Rubin’s Fanatics Formula

23:29You bring great people together. You do great things for their lives. You get paid back one way or another over time. So we enjoy the opportunity to do that and to curate that very carefully. Can I pivot from that to your move into live events, right? So Fanatics Fest, you have the Tokyo series. You're doing flag football. What you're thinking about live events, how does that help you? And then does that lead to more content? So can you build that for us? So look, live events are really hard, okay? Okay, Fanatics Fest that you, you know, had the experience of being with me for a full day. It's the hardest thing Fanatics does all year.

24:04Okay, and it's not, it's not even 1 % of our revenue. I mean, you sell 200 ,000 tickets at 60 bucks, it's$12 million. It's not, you know, so you maybe have, you know, whatever. Maybe the whole event's, you know, going to approach$100 million in revenue this year. So it's not even 1 % of our revenue. But what it does for our brand is incredible. Like, the biggest thing I worry about for Fanatics, I don't want to be a big company. I want to be a beloved brand. Okay? It's easy to be big. Okay? A lot of people here, you think about, like, who are the companies they respect? You think about companies for their financial performance.

24:38I used to think about how do I make Fanatics this big company? I don't even think about that now. I think about how do I be the most beloved company by sports fans? Okay? Fanatics Fest helps us be beloved in such a big way. You saw that firsthand. You saw the amount of people who were just like, you know, you watch it. A kid, their father, their grandfather. We watched four generations of family come in together. We watched people have these experiences that only that we could put on for people. And you know what? I remember, I basically remember Draymond Green and LeBron James saying to me this year, they're like, like only you, only fanatics would pull this off to get all these people together.

25:15They were saying they were all coming back from Cannes, from the film festivals. And like half the plane was like literally coming to Fanatics Fest. But for us to be able to put this on for 200 ,000 sports fans next year and be able to convene all these incredible athletes. And by the way, it's not just athletes. We're from like LeBron and Tom Brady and KD, but also Travis Scott and Jay-Z and Kevin Hart. And, you know, you know, the best up and comers, Victor Wimanyama, Jane and Daniels, CJ Strahd. I mean, it's just an incredible gathering. But for us, it makes us more beloved. I mean, we own if you look at social media, the week of Fanatics Fest, like we own it like period.

25:56I mean, I bet you were 10, 20 percent of the content that comes out. It's just it's egregious how much, you know, love we get. And so for us, that's a great opportunity. Why are we doing the flag football game in Saudi Arabia with Tom Brady? Because for us to get the biggest stars together, to have it be the Fanatics, you know, you know, flag football game. I mean, that's an amazing opportunity for us to build our brand. So we look at these. I kind of call it profitable marketing. We joke, like, we spend a lot of money in advertising, okay? That's a cost, okay? This is profitable marketing. We'll make money on Finax Fest this year.

26:31We'll make money on the Finax flag football game. And we do this because it's good to build our brand. So we like things like that. By the way, it's really hard, and that's the reason we don't do more of it.

26:41Bill Cohan:Why have you been able to skunk your competitors? Why have they let you do this? in effect you know the amount it's it's funny because like look oh you know me well enough to know all i do is work um you don't sleep i know that i'm not a good sleeper um but i will say i had my best stretch of sleep two nights ago i slept four hours straight which was which was amazing um and i woke up and when i looked at my whoop it said 4 10 and i there was no it was like only 14 minutes awake i got out of bed i'm like this i gotta just celebrate this and it's time to I can go to the computer. I can go run a marathon.

27:14Work at 2.30 in the morning. But look, what I hear from, we hear everything competitors say. So we hear when, you know, someone's like, the amount of people who said, oh, I should have done this with Fanatics Fest is entertaining. Because to be able to do Fanatics Fest, you need to have the relationships with all the athletes, the celebrities, the artists to be able to convene them and bring them together. They're not coming for me. They're coming because you've got every star NFL player there, every star NBA player there. You're the biggest artist in the world. You bring all these people together in such a great way.

27:44I think we, because we built these authentic relationships and people do, I will say, and I'm humbled by this. While I show up when people need me, people show up for us. And I think that's what you saw at Fanatics Fest. And I try to be like, right now, if you just look, I have three of the biggest stars in the world are three people I've just helped on things that are monumental to their lives. It had nothing to do with Fanatics, but I've just been involved in helping them to do the deals. It's like. Are you going to tell us who that is? Definitely not. But they're massive deals for each person.

28:17OK. People can actually figure it out. You'll see announcements and then you'll be able to connect the people to me. You will figure it out. OK. Two are to be announced over the next short period of time. And you will figure both out without me prompting you. OK. But anyway, I did both those deals. But I do those deals because it was like I knew they needed me to help them to do that because they didn't have the they weren't equipped to do that on their own. But then whenever I need them, they always show up for us. And so that goes to those authentic relationships. So why could another great brand not be able to do FinaxFest?

28:47They could never convene all the sports properties, all the athletes, celebrities, artists, and the fans to be able to do that. We are uniquely positioned to do that. By the way, it's also really hard, as I said. I wish it on anyone to try. Like, FinaxFest is July 16th to 19th next year. Made it the last weekend of the World Cup so we can make it all work together. And we will kill ourselves to pull that off for fans. So can we turn from that, which is a small business, to your core business? Yeah. A couple of weeks ago, after the Giants beat the Chargers, I saw a guy on the street wearing a Jackson Dart jersey.

29:17I thought of you because I'm like— Did you thank him for me? Yeah, because I thought to myself, that's something we've talked about in the past, right? So can you talk to the audience about how you've maybe accelerated the delivery of jerseys and product to take advantage of changes like that, right? From Russell Wilson to Jackson Dart. Look, we live in a world of immediacy. And I think no one's interested in the way that licensed sports business work 15 years ago is, you know, you kind of everything took a long time. Now something great happened to sports. That's going to be a collectible and a fangir, a piece of fangir product immediately.

29:56And we build a supply chain to them. By the way, we've got to keep being better, too. Like we're still not we're nowhere near where we need to be today. But I think we're so much better than we were 10 or 15 years ago. It's just, it's listening to your customers, listening to the fan. They're like, they want that Jackson Dart jersey. As soon as he had his first great play, oh shit, I gotta get that jersey. Well, we gotta be making those jerseys right away. And we built the supply chain to be able to do that. Didn't work that way before you had to, you know, Models had to order it and it took four weeks to get in.

30:22And, you know, who knows what happened to that four weeks period of time. Hey, John O 'Ran again, back in the studio. We're gonna take another quick break here. And when we come back, my colleague, Bill Cohen, and ask Michael Rubin about his ambitions with regards to sports betting. This is a good one.

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31:32Bill Cohan:Let's talk about sports betting. You know, we've talked about this before. You know, count me skeptical that it's going to be very tough. There's big, powerful competitors. I like you being skeptical. It motivates me. You told me that. Tell me more about your skepticism. He's not the only one, just to say. Perfect. I think last time we talked, you had either were losing like, you know, I think this is right? Something like$500 million on that business. Where does it stand now? It sounds like you've gone from number four to number three or number five to number three. How is that competition going?

32:11Bill Cohan:Do you still like that business? Am I going to be wrong and you're going to be right? Probably. But I mean, I'd like to. I don't want to tell you you're going to be wrong because then I'm going to jinx myself. Right. Because in the gambling business, you got to be a little superstitious. Look, here's what I tell you. Gambling is a great business. OK. I don't think any of us, you know, there's no revelation of that. Okay. So now the question is, does it fit for us? And with a big brand and a big customer base, I think we were probably the most logical person to get in the business. The same reason that everyone called me before we got in the business to say, Hey, can we partner with you to get in the business?

32:46Why, you know, Jason Roberts used to come to see me and Fandle reached out and why MGM reached out. Everyone says, Oh, fanatics, they got so many customers. That's like the most natural person to partner with. For us, If you guys study the math, if you look at what you spend in losses, purchases of companies, stock-based comp, the three kind of expenses. Trafficking spent over$7 billion to get to profitability. Vandal spent$6 billion to get to profitability. We're in it for about$1.5 billion. We think we'll invest another$200 million to$300 million before we make money next fourth quarter. and what's been really fun is when we got, when we decided to get in this business everyone said, great business, you're nuts there's a duopoly between Van Duol and DraftKings okay, you can't do this the same dumb shit people told me okay, when I was getting in the merchandise business people would go, oh, Amazon's gonna own this business and oh, you can't do this and by the way, in the collectibles business when they told me, by the way, my love words you can't do this like, tell me I can't do something that I want to do and that's very motivating to me.

33:56So we've - But it kind of wrecked your P &L for a period of time. I mean, you think it wrecked my P &L. To me, it was an educated investment, okay? And so I'd say, you know, as a decent-sized private company with a good balance sheet, easy for us to do it. And a no-brainer. And so we look out, so we launched in September of 23. In the first year, we had negative revenue. By the way, when you're in business, you're trying to keep more money than you spend. We had negative revenue in year one. OK. In year two, we had$333 million. And we had about$5 or$6 billion in bets placed. Got about$333 million in revenue in 2024.

34:34This year, we'll have about$25 billion in bets placed. And we'll do close to a billion in revenue. And next year, we think we'll double again. We are the fastest growing sports book and casino in the country. Our value prop is better. We thought about how do we make this better for sports fans. every time you bet. By the way, if you gamble on sports, if you bet on a casino, you are not smart if you don't do it with us because our value pops better. We say two things. One, every time you bet win or lose, we give you fan cash to finax. What can you do with that fan cash? Make more bets, get merchandise, get tickets, get trading cards, go to our marketplace, go to lids.

35:09You know, so many things you can do with that. We're going to issue a billion dollars of fan cash next year. That billion dollars will get redeemed. People use it 100%. Okay, that's how good the currency sport is that we're creating. And then the second thing is if your player gets hurt in the first half of a game, we insure it for you and we take them out of the player prop. Now the whole industry is following us because we made it better for customers. So I think we made the value prop better. And, you know, knock on wood, it's working pretty well. So I do think you'll be wrong. And I look forward to that.

35:37We'll have some fun words about that. And, you know, our goal is, you know, right now we try to say that we want to be a strong third. That's what people are saying. And people said we're going to lose all our money and die two years ago. Now everyone says we're going to be a strong third. Obviously, third sucks. No one wants to be third. OK. You know, we want to figure out how to be number one. And, you know, that's what we're going to focus on. Yeah. So we cover that market. We're very bullish on it. You're still negative on us? No. How can I be negative on you? You guys are motivated. But you're going to be motivated.

36:10Here's what people worry about now is the prediction markets, right? So all of a sudden, we had a normal structured functioning market, and now you have prediction markets. How do you see the development of prediction markets impacting this? Well, they should be worried. But then the question is, is that a worry or is that an opportunity? To me, there's one thing I've been saying for as long as I can speak. I'd rather disrupt myself than somebody else disrupt me. So stay tuned. OK, got it. So an area you and I have talked about in the past is collectibles, right? You were very bullish. You bought tops.

36:40And you said it's quadruple. The revenues have quadrupled since - It'd be 6X. 6X. So for everyone here who doesn't know about collectibles, can you talk a bit about what you've done and why the market was so dysfunctional before you guys entered it? Well, I'd say it wasn't dysfunctional. I'd say it was sleepy. OK. OK. So collectibles is primarily trading cards. We won the rights to the NBA, the NFL, and Major League Baseball in spring summer of 2021. We then bought tops to start earlier. Brexit kicked in in 25 and 26. We bought tops to - From Michael Eisner. Yep, from Michael Eisner. Yeah. January 1st, 2022.

37:21What we saw is that they were really - Collectibles was a COVID beneficiary. Same thing as sneakers. Same thing as watches. Same thing as cars. A lot of COVID beneficiaries. All those COVID beneficiaries have gone down. Sneaker market, you know, been tough. Watch market, been tough. art, been tough. So the natural thinking was that collectibles would come right back down the same way that so many of these other markets have come down in the secondary market. For us, what we realized was these guys were, I mean, they were the definition of fat and happy. Okay. It was a good business. They collected money.

38:00It was an easy business. They weren't, there was no innovation in the product. There was, they didn't market. I mean, it just happened accidentally. The athletes weren't involved. Like trading cards five years ago was for the nerd in the corner. That's who collected trading cards five years ago. Okay. We had, when we bought tops, there were 10 MLB players that collected trading cards. There's 170 today. Why? Because we got them involved. Okay. If you look at my phone on a daily basis, I got top NBA stars hitting me up about trading cards they want to buy now because we're getting them involved.

38:31So what do people do? People follow the athletes. Okay. So, you know, to me, we've got the players involved. And we're getting this sport involved. Think about, I don't know how many people saw yesterday when we announced the NBA, we create something called the debut patch. The debut patch is you play your first game. So think about a Shohei Ohtani on his first game or Tom Brady on his first game. We create this debut patch. We put it on your jersey for one game. When you get done, we take it off. And that's the true one-on-one card, okay? If there was a debut patch for Tom Brady, that'd be worth$25,$50 million, okay?

39:04Ohtani would be worth, you know, tens of millions of dollars, okay? We created one for, we did it start two years ago in baseball, three to 400 people come up from the minors to majors each year. Paul Skeen's debut patch got auctioned off last year for a million one. Cooper Flagg, people are pretty excited about Cooper Flagg. Okay. He'll be in his debut patch, which was our invention when he plays his first game next week. Okay. So like, it's like, how do you make the product great? Well, then how do you go story tell? Well, everyone on TV is going to be talking about his debut patch. Everyone ever talk about trading cards on TV before?

39:35In the middle of the games, they're going to be talking about all these new rooks who are in their debut patches that are going to be one-on-one cards. So it's just, it's not, this one was the, for us, sports fight is hard. I mean, Fando and DraftKings, they're good companies, okay? Merchandise business, physical, you know, it's a physical business. It's, you know, it's a complex, big infrastructure business. Trading cards was like a good model where everyone had been lazy. So for us, this has been, I mean, the competitors there were, you know, I think pretty awful, if I'm being honest. Whereas I think the competitors in sports betting are really tough and really good.

40:08Competitors in merchandise, tough and good. And so it's been the easiest business for us to go quickly, innovate the product, market for the first time, get the athletes involved. And the business, it did$500 million the year we bought it. It'll do over$3 billion next year. Now, a lot of that's the new rights we're bringing out from the NBA, from the NFL, from WWE, from UFC. But on a comp basis, I remember, I think you guys have some of the commissioners here. When I called in 2021, because I had the idea and I called each of the commissioners and I said, look, trading cards are all time high in 2021.

40:44They got like, you know, take the NBA. It's probably gone from 50 million to 300 million, 400 million over 10 years. Covert benefit. I'm going to guarantee you 100 percent of what you're making. I'm going to give you a better royalty rate. I'm going to create a secondary market instead of feeding eBay. why don't we feed ourselves? Okay. So I'm going to, I'm going to create a secondary business fast. I'm going to create facts live. I'm going to cut you guys in on all of that. And Oh, by the way, I'll give you an X on equity in this thing. The only thing the league said to me is how long do you want to go?

41:11Like, would you like to do a thousand year? Yeah. He's like, think about it for these guys are like, this guy must be crazy. He's guaranteeing us an all-time high of a COVID beneficiary, you know, give us higher royalty rates. I mean, it was like the easiest yes for the sports population. And by the way, they benefited greatly baseball. who was at an all-time high when we took it over,$370 million, they'll do a billion in revenue this year in that business and take over$100 million personally to baseball from trading cards. I think we pay more. I was having this discussion. The trading cards revenue for a lot of the sports properties could be their biggest non-media check in certain cases.

41:46Bill Cohan:I learned a new word just now, rooks. Thank you. I'll be using that. Keep you young and vibrant. Equity markets are at an all-time high. Last time I checked, Animal Spirits have been released. Is it time for the Fanatics IPO? You know, we don't like this sounds crazy. There are times when I don't look at the stock market for weeks at a time. Like, right. There are times I don't look at stocks. I don't look at the stock market. I don't care. OK, I have Fanatics has a good balance sheet. You know, I've been fortunate personally. So no one has any liquidity needs. Might we eventually go public? I think that's a real possibility.

42:29There is no rush right now. What I need to do first is prove the two of you wrong about sports betting. Okay. And make money. Yep. Okay. I need to finish integrating the rights, which will now be done in April with the NFL. And I just wanted the business to progress. Look, we're going from basically being a decent sized company, not making money to, you know, not going to make it, make it real money now. you know but there's no there's like no pressure for us I think if the your PE investors are they have the opposite so I own 30 % of this personally okay and they have the perspective that if we go public we kind of force them to distribute and ultimately sell they think you know we believe we can be the most important company in sports over the next 5 or 10 years the most valuable company in sports so they're in that almost hurts them if we go public because it kind of forces them to decide what they want to do.

43:22They want us to keep building. And so for us, again, do I think we get there? I think it's more likely than not. Do I even think about it? I am telling you, you could find a month where, like, my person who runs my family office will send a report of how she did for the month. Like, oh, shit, I forgot about the stock market thing. I got it. Like, I just don't. I'm not, you know, I watch CNBC every once in a while in the mornings. but like I'm more interested in what's going on in sports news to make sure I'm up to speed there. You know, you've been very good about telling us what's next along the way, and we've been tracking you.

43:54I asked earlier about content. Look at what the Mannings have done with their content business and LeBron. So it seems like a natural path for you to go and to do more production. Is that what's the next vertical for you? Can you share with that? So I think three primary verticals today. We call it Fnax Commerce. That's everything. That's merchandise related. That's over a$7 billion business. We have Fnatic's Collectibles, which is primarily the trading card business plus the live and collect platform and the betting and gaming business. I think on that one, stay tuned. But think about a business that could be in that camp of profitable marketing to support our three businesses.

44:37Now, we do have something else. I think next year you will see us announce over the next six months three new businesses. Two of those businesses will be, think about something more like a Fanatics Fest that's profitable marketing to help us build our, because Fanatics Fest builds our three businesses. And then one will be kind of our fourth business. But everything we're doing is to build our ecosystem. You know, we're not trying to, and again, this is really important. When we get into business, we ask ourselves one question, which is, it's actually two questions. Can we make it better for the fan?

45:16If we can't make it better for the fan, we're not going to do it. And then number two, is it big enough to care? Can it move the needle? If we can't get a yes to both of those, we're not spending any time.

45:27Bill Cohan:Wow, look at that. Right on time. I guess that's it, isn't it? That's it. I just do as I'm told. I'm here at your service. Okay. I think we're right on time. Thank you, Michael. Thank you very much. That was great. That was great.

45:49This is one of those interviews, and frankly, Michael Rubin's one of those guys where I almost don't care as much about what he says as opposed to how he says it. Michael Rubin's energy and passion comes through clearly. Check out his answer when he was pressed about getting deeper into sports betting. Everyone says we're going to be a strong third, he said. Third sucks. No one wants to be third. We want to figure out how to be number one. That is the essence of Michael Rubin. So I want to thank Michael Rubin for agreeing to participate in Pucks in the Arena event. He led off the event and we were very happy to have him.

46:26Thanks also to my buddy, Mayor Ravich, for all his work in arranging this. What a treat that was. More importantly, though, I want to thank you for listening to The Varsity, an Odyssey podcast in partnership with Puck. I also want to thank the executive editors from Puck, Gabby Grossman, Ben Landy, John Kelly, and the great team from Odyssey, Bob Tabador and Patrick Antonetti. If you like this podcast, make sure to sign up for my newsletter, also called The Varsity. Head over to puck.news and use the code word TheVarsity, all one word, for a 20 % discount. And I will see you on Wednesday.

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