12 Part Blog Description

Are you looking to learn as much as you can about the business of sports licensing? Then please read the 12 Part "An Insider's Guide to the World of Licensed Sports Products in 12 Parts: Practical Lessons from the Trenches" - all 12 parts of the blog can be found within this site. Click here to start with the Introduction.

Monday, March 19, 2012

How do I sell to the ecommerce / online stores of the major sports leagues? Can you say Kynetic?

How do I sell to the ecommerce / online stores of the various professional sports leagues? I was recently asked this question by a number of people, and thought that I should post my answer for others to see. As always, I welcome feedback so if I have any misinformation or outdated information, please let me know!

1. League ecommerce stores:

In most cases the leagues farm out the ecommerce / online store portion of their websites to a third party. To the consumer it appears to be the league running their own online store, but it is actually a third party. Here is who five of the biggest selling leagues work with:

A. The MLB e-comm site was run by GSI Commerce until late 2011 – now run by Kynetic LLC.
MLB online store logo

B. The NFL e-comm site was run by GSI Commerce until late 2011 – now run by Kynetic LLC.

C. The NBA e-comm site was run by GSI Commerce until late 2011 – now run by Kynetic LLC.
NBA online store logo

D. The NHL e-comm site was run by GSI Commerce until late 2011 – now run by Kynetic LLC.
NHL online store logo

E. The NASCAR e-comm site was run by GSI Commerce until late 2011 – now run by Kynetic LLC.
Nascar online store logo

Notice anything?

Here’s the background…

2. The story of Kynetics

- In 1999, 25 year old and serial entrepreneur Michael Rubin started Global Sports Incorporated.

GSI Commerce logo
- GSI grows and grows, and by the beginning of 2011 GSI Commerce (as it is was then known) is running 200+ online e-commerce sores for all sorts of blue chip companies including the NFL, MLB, NBA, NHL, Nascar and ESPN. In a short 12 year span GSI had become the 800 pound gorilla in ecommerce world – in addition to the well-known, high profile sports sites, they also run e-comm sites for 175+ other well known companies including Ace Hardware, Calvin Klein, PBS, QVC, Restoration Hardware, Toys R US, Speedo and Ralph Lauren.

- In early 2011 GSI buys Fanatics, a leading provider of outsourced e-commerce solutions to colleges, conferences, professional sports teams and sports media properties. Included are the e-comm stores for more than 20 NCAA Division I programs including Ohio State, Florida and Oklahoma.

- In June 2011 GSI was purchased by eBay and becomes known as “GSI Commerce, an eBay Inc. Company”. But of interest to readers of this blog is the fact that at the same time and as part of the transaction Ebay sold 100% of GSI's licensed sports merchandise business to GSI Founder and CEO Michael Rubin. Talk about shrewd – the jewel of the crown was spun off to the original owner! GSI started in 1999 as a company selling sports products, and when it was sold to Ebay, Ebay divested itself of the sports component of GSI because Ebay believed “these businesses are not core to its long-term growth strategy”. Un huh…

Kynetic logo
- Thus it is that a company founded in the summer of 2011 – Kynetic - is now , as per their website, “The largest seller of licensed sports merchandise in the world. Fanatics operates the official stores of the biggest names in sports, including the NFL, NBA, NHL, MLB, NASCAR, ESPN and more than 60 Division I athletic programs and conferences, professional sports teams and top sports media properties. With more than 150,000 items, Fanatics offers the broadest product assortment—spanning professional and collegiate teams—through league partnerships and Fanatics’ own network of sites.”

This site lists most of Fanatics’ partners, but as of March 2012 still doesn’t list the NFL, MLB, NBA, NHL or Nascar, ie it doesn’t list the former blue chip GSI e-comm sports sites even though they are all now part of Kynetic. My guess is this is deliberate – please read on.

- GSI, and now to a certain extent Kynetic, seemed to make it their business to make it seem as though every one of their websites was run by the league/company/partner being represented, and as such you will almost never find any reference to GSI/Kynetic anywhere on the site. It's almost remarkable (to the point of being eerie) how good they are at “hiding” the fact that they have anything to do with the site. Greater minds than mine are at work here…

- That being said, Fanatics seem to have a different philosophy and most of their team and school sites link back to their corporate site – www.teamfanshop.com . But the NFL, MLB, NBA, NHL and Nascar sites remain shrouded in mystery, and thus the reason for this blog – to explain who is behind the majority of North American sports leagues e-comm websites. If you look at GSI's website right now (March 2012), it still shows the NFL, MLB, NBA, NHL and Nascar as their clients, but since September 2011 they have been part of Fanatics/Kynetics. I am not suggesting there is skullduggery going on, I am simply trying to answer the question posed in the title of this blog.

3. More on Kynetic

Kynetic consists of three consumer Internet businesses: Fanatics, the world’s leading online retailer of licensed sports merchandise; Rue La La, a leading online private sale destination in the U.S.; and ShopRunner, an innovative members-only service that aggregates shopping benefits from the top retailers and brands.

The Philadelphia Business Journal wrote a great article on Kynetic and Michael Rubin in September 2011 and I have copied some of the content below in italics. Many thanks to the PBJ.

“Rubin has been an entrepreneur since 1986, when he opened a ski sales and repair business in his parents’ house at the ripe old age of 12. I detailed the chain of events that led him from it to forming what would become GSI Commerce in this 1999 story.

GSI’s revenue was $1.36 billion last year (2010), and the company was on its way to some serious growth this year when eBay bought it, due in no small part to the March acquisition of Fanatics for $277 million. When GSI bought Fanatics, the Jacksonville, Fla., company operated more than 250 e-commerce websites, including www.footballfanatics.com, and an additional 60 e-commerce stores for collegiate and professional sports teams and media organizations. It employed 400 and had posted non-GAAP income from operations of $23.8 million on revenue of $186.3 million last year.

The Fanatics that is part of Kynetic also includes the licensed sports merchandise operations that GSI had before buying it. Those posted revenue of $300 million last year (2010) and included the e-commerce operations of the National Football League, Major League Baseball, the National Basketball Association, the National Hockey League, NASCAR and ESPN.

Rubin anticipates Fanatics will post revenue of $600 million to $700 million next year. He said the company employs 500 in Jacksonville and will have 100 employees in Kynetic’s Conshohocken PA office when that opens (Nov 2011). Fanatics is still run by Alan Trager, its CEO prior to its purchase by GSI. [The other two divisions of newly formed Kynetic are] Rue La La [which] employs 400 at its headquarters in Boston and its other offices in New York and Seattle., and ShopRunner [which] will employ a little less than 50 people at Kynetic’s Conshohocken headquarters.

Fanatic/Kynetic also has fulfillment operations in Kentucky that can employ as many as 300 people, depending on demand, which peaks during the holiday shopping season.”


4. Kynetic’s 411

Kynetic LLC’s head office of approximately 100 employees in Conshohocken PA is located close to GSI’s in King of Prussia PA:
Kynetic LLC
Millennium Corporate Center
225 Washington Street, 3rd Floor
Conshohocken, PA 19428
Ph: 484-534-8100
Ph #2 - Fanatic admin within Kynetic: 484-567-8383
www.kynetic.com

The bulk of the Fanatic employees (500+) work out of Fanatic’s office in Jacksonville, FL:
Fanatics, aka TeamFanShop
5245 Commonwealth Avenue
Jacksonville, FL 32254
Customer Service: 1-877-827-8965
Business Development: 904-421-1897
www.fanatics.com
www.teamfanshop.com

5. Selling to a “league” e-commerce website

Let’s continue to use the NFL as our example… If you would like to sell a licensed product to www.nflshop.com, the NFL ecommerce website run by Kynetic/Fanatics, the Kynetic/Fanatics buyer will be trained to make sure you are an NFL licensee in good standing before they can/will buy from you. If you are not a licensee, they can not and will not buy from you. The Kynetic/Fanatics buyers will work very closely with their NFL counterparts to make sure this principle is closely followed.

With respect to the NFL ecommerce site vs individual team ecommerce sites - Kynetic/Fanatics runs the NFL ecommerce site. But every team has their own ecommerce site and in most cases the team site is run by someone other than Kynetic/Fanatics (Kynetic runs a handful of team ecommerce sites including the Denver Broncos, NY Giants and San Francisco 49ers). The teams are free to either run their own sites or to farm them out to someone else. You need to contact each team to find out how each does it – even if I provided you with a list by league and team, it would be outdated the moment I published it. The e-commerce landscape vis a vis team e-comm sites changes too quickly for me to keep up, so I encourage you to go directly to the team and ask who runs their ecommerce store.

6. Advertising on a league website

A. If you are interested in advertising on the League's ecommerce site, then you would go through Kynetic/Fanatic. I don't know this for a fact, but I am fairly confidant in saying that Kynetic/Fanatics has all sorts of restrictions as to who can/can't advertise on each site, and ultimately someone at the league would have to approve each and every advertiser. What they would be checking is that the potential advertiser is either: a licensee of the league; a sponsor/marketing partner of the league (ie Coke); or if not a sponsor/marketing partner, then at least not in conflict/competition with someone who is (if Coke is a league sponsor, Pepsi wouldn't be allowed to buy ad space online).

B. If you are interested in advertising on the League's webite (but not the ecommerce site), you would start by contacting the league itself. In this case the same vetting process would happen - they would thoroughly check to see that the potential advertiser is either: a licensee of the league; a sponsor/marketing partner of the league (ie Coke); or if not a sponsor/marketing partner, then at least not in conflict/competition with someone who is (if Coke is a league sponsor, Pepsi wouldn't be allowed to buy ad space online).

I hope this helps and as always, please call or email if you have other questions or information to share with me!

Scott

PS In June 2012 Kynetics, through their Fanatics Division, bought a licensed sports product company Dreams Inc. (aka Dreamscorp). It is quite interesting to note that Dreams Inc. was both a retailer (Dreams Inc. owned a chain of stores known as Field of Dreams - once 30-ish bricks and mortar stores, now downsized to roughly 10 stores - plus an e-commerce operation) and a licensee (Dreams Inc. owned Mounted Memories, a licensee of most of the major sports leagues plus other licenses). Thus by purchasing Dreams Inc., Kynetics and Fanatics have clearly established themselves not only as America's leading licensed sports product e-commerce retailer, but also a leading sports memorabilia retailer AND a sports league licensee - a very unique combination.

- To read more about the acquisition, please see this Fanatics newsrelease. When the newsrelease mentions the figure of $150 million, don't be confused into thinking this is what they paid to acquire Dreams Inc. - I don't know what the figure was but I suspect a whole lot less than $150 million.

- To understand more about what business Fanatics (and therefore Kynetics), is now in by virtue of this acquisition, please see this section of Fanatics website. As their website clearly states, they are now in the business of "Licensing and Manufacturing - Fanatics holds licenses for over 600 colleges and universities, as well as professional leagues and organizations. This licensing strategy is supported with state-of-the-art manufacturing, sourcing, and customization capabilities."

- The impact of this development should not be ignored - Fanatics can now be a competitor to many of their suppliers - a somewhat frightening prospect to existing licensees, many of whom may be unaware of this situation. At the very least, this is something existing sports licensees, especially those who sell to Fanatics, should be keenly aware of.

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Thank you for taking the time to add a comment - all input is welcome, especially the constructive kind! All the best - Scott