Not surprisingly, the plan for a Fanatics-branded sportsbook app is already causing hiccups.
Last week, the Ohio Casino Control Commission demanded the sports apparel vendor pull a promotion in which potential Ohio players receive “bonus wagers” equal to the value of the purchase price of some sports merchandise. Fanatics wisely pulled the promo. When asked by reporters, Massachusetts gambling regulators said such a gambit would not be tolerated either as it rounds the corner to its imminent launch there.
The problem is, this is exactly what experts warned when I wrote about the coming, very expensive push by Fanatics into the online sports betting world. And this failed marketing effort in Ohio portends very rough sailing for a company whose arrival so many are marveling at or celebrating.
In theory, Fanatics has one incredible and distinctive asset — its mammoth database of sports-fan customers and information based on purchases of their team loyalties — that could be used to draw in players with customized offers and marketing pitches.
The $150 million question is how it uses all of that without violating privacy and marketing to children.
Clearly, it still doesn’t know.
Sports betting is still a risky, low-margin business
The only reason the Fanatics entry into the market is being greeted with so much interest and fanfare is that it is the first large-scale effort to convert a brand known for something else into one that will draw players online. There are other smaller examples — Sports Illustrated and MaximBet spring to mind — but even top-notch gambling brands like WynnBet are considering pulling back because the market is so saturated and the profit margins (if any) are so slim.
Enter Fanatics, which kicked in $25 million on the losing, big-gaming side of the effort to legalize online sports betting in California and just announced a $150 million deal to take over PointsBet’s U.S. business. The parent company has a market valuation of more than $31 billion, sits on at least $2 billion in cash and its 2022 revenues were exceeded $6 billion.
It’s a behemoth and so, as when Apple decided to create a TV streaming service out of whole cloth, Fanatics cannot be ignored.
Like Apple, what Fanatics hangs its hat on is its existing customer database, some 100 million people, as a gigantic jumpstart for BetFanatics.
How will Fanatics know a bettor is over 21?
Unlike Apple, though, the product they are pushing is restricted to adults, and certainly they’ll have to requisite protocols in place to ascertain whether bettors are of age. But any marketing efforts that present gambling to minors is going to cause regulator heartache — and it’s not as though it can fly under the radar because competitors, among others, will gleefully rat them out.
Fanatics might know a lot about their shoppers — team favorites, e-mail addresses and cell phone numbers, how much they spend — but they don’t know whether they’re over 21. Even credit card usage is no tell on this front; people give their kids use of their cards all the time.
“Certainly directing things to the minors would violate just about every regulation that you have,” Oklahoma State University business professor John Holden says. “They might not know it, though. Sure. But to some extent, purposeful ignorance is not going to be a really strong defense here.”
Las Vegas Advisor blogger David McKee agrees:
“They’ve got to be very careful and really screen those databases because it’s exactly the sort of thing that could not only get them into legal and regulatory hot water, but confirm for opponents of sports betting what they’ve been saying all along, that little Jimmy is going to be betting on sports on his computer.”
Does Fanatics define success differently?
Another possibility, though, is that Fanatics isn’t getting into the sports betting market to win it or to reap big profits off gamblers. Maybe it’s more like how Amazon has built Amazon Prime Video and plunged ungodly sums of money into content creation as a mere amenity to its core business.
In other words, maybe Fanatics is going into sports betting to create more customers for its jerseys, T-shirts and autographed baseball cards. Maybe the advantage it has in the online sportsbook space is that is doesn’t care about profits or losses, that it can offer more freebies and cheaper odds the same way Amazon can afford to undercut every other vendor of just about anything online.
That may be. It’s not, however, how Fanatics brass are talking about it. CEO Michael Rubin told Sports Business Journal in February:
“We can be the No. 1 player in the world in that business in 10 years. That does seem ambitious for someone who’s not in the business today, but our strategic advantages are that we are one of the best-known digital sports brands and we touch so many fans. There’s been so much money lost in this business, but we will be deliberate and I’m bullish on it being one of our key long-term businesses.”
Perhaps. But it will be fascinating to watch them figure out how to bring those strategic advantages to bear without causing regulatory heartburn.
Read more from the State of Play column:
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- Penn Entertainment Missed Teachable Moment By Firing Barstool’s Mintz
- Las Vegas Doesn’t Need A Losing MLB Team To Be Relevant
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