The spring training uniform fiasco has led to more scrutiny for Fanatics, a company that had, until recently, been widely considered an American success story. CEO Michael Rubin, a college dropout, grew Fanatics from a ski and snowboard business into what some now call “the Amazon of Sports.”
Thanks to its connections with the leading U.S. sports leagues, Fanatics has quickly become the dominant player in nearly every aspect of the sports licensing industry. It manufactures and sells everything from team hats and T-shirts to logo-adorned license plate frames and birdhouses.
But uniforms are not the only aspect of Fanatics’ licensing strategy that has elicited controversy. Over the past few years, Fanatics has undertaken an aggressive campaign to acquire the exclusive rights to produce the officially licensed sports trading cards for not only MLB but also the NFL and NBA. In some cases, these deals are set to run for as long as 20 years.
As we explain in a forthcoming article in the University of Illinois Law Review, Fanatics’ consolidation of the sports card industry threatens to reduce the company’s incentive to innovate or invest in trading cards, risking a stagnant future for the hobby.
Pro sports get exclusive
In order to produce apparel or memorabilia featuring official team logos, manufacturers must secure the legal right to use the teams’ trademarks, the intellectual property that legally protects teams’ names and emblems.
The companies will typically acquire these legal rights by entering into contracts, called licensing agreements, with a particular sports league, giving the manufacturer the right to use all league and team logos on its products.
Historically, U.S. sports leagues have granted multiple companies these rights.
In recent years, however, leagues and manufacturers have tended to favor exclusive licenses – agreements that ensure that only a single company will have the right to use the league’s trademarks on a particular type of product. EA Sports, for instance, has held the exclusive rights to produce NFL video games – via its Madden franchise – for nearly 20 years, giving it an effective monopoly over this product line.