A year into new ownership, Sports Illustrated’s earnings have doubled through licensing deals
When Sports Illustrated was purchased by Authentic Brands Group for $110 million from Meredith in May 2019, the new owners were not after the magazine or its editorial operations.
Instead, ABG was after the lucrative business opportunities that could come from slapping SI’s logo on new products and businesses that fit nicely into the franchises and intellectual property that the brand developed over its nearly 70 years of covering sports.
The legacy sports publication had been losing millions of dollars in ad revenue in the previous couple of years before ABG came into the picture, according to a source familiar with the company.
Now Marc Rosen, ABG’s evp of entertainment, said Sports Illustrated is profitable and its earnings before interest, taxes, depreciation and amortization (EBITDA) has more than doubled since the May 2019 acquisition, which is on pace with the company’s forecasts. The company declined to share hard revenue figures.
This is thanks in large part to the 15 active licensing deals on going for Sports Illustrated that ABG signed in just over a year of owning the brand, said Rosen. ABG’s SI is also expected to close three to five additional deals in the fourth quarter, he added.
Part of the strategy for licensing is finding partners who can do the job better than can be done in-house, and given ABG was ranked as the third largest licensor of 2020 and sold $12.3 billion worth of branded products, according to License Global’s list of Top 150 Leading Licensors, the company thrives when it can find other companies to pay top dollar for SI’s name.
“The everyday conversations around sports now includes gambling and esports, things that weren’t in the conversation 10 years ago,” said Rosen.
Some of the new licensing deals coming at the end of the year include a new ticket sales business for secondary sporting events, including meet and greets with athletes. Additionally, like several other sports publishers, online betting is the new frontier where Rosen said he sees “a lot of upside.”
Arguably the most important deal that ABG has going for SI is its deal with The Maven, which paid ABG $45 million upfront in June 2019 for the right to SI’s editorial operations and print the magazine, and also includes an ongoing revenue share. A source familiar with The Maven said that currently approximately 60% the revenue earned from SI’s editorial operations comes from subscriptions while the remaining 40% comes from advertising. The company wouldn’t disclose additional revenue figures.
Acting as a bridge between ABG and The Maven-run editorial team is the Sports Illustrated Studios, which was created in May through a licensing deal with production company 101 Studios. Rosen would not disclose the terms of the deal but said members of the editorial team will be involved in creating films, documentaries, television shows and long-form podcasts.
Some tried and true licensing deals for SI include a swimsuit line tied to its Swimsuit Issue franchise, coffee table books and an art gallery and photography reprints business. Those businesses have been strong performers within the category, according to Rosen, adding that the SI Cover Store more than doubled its sales year over year.
But these categories are not known to be significant money makers on their own. Apparel as a category is likely to fetch in the range of $50,000 to $100,000 per year, with SI’s swimwear line likely being on the upper end of that scale, said one licensing consultant who spoke on the condition of anonymity. The consultant also priced the category of branded books and coffee table books at under $50,000 per year per book, adding that coffee table books are one of the hardest things to make money off of because all of the parties involved in the photographs (photographer, subjects, etc.) have to give the right to use their image, which usually results in a revenue share with each party.
In all, the consultant estimated that all together these businesses would give ABG only “a few hundred thousand dollars per year.”
“Apparel, books and art won’t generate enough revenue for this to be a successful acquisition,” said Stu Seltzer, president of Seltzer Licensing Group. The bigger opportunities that he said he sees for SI is its new ticketing business, its studio and particularly gambling.
The reason why publisher partnerships with online betting companies have been successful is because they have the authority of being trusted resources for their audiences and people are more likely to risk their money with a trusted source than on some random online betting outlet, Seltzer said.
“It’s plausible to say that gambling might be a successful venture because those with more disposable income are 50-plus and they know and respect and trust the SI brand,” Seltzer said.