Fanatics: Merchandise Giant to Sports Betting Contender

In the competitive landscape of U.S. sports betting, Fanatics has emerged as a formidable challenger, leveraging its established merchandise empire to fuel its ambitious expansion into the gambling sector. Much like Apple TV+ is subsidized by Apple's hardware sales, Fanatics is using its profitable merchandise business to bankroll its sports betting venture, creating a unique competitive advantage in the process.

The Fanatics Empire

Fanatics reported impressive growth in 2024, with total revenue reaching $8.1 billion, a 15% increase from the previous year. The company's core Commerce division, which includes apparel and merchandise, remains the backbone of the business, generating $6.2 billion—or 77% of total revenue. Fanatics Collectibles contributed $1.6 billion, while the newer sportsbook division pulled in $300 million, according to Sportico.

This diversified revenue stream allows Fanatics to operate differently than pure-play betting companies. As CFO Glenn Schiffman noted, "Profits from our commerce business, retail, and collectibles businesses are funding that investment in gaming."

With a strong financial foundation, Fanatics has been able to invest aggressively in customer acquisition, technology, and marketing, positioning itself as a serious competitor.

Rapid Market Share Growth

Since launching in late 2023, Fanatics Sportsbook has made remarkable progress in capturing market share. According to JMP Securities, Fanatics has now captured a 6.7% market share as of January 2025, putting it within striking distance of BetMGM's 7.5% and well ahead of Caesars Sportsbook's 5.3%.

This growth is particularly impressive considering Fanatics only held around 0.5% market share when it entered the market, growing to approximately 5% by the end of 2024, according to Eilers and Krejcik Gaming. While still far behind industry leaders FanDuel (36.9%) and DraftKings (36.3%), Fanatics' trajectory suggests it's poised to become a serious competitor in the space.

Fanatics' ability to scale quickly is a testament to its brand recognition and existing customer base. The company has millions of customers who already purchase sports-related merchandise, providing a built-in audience for its sportsbook.

The Data Advantage

Perhaps Fanatics' most significant competitive edge lies in its unique access to customer data. The company's established relationships with millions of merchandise buyers provide invaluable insights that can be leveraged to enhance its betting operations.

When sports fans purchase team merchandise through Fanatics, the company gains an understanding of team allegiances, spending patterns, and engagement levels. This data can be used to create highly targeted betting promotions and personalized experiences that resonate with users on an individual level.

Fanatics has already begun implementing this strategy. During peak merchandise sales periods like Cyber Week and early December, the company saw sportsbook signups increase by over 200% compared to weekly averages. When MLB teams unveiled new spring training caps, Fanatics offered $100 bet credits to merchandise buyers in states with legal sports betting.

This level of data-driven engagement gives Fanatics a major edge over competitors, who often rely on expensive advertising campaigns to acquire customers. By integrating betting offers within its existing ecosystem, Fanatics can efficiently convert merchandise buyers into sportsbook users.

The Road Ahead

While Fanatics has made impressive strides, challenges remain. The U.S. sports betting market is dominated by FanDuel and DraftKings, which together control more than 70% of U.S. bets. Breaking this duopoly will require continued investment and innovation.

However, Fanatics' approach of using its merchandise business to subsidize betting operations while leveraging cross-platform data appears to be working. As CEO Matt King noted, "We're trying to approach this market differently than every competitor has to date."

If Fanatics can continue to convert merchandise buyers into betting customers while using its data advantage to create more effective betting algorithms and personalized experiences, it may achieve profitability faster than competitors who lack these synergies, potentially reshaping the sports betting landscape in the process.