The National Football League (NFL) has sealed a pact to invest $95 million and acquire a 3 percent equity stakes in Fanatics, the world's leading online seller of licensed sports merchandise. The NFL Player Association (NFLPA) and Major League Baseball (MLB) also obtained stakes. The MLB already made an $50 million investment (with 1.5 percent stake), while the NFLPA invested $5 million (with less than a 1 percent stake) in Fanatics.

The Sports Business Journal originally reported the story.

As the online sports retailer's revenue continues to grow, the Fanatics' market value is worth $3.17 billion.

By comparison, according to a report, sports retailer Dick's Sporing Goods has $5.8 billion in market capitalization and generates $7.2 billion in revenue. Entrepreneur Michael Rubin spent $277 million to become a chairman of Fanatics six years ago.

"If you're looking to add billions of dollars in revenue, like the NFL is, you probably have to make some investments to get there," former NFL consumer product chief Frank Vuono said. "It's a smart model for Fanatics, so of course you wonder who else will adopt it. Still, when companies like Starter went public 20 years ago based on their success with the NFL license, we talked about the same kinds of models.

The impact of e-commerce on business model

Thanks to the Internet, e-commerce has changed the way the licensed online sports retailers sell products for professional and collegiate sports leagues, including more than pro sports and college teams, in order to generate revenue. Fanatics has formed a business model and strategy that can grow online sports retailers and increase profit by producing revenue.

"Fanatics is the most disruptive force in licensing for a long time," co-founder of Fermata Partners Kit Walsh said.

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"No one in the licensing business knows what the new model for sports licensing is going to be, but we all know Michael Rubin is investing in it."

Fanatics has embraced a model that helps enhance VF Corporation's licensed business capabilities to manage rights in sports licensing, including the National Basketball Association (NBA), National Hockey League (NHL) and MLB uniform rights. The retailer establishes physical stores for several properties such as NASCAR, Kentucky Derby and among others.

Fanatics' investment in technology and production

Prior to joining Fanatics, Rubin established Global Sports (which would turn into GSI Commerce) in 1998.

While at GSI Commerce, he managed online shop rights to all the major sports leagues and making certain that his company delivered items quicker than competitors that offered a virtual service. In 2011, GSI Commerce was sold to e-Bay for $2.4 billion.

The NFL shows how equity investments can help technology companies such as ESPN, DirectTV and Electronic Arts flourish tremendously. The NFL ownership source told the Journal that Fanatics has a great room to grow by investing in technology and production.

The company is spending more than $100 million within their space.

Fanatics, which has a deal with Under Armour starting in 2020, will produce and supply products to MLB teams with all on-field gears, such as uniforms and game-day and practice outerwear. Those items have been produced by Majestic Athletic, which currently has a deal with Nike for apparel productions. The deal between Majestic Athletic and Nike runs until 2019.

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