Fanatics’ acquisition of Top of the World (ToW) signals both a further consolidation of the sports licensing business and another move toward becoming more vertically integrated, adding inhouse headwear manufacturing to the apparel production it acquired in 2017 when it bought Majestic. (It even bought a licensing agency, Fermata Partners — now Fanatics College — in 2017.)

Start of a spree?
The move by privately-held Fanatics to buy ToW as its parent Vetta Brands was being liquidated, is seen by some as the first leg of a potential Fanatics buying spree. The company raised about $350 million in financing earlier this year in deals which valued it at $6.2 billion. Top of the World has about $160 million in annual sales, according to founder Pete Wilson.

The purchase raises questions about how Fanatics, which operates more than 300 online and offline stores including the ecommerce business for all major U.S. professional sports leagues, will approach ToW’s ecommerce business  — for example, it has a store on competing ecommerce platform Amazon —  and whether it will expand the headwear manufacturing operation more deeply into professional sports.

Headwear muscle
Fanatics is a dominant player in many categories, but has had a relatively small headwear business; acquiring ToW positions it to compete with the likes of ‘47 Brands, New Era and others. ToW has licensing rights for about 600 schools. Prior to the acquisition, Fanatics had deals with about 150 schools.

As it has built manufacturing capability and expanded its rights portfolio, Fanatics has been increasing its presence with other retailers. For example, the website of retail competitor Dick’s Sporting Goods’ features more than 1,000 Fanatics-branded sku’s carrying MLB, MLS and, especially NHL licenses. Many of those items are in Dick’s brick and mortar stores.

Similarly, the newly minted “Top of the World, division of Fanatics” has distribution through such major retailers as Walmart, Sam’s Club, Costco, Meyer and Dollar General.

It also has struck alliances with other retailers. In one case, Kohls.com shoppers are able to select from “Hundreds of thousands of items [from Fanatics] across team apparel, jerseys and additional merchandise categories” – far beyond what it carries in its stores – and pay for them via kohls.com; Fanatics fulfills and ships the orders.

“It does give Fanatics immediate scale to better reach traditional retail such as mass retail, mid-tier and campus bookstores,” says Matt Curran, Director of Trademarks and Contract Compliance at the University of Southern California. “It will also help Fanatics improve both the quality and variety of their apparel, especially headwear offerings. The interesting question will be how Fanatics now approaches non-Fanatics e-commerce distribution, especially with Amazon, which has been an underserved market in collegiate licensing.”

Terms of the purchase weren’t disclosed. But Fanatics agreed to pay off factory liabilities and royalties owed schools for products that had been produced. Top of the World, which was solely focused on collegiate licensing, was struggling financially pre-pandemic and then faced sharp price competition when licensed face masks emerged as a business. It also was hit when the Big Ten and Pac-12 conferences – which account for a third of their business, according to Wilson – said they wouldn’t play football this fall.