary, back-end technology platform that they completely control.

I tell you that to illustrate one specific point — operationally, the sports betting game in the United States has always been about cheaper customer acquisition, not who has the better technology stack.

FanDuel and Draftkings leveraged their daily fantasy sports platform and spent billions of dollars to grow their customer base, but what Fanatics is attempting to do is much more similar to the strategy Penn National Gaming deployed with Barstool Sports.

Sure, the $450 million valuation they awarded Barstool gave them a large equity share in a business doing $100 million in annual revenue and growing. But more importantly, it enabled them to infiltrate a devoted base of millions of potential customers through a consistent & relentless media presence.

The result: A much cheaper means of acquiring customers than traditional commercials and promo giveaways.

As for Fanatics, I actually think they have the ability to do it even better. They have hundreds of millions of dollars in dry powder to invest in the business, would immediately have the largest marketing database in the space, and are already strategically aligned with every major professional sports league you could imagine.

My guess? Don’t be surprised if you see Fanatics use the $325 million in fresh capital to really go for it. I’m thinking merchandise, memorabilia, media, sports betting, ticketing, NFTs, and more.

Building a comprehensive sports marketplace that satisfies all consumer needs is certainly an optimistic and aggressive plan, but if you look back at Michael Rubin’s entire career, you’ll notice that he doesn’t approach business any other way.

Have a great day, and I’ll talk to everyone tomorrow.

Your feedback helps me improve Huddle Up. How did you like today’s post?

Loved | Great | Good | Meh | Bad

If you enjoyed today’s email, please share it with your friends!

At 46,000+ subscribers, Huddle Up is quickly becoming one of the largest sports business communities on the internet — every addition helps :)

Improve Your Fitness Through Sleep

Eight Sleep is the premier sleep fitness company that powers human performance through optimal sleep.

They use an advanced temperature-controlled system that adjusts throughout the night. It analyzes your personalized sleep stages, biometrics, and bedroom temperature, reacting intelligently to create the optimal sleeping environment.

The result? Since getting my Eight Sleep Pod Pro Cover a few months ago, not only do I fall asleep faster, I actually get high-quality sleep, so I wake up feeling well-rested and energized.

Simply put, it’s been a game-changer.

If you want to join me and thousands of pro athletes, CEOs, and other high performers that are dedicated to improving their sleep fitness, you should get an Eight Sleep Pod Pro Cover too. Trust me; you won’t regret it :)