The political scheme that has enabled the Republican Party to take control of state legislatures is essentially allowing politicians to pick their voters instead of voters picking their representatives. One company in the entertainment business is adopting that same strategy. It’s beyond creating an illegal trust. It’s economic gerrymandering.
Over the past week, Fanatics has gotten a lot of press. It started with its part in a bid with other companies to get one of at least two platform provider licenses for legal online sports betting in New York. On Thursday, however, it flexed its financial might even further, as the Wall Street Journal reported that a new Fanatics subsidiary had wrangled control of the North American trading card industry by simultaneously buying out exclusive licenses for MLB, NBA, and NFL cards.
Adding this to Fanatics’ existing stranglehold on officially licensed sports merchandise in the United States of America creates a situation where one corporation won’t just decide what fans will buy. It will determine whether brands have access to fans.
A brief history of Fanatics
Fanatics began as a solitary brick-and-mortar store in Jacksonville, Fla. It focused on retailing Jaguars and local collegiate merchandise in 1995. After expanding to a second store in 1997, ownership launched the first website for the business.
From there the business’ strategy shifted from in-person retail being the emphasis to sponsoring content on the Internet and acquiring domains that already had an established customer base. There were no visible takeovers of those brands.
Consumers were oblivious that when they went to sites like collegefootballstore.com, they were actually buying from Fanatics. The first major investment came in 2011.
GSI Commerce, chaired by Michael G. Rubin, bought Fanatics that year. Rubin had shortly before sold GSI to eBay but was able to purchase the direct-to-consumer side of the business back from eBay for pennies on the dollar soon thereafter. At the time, eBay was only interested in the fulfillment logistics side of the business because it wanted to compete with Amazon.
With the new funding and under Rubin’s direction, Fanatics continued its strategy of consolidating access to sports merchandise under its umbrella. The biggest of those was Dreams, Inc. in 2012. Due to its continually growing ability to control the flow of officially licensed merchandise, the entities that delved out those licenses took notice.
In 2015, the NBA sold operations of its online merchandising along with the brick-and-mortar store in New York City to Fanatics. NASCAR and MLB made similar moves that same year.
The NFL domino fell next, giving Fanatics the keys to its merchandise machine early in 2016. The NHL and MLS fell in line in 2017. That was also the year that Fanatics started taking control of the production of the goods it once only controlled the distribution of.
It started with the acquisition of Majestic. At that point, Fanatics greatly expanded its manufacturing of the fan versions of jerseys and other merchandise. Later that same year, the company went public at a billion-dollar valuation.
Rubin maintained 72% of the shares of the company after the latest funding round, which valued the company at over $3 billion. Other companies to sell their e-commerce of the officially licensed sports merchandise biz out to Fanatics over the past few years have included Lids and Walmart.
This is a bigger deal than just the fact that when you buy a hat from Lids’ website, you’re actually buying from Fanatics. It’s even a bigger deal than Fanatics deciding what it will and won’t sell to you and what percentage of the royalties from merchandise sales the appropriate parties get. Fanatics increasingly controls who gets access to your bank account.
People in a room making decisions about you
In the 2006 film The Devil Wears Prada, a scene about a cerulean sweater makes a solid point about a very real fact. A select committee of people decides what the rest of us wear.
If all Fanatics was doing was deciding whether athletes whose names emblazon the replica jerseys they make and sell get a paltry one percent or three percent of attached revenue, that would be bad enough. If the company merely used its funding to buy out all of its competition like Jansport, this would be enough of a concern.
What’s more, if Fanatics choosing to partner with Penn National Gaming, the gambling company that’s sold its soul to get into a slimy bed with B*rFool Sports, for the aforementioned New York mobile sports betting bid was the sum total of its moral failures, then that would still be a lesser concern as to what’s on the horizon.
The trading card coup is a signal of the most insidious aspect of the unfettered and destructive greed of capitalism. It isn’t capitalism run amock. It’s the realization of the ultimate dream of capitalism.
This isn’t about trading cards
Trading cards themselves are a pretty niche business. The truth is that Topps makes more money off its candy sales than baseball cards.
Even for Panini America, which currently holds the NBA and NFL exclusives for trading cards, it’s like sports betting. It’s not a high-profit operation in and of itself. The valuable commodity is market share and access to assets.
The strategy hasn’t changed at all for Fanatics. It’s merely grown in scale.
For example, the NHL and NHLPA trading card exclusives belong to Upper Deck right now. Because of the tremendous assets Fanatics already holds, it will likely have zero trouble getting enough capital put together to outbid any challengers for those rights when they’re next available.
After that, maybe it’s the MLS and UFC licenses. To augment its trading card production operations, perhaps Fanatics then buys Panini, Topps, or Upper Deck. Maybe all three.
It’s all about consolidating power, not pieces of cardboard with pictures and words on them. The merchandise itself is just a pile of stuff.
Consumers don’t dictate markets under capitalism
One of the great lies about capitalism is that consumer choice dictates the behavior of companies providing goods and services. The reality is that people in boardrooms like Fanatics’ dictate consumer behavior.
Where did Fanatics’ money to buy the exclusive trading card licenses from MLB, the NBA, and the NFL come from? MLB, the NBA, and the NFL.
Where did MLB, the NBA, and the NFL get the money to boost Fanatics’ valuation? From Fanatics’ sales of MLB, NBA, and NFL officially licensed merchandise. I hope you see the pattern by now.
This whole story is just a group of billionaires passing money back and forth between themselves when they need it to further consolidate their power, using millions of consumers as couriers. Until consumers and workers in the United States of America organize and take ownership of what actually belongs to us – our agency, our labor, and our time – we’ll continue to just be errand people for those boardrooms.
In the eyes of the capitalist class, we’re just another thing to manage en route to global domination. To them, we’re just a pile of stuff.