Leaked Documents Reveal Plans for “Super League”, FIFA Threatens World Cup Ban


On November 2nd, German magazine Der Spiegel leaked documents (internal emails, confidential presentations) indicating 7 elite European football clubs (Real Madrid, Barcelona, Bayern Munich, Juventus, AC Milan, Manchester United and Arsenal) considered leaving their respective domestic leagues, to form a “Super League” back, in 2016. The bombshell report has reignited speculation that select clubs could “break away” with Europe’s top teams wealthier and more dominant on the field than ever before; the league would showcase 16 teams and start in ’21. FIFA and +/-6 European domestic soccer federations would be in opposition (see: lengthy lawsuit), believing the league’s formation would effectively put an end to domestic soccer, but European football has a history of clubs “breaking away”; the Premier League was formed in ’92, when the most successful English clubs sought to “maximize television revenues and retain a larger share” and opted to split from the old Football League First Division.

Howie Long-Short: Rumors of a “Super League” forming are not new, so the talk should be met with more than a little skepticism.

The UEFA strategy council met with players’ union officials and European league representatives on Wednesday. Each denied their knowledge of the proposed plan, saying it was the brainchild of “one and a half” clubs (Real Madrid and Bayern Munich). Real Madrid did not send a representative to the meeting.

If Europe’s elite clubs are to “break away”, it would be in pursuit of a financial windfall (see: broadcast dollars), while eliminating the threat of relegation (for 20 years). The 11 elite clubs “breaking away” would receive ownership in the new league, while 5 others would be invited to participate.

FIFA is already on record opposing the formation of a “Super League” and threatening to ban any player who were to participate from future World Cup competition. Their decision matters as the international governing body for the sport, but they’re not exactly impartial arbiters on this topic; back in March, FIFA proposed plans for a revamped “Club World Cup” that would debut in ’21 and include at least 12 European clubs. The quadrennial tournament (currently annual) would increase the number of participants from 7 to 24, with the teams splitting $2 billion in prize money. UEFA, which perceives an expanded “Club World Cup” as a threat to its Champions League strongly opposes the FIFA’s plan. Softbank (SFTBY) was named among the consortium of investors (includes: UAE, Saudi Arabia) that would fund the tournament.

Fan Marino: On a final note on FIFA, President Gianni Infantino said that it’s possible the World Cup would expand to 48 teams in ’22 (previously planned ’26); the decision would be contingent upon another Middle Eastern country’s willingness to share hosting responsibilities with Qatar.

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“LeBron James Effect” on Ticket and Merchandise Sales


LeBron James’ arrival in Los Angeles has already begun paying dividends for the Lakers; according to the team, merchandise sales are up 100% YoY through the team’s first 2 home preseason games. While the “LeBron James effect” (the NBA version of the Tiger Woods effect) has helped the Lakers to sell fan gear, it’s yet to impact primary market ticket or sponsorship sales; by the time James signed to play in Tinsel Town on July 9th, little sales work remained for the ’18-’19 season. James has made his mark on the secondary ticket market, the average price to see a Lakers home game this year is up +427 YoY (StubHub); the “LeBron James effect” has had the opposite impact on Cleveland, where his former franchise has seen season ticket sales plummet.

Howie Long-Short: James will certainly have an impact on ’19-’20 primary ticket sales, the club has already stated its intention of increasing ticket prices at Staples Center next year. The question is how much will the price rise? The team is said to be using StubHub to determine the intrinsic value of their tickets and claims demand is so great they could sell out a building with 31,000 seats, 10,000 more than Staples Center has.

One way to play the LeBron James effect is via the NBA’s exclusive licensing and manufacturing partner, Fanatics. e-Commerce has exploded from 1% of all licensed pro league merchandise sales to 20% within the last decade and according to NBA commissioner Adam Silver the company “owns the marketplace” (they are expected to do $2.3 billion in ’18 sales and founder Michael Rubin believes that figure could eventually reach $10 billion). Fanatics isn’t public, but Softbank (SFTBY) and Alibaba (BABA) are investors.

Fan Marino: The NBA season gets started next Tuesday night (October 16th) with 2 games (Philadelphia at Boston and Oklahoma City at Golden State), the Lakers open on the road (on 10.18) at Portland. According to StubHub, their home opener against Houston (on 10.20) has the highest average ticket price ($934) of any NBA game this season.

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Fanatics to Replace Nike as Exclusive Manufacturer/Distributor of NFL Fan Gear

Fanatics 200x200

Starting in 2020, Fanatics will become the exclusive manufacturer and distributor of all Nike-branded, adult-sized (i.e. no kids), NFL fan merchandise. The league wants a partner with on-demand production capabilities so it can provide fans with “instant gratification” (think: Chiefs fan who seeks rookie Kareem Hunt jersey after 246 total yards/3 TDs in season opener) and maximize revenues; as opposed to the consumer finding the product “out of stock” (Nike would not have printed the jersey of a 3rd round selection in quantity before the season) and leaving money on the table. Fanatics produced Nike fan gear (to include the Swoosh) will be sold on NFL Shop (Fanatics controlled), on all team sites and in all team stadiums (some of which Fanatics controls), through Fanatics.com and also at brick and mortar retailers like Dick’s, Modell’s. Nike will continue to manufacturer jerseys and the balance of their on-field product line for players and coaches. The deal runs through 2029.

Howie Long-Short: Sure, fans will benefit from Fanatics printing on demand, but this deal doesn’t happen unless everyone involved was going to benefit. Nike had been compensating NFL owners with a percentage of the wholesale price on all merchandise sold, but the new deal entitles team owners to a percentage of the retail price on products sold through Fanatics — in addition to their cut of the wholesale price on sales to brick and mortar retailers. Increasing the take on retail sales will help the league continue to grow the pie, particularly with Fanatics’ ability to increase sales by an estimated 50% over the life of the deal (thanks to its wide product line and on demand availability). Commissioner Goodell has openly stated the league’s intention to generate $25 billion in revenue by 2027 (currently at +/- $14 billion). NFL owners will receive ancillary benefits (think: increased valuation) from Fanatics’ “higher sales base”, as the league is a minority investor in the company.

As for Fanatics and Nike (NKE), they’ll come out on top too. Fanatics will increase sales (and ultimately their valuation), while Nike can refocus on what it does best – develop best in class sports performance footwear and apparel. Nike may not make more money with this deal, but any losses will be negligible since they’ll gain extra exposure with more Nike NFL product sold. MLB was the first to pursue this on-demand DTC model that split the rights between a performance brand and Fanatics, but with the NFL now on board it’s safe to say we’re looking at the future of fan gear sales – one’s an accident, two’s a trend.

There are a couple of ways to play Fanatics, as Alibaba Group Holdings (BABA) and Softbank (SFTBY) are stakeholders. In September ‘17, Softbank invested $1 billion in to the company at a valuation of $4.5 billion (+/- 2x revenue), bringing the total capital raised to $1.7 billion. Fanatics is well positioned for long-term success, maintaining exclusive long-term licensing agreements with all the major U.S. sports leagues through at least 2030.

Fan Marino: Fanatics has had a busy month, doing a deal with Aston Villa to become the exclusive licensing rights holder for all club merchandise (noteworthy as they’ll be competing with the big apparel brands) and another with Formula One (FWONK) to become the exclusive merchandise retail partner on race-day (they’ll have an enclosed Superstore in the Fanzone) and online. F1 fans can expect a wider range of merchandise for each of the 10 teams and custom gear designed for each of the 21 Grand Prix.

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Fanatics to Take on Nike, Adidas, Under Armour

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Aston Villa Football Club (AVFC) has announced that Fanatics, Inc. will replace Under Armour as the exclusive licensing rights holder for all club merchandise, in time for the 2018-2019 season; but, unlike traditional sports merchandising deals, the company logo will not adorn team gear. Instead, the online retailer of licensed sports apparel will negotiate separate pacts for various pieces of merchandise (think: match-day kit, practice gear, fan apparel) with multiple 3rd parties. The rising value of kit sponsorship deals for the world’s most prominent clubs and the resources required to turn a profit on those partnerships, have left second-tier clubs like Villa with little marketing attention, less merchandise to sell and inevitably depressed revenues; opening the door for a new entrant. With the deal, Villa becomes the first English club to adopt the manufacturing model used in North American sports; Fanatics will manage everything from production to point of sale (including the Villa Park store and e-commerce platforms).

Howie Long-Short: This deal is sensible from the Fanatics perspective because it requires minimal capital expenditure to enter the potentially lucrative English football market. Villa’s status as a second-tier club meant that Fanatics faced little competition for the rights; and the company already maintains production and warehousing facilities in the U.K., properties acquired in their $225 million acquisition of Majestic Athletic. It remains to be seen if the club can increase merchandise sales without a major sportswear label’s logo on their products (hint: they will be), but if successful, sponsorship rights will continue to rise as the traditional players (NKE, ADDYY) look to retain control over the apparel space. Much like cable television providers and sports broadcast rights, the current establishment can’t afford to lose their association with sports teams/leagues and still manage to hit their growth targets.

There are several ways to play Fanatics, as Bank of America (BAC), Alibaba Group Holdings (BABA) and Softbank (SFTBY) are all stakeholders. In September, Softbank invested $1 billion in to the company; bring its total valuation to $4.5 billion (or +/- 2x revenue). For comparison purposes, retailers Dick’s Sporting Goods (DKS) and Hibbett Sports, Inc. (HIBB) currently have market caps ($3.33 billion, $494 million); roughly half of what they generated in 2017 sales ($7.92 billion$973 million). Of course, Fanatics is far better positioned for long-term success, maintaining (among other advantages, like a DTC model) exclusive long-term licensing agreements with all the major U.S. sports leagues through at least 2030.

Fan Marino: The team’s match-day kit is going to be designed by Luke 1977, a Birmingham based (where the team plays) premium menswear brand. The company’s logo will replace Unibet on the new design. For what it’s worth, Luke 1977 was named the ’10 Young Fashion Brand of the Year, beating out Diesel, Fred Perry and Firetrap in the process.

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SoftBank Led Consortium Offers FIFA $25 Billion for Expanded Club World Cup, Nations League


A consortium of Middle Eastern/Asian investors (including SoftBank Group, SFTBY) has offered FIFA $25 billion for a 49% stake in an “expanded version of (the) Club World Cup” (annual competition featuring the winners of 7 regional tournaments) and a “proposed global league for national teams” (to be known as the Nations League). The proposal, to span 12 years but otherwise lacking detail, was rejected by the FIFA Council pending additional information; despite support from President Gianni Infantino, who could use the platform as the basis for his 2019 re-election campaign. FIFA, which traditionally generates revenue via ticket sales, sponsorships and media rights, has never sold control of its competitions.

Howie Long-Short: The sheer size of this offering is staggering. $25 billion would represent a 47% increase in revenue for an organization that currently generates $5.5 billion/WC cycle and +/- $100 million (just $37 million in ’17) for the Club World Cup.

To clarify, $12 billion was offered for a national-team competition, with the remaining $13 billion allocated for a quadrennial tournament comprised of the world’s top club teams; including at least 12 from Europe. There are many reasons why this deal will never be completed, but club valuations must be at the forefront. For $13 billion, the mystery investment group could buy Arsenal, Chelsea, Liverpool, Juventus, Tottenham Hotspur, Paris Saint-Germain, Borussia Dortmund, AC Milan, Athletico de Madrid, West Ham United, AS Roma and Inter Milan, run their own 12 team tournaments and still have nearly a half billion dollars in the bank.

The European Club Association also formally opposes the formation of any tournament that would compete with the UEFA Champions League, worth $15 billion over 4 years. Even if the financial aspect were to be overcome (unlikely), the association has said it would like to cut back on the number of games its teams play in the name of player health.

Fan Marino: Lakers minority owner Patrick Soon-Shiong (also owns L.A. Times and S.D. Tribune) and D.C. United CEO (and Swansea City minority owner) Jason Levien are closing in acquiring Erick Thohir’s majority stake in the MLS franchise, at a league-record $500 million valuation. That figure sounds outlandishly high to me. Forbes (2017) pegged the league’s most valuable team at $315 million (L.A. Galaxy), the United at $230 million and you can buy an expansion franchise for just $150 million. The United generated $25 million in 2016 revenue. Even if they doubled revenue in their new soccer specific stadium (opens in July), the team isn’t worth 10x revenue; NBA franchises sell for 8x, NFL franchises sell for closer to 6x.

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Fanatics’ Pursuit of Global Dominance

Softbank Group Corp. (SFBTY) recently made a $1 billion investment in Fanatics and the apparel manufacturing giant plans on using the capital to pursue global expansion. Fanatics, which currently generates just $200 million (of the $2 billion it will generate in 2017) in international sales, is looking to grow global revenue to $10 billion within 5 years; with half of the business originating outside of the U.S. The company will start by opening manufacturing facilities in Germany and China in 2018, before establishing residence in Japan and Australia in 2019. Concerns do exist, pertaining to varying cultural norms and the company’s ability to penetrate a complex Chinese market, but a global sports merchandise market worth an estimated $25.3 billion is worth pursuing.

Howie Long-Short: CEO Michael Rubin believes he’s built a moat around the business, saying competitors “can’t be a significant player without the rights (NFL, NBA, MLB, 500 Colleges/Universities etc.) that we possess.” NPD Analyst Matt Powell disagrees, arguing “what they’re doing is replicable.” Fanatics has exclusivity agreements with the leagues that span 13-17 years. That’s too far down the road for me to be concerned about competition. Look at the 1995 Fortune 500 list and compare it with the 2016 edition. A lot can and will change in 10 years. Just 3 of 2006’s Top 10 companies (by market cap) remained on the list in 2016.

Fan Marino: Fanatics announced earlier this week that it has extended its NHL deal through the 2034 season. The new deal gives the company rights to produce the league’s premier “Center Ice” collection, replica jerseys (on-ice jersey rights are held by Adidas) and championship apparel. Fanatics also picked up exclusive rights to sell NHL headwear within sporting goods retail channels.

Two Billionaires Bet They Can Sell Sports Swag to the World

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Fanatics Acquires the Rights to Manufacture Official MLS Merchandise, MLS Invests in Fanatics

Major League Soccer has signed a long-term deal with Fanatics, scheduled to begin domestically in 2019 (‘18 in Canada), that provides the fast-growing sports apparel manufacturer with the rights to produce official MLS merchandise, not just sell it. The company will be able to make everything but official MLS jerseys, as Adidas (ADDYY) owns those rights as the league’s official on-field apparel provider; though the company is able to sell ADDYY game jerseys on the e-commerce platform. In an unrelated transaction, MLS has made an investment in Fanatics. Financial terms were not disclosed.

Howie Long-Short: The NFL bought 3% of Fanatics in May 2017 for $95 million, at a $3.17 billion valuation. By August of 2017, the company had a $4.5 billion valuation; closing on a $1 billion investment from Softbank (SFTBY). Remarkable growth for a company that was purchased for just $277 million back in 2011. It’s worth noting that both MLB and the NFLPA are also invested in the company.

Fan Marino: In 2019, Fanatics will become the manufacturer of MLB’s official Under Armour (UAA) game jerseys. However, April’s $225 million acquisition of Majestic Athletic means they could be putting their product on the field, as early as next season. Majestic and Nike (NKE) currently own the on-field uniform rights to MLB.

Major League Soccer invests in Fanatics, signs long-term merchandise deal

Editor Note: The summary for this story was co-written by our friends at The Water Coolest. Check out TheWaterCoolest.com for the latest market news and professional advice.

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IMG College, which holds multi-media and sponsorship rights to more than 90 schools, has agreed to a blockbuster merger with Learfield, which holds rights to 130 other collegiate athletic programs; meaning together they will control the marketing and media rights for 70% of D1 programs and 90% of P5 conference schools. Industry experts speculate the new company could be worth more than $2 billion. Learfield CEO Greg Brown is expected to lead the new entity. Terms of the deal are expected to be finalized in the coming days.

Howie Long-Short: WME-IMG is a privately held company, but you invest in it through Japanese internet/telecom giant, Softbank (OTC: SFTBY). Softbank invested $250 million into the company at a $5.5 billion valuation in 2016. That investment has done well. WME-IMG recently closed on a $1.1 billion investment round with the company valued at $6.3 billion.

Fan Marino: College Presidents looking to shake up their athletic department should place their first call to IMG President, Tim Pernetti and offer him a blank check. Prior to being made the “fall guy” in the Mike Rice scandal; he oversaw a successful Rutgers football program, set fundraising records at the school and negotiated the deal that brought the University into the Big10. I don’t believe you can hire a better A.D. than Tim Pernetti.

IMG College Negotiating Merger With Learfield To Create Media Rights Juggernaut


Japanese telecom giant Softbank Group Corp (TYO: 9984) has made a $1 billion investment into Fanatics Inc, a leading sports merchandise licensor that handles e-commerce sales for a variety of teams & leagues, including the NFL and MLB. The deal places a $4.5 billion private market valuation on the company. Fanatics sells everything from t-shirts to lawn chairs and has built a burgeoning memorabilia business with the likes of Steph Curry, Ronda Rousey, and Peyton Manning, signed to exclusive contracts. Softbank is looking to compete with the likes of Nike, Adidas, and Under Armour within the licensed sports apparel space.


SoftBank to invest $1 billion in sports retailer Fanatics amid aggressive spending spree

Howie Long-Short: Want to invest in Fanatics, but not interested in Softbank? Alibaba (BABA) contributed to a $170 million round in June 2013, at a $3 billion valuation.

Fan Marino: Fanatics is the ONLY place I shop for licensed sports apparel. Just make sure you don’t pay full retail; they are always running 20-30% off sales!