Fanatics CEO Michael Rubin sells the Sixers property, paving the way for the sports betting move

Fanatics CEO Michael Rubin is selling his stake in Harris Blitzer Sports and Entertainment, which owns the Philadelphia 76ers and New Jersey Devils, according to a statement.

Rubin’s retirement from the ownership group paves the way for Fanatics to push further into sports gambling and digital collectible products such as NFTs. Under league ownership rules, Rubin could not own part of a team and operate a gaming platform at the same time.

“As our Fanatics business has grown, so do the hurdles I have to overcome to ensure our new business doesn’t conflict with my responsibilities as a co-owner of the Sixers,” Rubin said in his statement. “With the launch of our trading card and collectibles business earlier this year – which will have individual contracts with thousands of athletes worldwide – and an upcoming sports betting operation, these new businesses will enter in direct conflict with the ownership rules of sports leagues. Given these realities, sadly I will sell my stake in the Sixers and return from co-owner to fan for life. “

Fanatics, which started as a sportswear company and has deals with four major US sports leagues, raised $ 1.5 billion in March at a $ 27 billion valuation. Earlier this year, the company bought the Topps collection company for $ 500 million and also owns the Candy Digital digital collection company. Now with Rubin separating himself from sports ownership, he has his sights set on the sports gambling market, an area where he previously told Yahoo Finance he was “super bullish.”

“Online sports betting and iGaming is an activity that we believe will be a very significant long-term business for us,” Rubin told Yahoo Finance in February. “I’ll say it: we want to be the # 1 player in the world in the long run. So in a decade, I’d be disappointed if we weren’t the best players in the world, both online sports betting, iGaming. We’re just getting started.”

DST in 31 U.S. territories, sports gambling has taken off since its legalization in 2018. The total market is projected to reach more than $ 100 billion by the end of 2025. With legislation in place in three states, including California, the market is expected to reach grow after this year’s mid-term election cycle.

Philadelphia 76ers owners Josh Harris and Michael Rubin, also CEO of Fanatics, assist during the first half of the second Eastern Conference semi-final game against the Miami Heat at FTX Arena on May 4, 2022. (Photo by Michael Reaves / Getty Images )

An expensive endeavor

While Fanatics is well positioned to engage with potential bettors and flaunt promotions aimed at the correct consumer, the company will still face costly headwinds.

DraftKings (DKNG), FanDuel (PDYPY), Caesars Entertainment (CZR), and MGM International (MGM) have all been in the sports gambling industry for several years, but are not making a profit at their overall bookmakers. DraftKings posted a net loss of $ 468 million in the first quarter of 2022.

Wall Street analysts told Yahoo Finance that it normally takes a company about three years to make a profit in a particular state. Fanatics will start three years behind those companies in key states like Pennsylvania, where some bookmakers have already experienced positive cash flows.

Opening in a new state can also be expensive. Jeffries recently estimated that DraftKings will spend around $ 650 million to open operations in California if the market opens in 2023.

While it may appear that Fanatics is starting the race a lap late, Rubin believes that entering this market later can be profitable in the long run.

“This business, like many others, so many people got into it early on because of how big and how big it will be,” Rubin previously told Yahoo Finance. “And there has been so much money invested and, in many cases, lost. I think this business would become a good business in the long run. Today it is a very difficult financial business, people are investing not hundreds of millions of dollars, but billions of dollars in losses this year and they will continue to do so. “

“From our point of view,” he continued, “we have probably the most digitally oriented transactional commerce brand and we have the best database of all sports. So this is a real structural advantage to help Fanatics become the ultimate leader in sports. this business and, at the same time, give a better experience to the fan “.

Josh is a producer of Yahoo Finance.

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