← Making It with Jon Davids
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John Davids
This guy made $1.5 billion from the NFL, but he doesn't own a team and he doesn't even play football. I'm talking about Michael Rubin, CEO of Fanatics. This is the company making branded merchandise for the NBA, wwe, NASCAR, and many more leagues. And how Michael got here was a wild ride. I'm going to tell you all about that right now. That's coming up in just a second. Welcome to Making it with John Davids. You can call me J.D. if you're a fan of this podcast, leave a rating and review wherever you're listening. And also take a of yourself listening to the show or grab a screenshot and tag me in it on Instagram, Facebook, TikTok or wherever. I'll repost it. Let's get the word out. Get my best stuff to your inbox@johndavids.com and now let's talk Michael Rubin. You're listening to Making it with John Davidson. So rewind to 1980. That's the year Michael is a young hustler learning the laws of commerce, supply and demand. His first attempt at business is a ski shop that he opens up at about 14 years old, and it is a disaster. But in the process, he manages to get his hands on a bunch of merchandise for pennies on the dollar skis. And he flips those skis for a quick $75,000 in profit. So now he's in the game, he's got some cash, and it's about to get really serious for Michael because he's learned something interesting. And that is it's better sometimes to sell the product, even if you don't make a lot of money on each individual unit. But if you can sell the whole thing for a whole bunch of money, we're in business. So Michael keeps on doing it. He's buying and selling overstock product from big brands, and he's quietly getting very good at it. You see, when brands make too much of something, they end up selling the merchandise. And so if you have a season where you're trying to sell a whole bunch of a certain kind of skis or bicycles or skates or baseball bats or whatever, and you can't sell that and you're moving on to the next season, you got to get rid of it quickly. So Michael gets his hands on that stuff, the overstock merchandise, and he's making a killing selling it. Before long, he's selling $50 million a year. Then he starts a company called GSI Commerce. He's building and buying more businesses, bulking up to play with the giants, doing the m and A game, trying to get bigger. And then in 2011, one of those giants takes him out. Ebay buys GSI for $2.4 billion. Big win. But we haven't even gotten to the good part of this story just yet. So Michael's got a $2.5 billion win under his belt. And next he pulls another baller move. He buys back a little chunk of GSI from ebay. This little chunk includes fanatics, which makes branded clothing for sports leagues. So they had had it inside GSI tucked away, and he buys it back. Then he modernizes the company with things like real time manufacturing, e commerce, and a whole bunch of new licensing deals with the sports leagues. And then growth explodes. Today, fast forward, Fanatics is a juggernaut valued at $30 billion. And the biggest investor in fanatics, you guessed it, the NFL. They went in for one and a half billion dollars. And Michael is still growing. You see, Michael's approach is so simple, but his execution is relentless. He sees value where others miss it and jumps on opportunity. From that first overstocked flip of skis to scooping up fanatics from ebay, he finds riches in the niches. Michael goes narrow and deep, aiming to own a huge slice of a single piece. No crumbs left. And he leans on big brands. Why build when you can borrow? And the world's biggest sports franchises are happy to share their brands with him as long as they can get a nice share of profits. Finding value where no one else is looking. I want to go into this point a little deeper. Finding value where no one else is looking. What Michael did with GSI was brilliant. He sells the company for $2.4 billion. Now, that wasn't all his because he had investors, but he probably made a few hundred million on that sale. And then he buys back a piece of company that he knows, or at least he suspects is not strategic to the buyer. So, ebay, maybe they wanted something else in the business, but this little thing called fanatics wasn't strategic. They were willing to let it go. You know, this actually happens more than you'd think. Dave portnoy did this. You guys know Dave portnoy and barstool. So Dave portnoy sells barstool to pen Entertainment back in 2020. And I think he sold it for like 550 million bucks. And then they sold it back to him in 2023 for $1. Now, in reality, it was a dollar plus 50% of profits on an ongoing basis. So it wasn't really a dollar, and there was probably also a lot of debt on it. But he got the assets back because those assets were of no value anymore to Penn Entertainment. They were actually a hindrance, and so Portnoy was able to buy them back. These things happen with founders. I've heard so many stories of founders selling their companies and then buying them back in whole or in part. And this is exactly what Michael did. He knew what was valuable inside GSI that was missing, maybe from ebay, and they didn't see it, or they just didn't want to see it. Boom, he snapped it up and then he blew it up. Quick break. So I can tell you about Influicity. That's the little marketing agency I started in my apartment about 10 years ago. Well, fast forward. It is not so little anymore. Influicity works with some of the biggest brands in the world, building customer communities that drive revenue. We do this through influencers, podcasts, paid media, social media content, AI, and so much more. You can learn more@influicity.com and hey, while you're there, check out our case studies. We have a lot of them. That's influicity.com Michael is also someone who leans on great talent. Jamie Salter is a great example. Now, you guys know Jamie Salter, if you listen to this podcast. Podcast, because he's the guy behind Authentic Brands, which I talked about in episode 167. And authentic brands does something kind of similar. They buy IP from bankrupt brands and then they do all kinds of things to exploit it and make it more valuable. But what's funny is that Michael went ahead and found Jamie Salter, and Jamie Salter was instrumental to making GSI what it was. But people in the comments when I posted this actually use that as a knock on Michael. They say, listen, Michael Rubin isn't so special. He just finds other people who are smarter than him and they do all the work. And it's like, yeah, I know. That's what makes it special. And that's what business is all about. It's not about being Batman or being James Bond or being Jack Bauer and doing everything yourself. When it comes down to it, you have resources like money and you have resources like people. And if you have money and you have people and you're able to put those two things together and a winning strategy, that's how great businesses are built. It's silly to think that you need to do it all yourself, that you need to be the smartest person in the room and if you don't, then you're somehow cheating. I don't see it as a knock on Michael that he finds people that are smarter than him and utilizes them. I actually see it as an advantage because if you want to go far, you got to do it with a team. Because you know what they say, if you want to go fast, go yourself. If you want to go far, do it with great people. The other hidden gem in this story is picking the right customer. So rather than selling direct to the consumer, Michael figured out early on with the ski shop that he needed to sell in bulk. And that one move changed everything. There are so many applications for this. I did this in my business. I started selling to consumers, and then I realized when it comes to marketing services, you really have to sell to businesses. B2B. And there are lots of examples of this in business. I'll give you a few. Mountain Dew is a really good one. They launched the drink in the 1940s and it was selling okay. But over the decades, it was lagging. Nobody wanted to drink the dew, so the company pivoted hard and they went all in on gamers. In the 80s and 90s, they made it the quencher for extreme sports, and that customer ended up loving it. Today, Mountain dew is a $7 billion brand. Quaker Oats, another example. Back in the 1800s, Quaker Oats started out with one key customer, horses. Apparently they love oats, but Quaker wanted to sell to different people, ideally humans. So they repositioned this product. They had oats as oatmeal. Very healthy, very good for you. And people wanted it. And now they sell more oats than anybody. Harley Davidson, maybe one of the most famous examples. They start out in 1903 and they're targeting hardcore biker, and things are good. But soon the competition gets really tough. So Harley gets smart and they lean into their heritage, classic Americana, and they find a brand new buyer. Middle aged dudes with money to spend, and they're burning plenty of money. Harley Davidson made $5.8 billion last year. If you were selling financial advisory services, you'd be better off selling it to older people with lots of money versus teenagers. If you were selling dog walking services, you're better off selling it in rich neighborhoods to people who can really afford it. If you're going to open a thrift shop, do it in a neighborhood with lower average incomes because people with a lot of money don't want to shop at a thrift shop. Michael realized this from the beginning. Pick the right customer, that's 50% of the battle. And the last point in this story that really jumps out at me, because I see it over and over again, is that the greatest victories often come from the biggest moments of disaster. We saw this with Paige Mykowski when I told you the story of Aviator Nation and how the brand really blew up in Covid when she desperately had to sell all her merchandise in an online blowout sale. And then it wound up flooding the feeds on TikTok and Instagram and got Uber uber famous overnight after 20 years, of course, of being a cult brand. We see this over and over where in moments of desperation, where people really are out of choices, their backs against the wall, that's when they have their biggest moments of victory. But if you're in the 99% of people who simply give up and throw in the towel when times get really tough, you don't give yourself the chance, the opportunity to really shine when your moment comes. So in that moment where Michael was absolutely against the wall, he had made a huge mistake. He had all this ski equipment. He's a young guy. Oh, I made a huge mistake. My friends are going to laugh at me. My mom and dad are going to say, oh, they were right. I never should have done this. He winds up flipping it for $75,000 pennies in the dollar, gets his money, gets that cash to go on and do amazing things. More importantly, learns a very valuable business lesson. There's always a way to make a buck. You just got to be the most creative person in the room. And that's the story of Michael Rubin. That's the story of fanatics. If you enjoyed this story, leave a comment or a rating. Review Wherever you're listening to this podcast or on the YouTube, share it with a friend and get my best stuff to your inbox@johndavids.com Talk to you guys next time.