By Gary Symons
TLL Editor in Chief
In a major upset, Major League Baseball has dropped Topps from its trading card roster, and has given the lucrative licensing agreement to sports merchandise giant Fanatics.
The change will take place over time, due to the nature of the contracts. The Topps contract for player images expires in 2022, which the players’ union controls, while the contract for MLB team logos expires in 2025.
The decision, which reportedly took Topps completely by surprise, is a devastating blow for the company. The MLB is not only one of Topps’ most important licensing partners, but the move also crushed the company’s plans for a $1.3 billion go public dealt with Mudrick Capital Acquisition Corp II.
As reported in The Licensing Letter in April, Topps had announced a deal to merge with a Special Purpose Acquisition Company, or SPAC. The merger was set to go to a shareholder vote next week, but the entire deal was cancelled the day after the MLB decision. (See the original story at the link below)
Topps’ executive chairman Andy Redman said the company had been effectively sucker punched by the MLB, and was left completely in the dark about the talks between MLB, the players’ union and Fanatics.
Topps was “… unaware that Major League Baseball was negotiating with anybody other than Topps regarding our rights beyond 2025,” he said, adding the company only learned last Thursday “… that a deal was completed, finalized and exclusive with Fanatics.
“Similarly, as recently as the All-Star Game on July 13, in two one-hour conversations, Evan Kaplan from MLB. Players Inc. never indicated to Topps that the union was negotiating with any other parties about our rights,” Mr. Redman added.
Fanatics has said little about the deal to date, but the company has been very aggressive about its expansion into new sectors of the sports licensing industry. Much larger than Topps, with a recent valuation of $18 billion, Fanatics has been acquiring key competitors and has also been negotiating deals with major league teams that go beyond its traditional market in apparel, such as hats, T-shirts and hoodies.
It now appears that the establishment of a new digital collectibles division called Candy Digital in June was the first step in a plan to move into the trading card market. Seen in retrospect, the company’s work on NFTs (non-fungible tokens) was likely a precursor to the takeover of the trading card business by Fanatics.
Back in April of this year, Topps had launched its own NFT offering with the MLB, but in June, only two months later, Candy Digital also teamed up with the MLB in what the league called an “expansion” of its NFT program.
“I feel like this is e-commerce 25 years ago,” said Fanatics CEO and Founder Michael Rubin. “I’m not just talking about NFTs but leveraging sports digitally. We sell millions of MLB jerseys a year. Why shouldn’t a jersey come with an NFT? We haven’t even begun to imagine where this can go over time. It’s our responsibility to innovate and disrupt this business.”
It’s fair to say that Fanatics has definitely disrupted the business this week, hitting a bases loaded home fun versus their top competitor in the sports collectibles business.
Fanatics says the deal with the MLB will result in the creation of a new trading card company. Representatives of the MLB and the players’ union will be given seats on the Board of Directors, and the league may even get a stake in the company.
The blow against Topps will also be a worrying development for others in the collectibles industry. Fanatics has a history of acquiring other companies after successfully taking away some of their business. for example, when Fanatics won the rights for major league uniforms from the company Majestic, it later acquired Majestic.
As a new player in the industry, Fanatics may try to acquire one of its competitors. Currently the three top trading card companies include Panini, Upper Deck, and of course Topps itself.
Even more worrying for competitors is the fact Rubin is very closely tied to all of the major leagues in North America. In fact, he is the current owner of the NBA’s Philadelphia 76’ers and the NHL’s New Jersey Devils.
Reporting by the Wall Street Journal, relying on sources close to the deal, also indicates that in addition to the MLB and the MLB Players’ Association, the NBA, the NBA players’ union, and the NFL players’ union will all be getting a stake in the new trading card company being formed by Fanatics.
Right now, the NBA and the NFL have licensing agreements with Panini America. Most observers in the space now expect Fanatics will make a play for those licensing agreements as well.
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