NFL to Pay $95 Million for Three Percent Stake in Fanatics

Seeking a greater return on the rise in the sale of its merchandise and the company that handles the majority of licensed sports business, the NFL has invested $95 million in Fanatics, the sports retailer that also runs its official online shop, Darren Rovell of ESPN.com reports.

The deal, first reported by Sports Business Journal, and confirmed by ESPN, is for a 3 percent total stake in the business. It values Fanatics, which entrepreneur Michael Rubin bought for $277 million in 2011, at $3.17 billion.

The strategy for the NFL, whose executives are not yet publicly commenting on the deal, is to get a piece of the upside from the company’s growing business instead of just getting the standard licensing fee. A representative for Fanatics also declined comment.

Before selling his main business, GSI Commerce, to eBay in 2011, Rubin secured the online shop rights to all the major sports leagues, winning the business by promising to physically warehouse the merchandise to ensure faster delivery compared to competitors who only offered a virtual service.

That meant that an inventory risk had to be taken; if a player got traded or became significantly less relevant, the company would have a glut of product it couldn’t move and would have to write it off as a loss.

In recent years, Fanatics has solved that problem by investing more than $100 million in technology and production that allows it to create the ultimate vertical platform — conceiving ideas, getting them quickly approved and posting to the main site, as well as the league and team sites it manages, where the product can be sold minutes later.

Soon, the company will producing on-field jerseys itself. Fanatics, with Under Armour, will have a contract to produce on-field uniforms for Major League Baseball in 2020. But that might happen sooner, as Fanatics recently closed its purchase of Majestic Athletic, which is the league’s current on-field uniform licensee with Nike.

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