Installed-Base Arbitrage
Enter a market whose biggest cost is customer acquisition — when you already own the customers.
The biggest cost for DraftKings and FanDuel is acquiring customers. Fanatics already had direct relationships with 100M+ sports fans and a known brand, so its effective acquisition cost is near-zero for a huge installed base. That structural advantage funds a better value proposition rather than ad spend: Fan Cash (a currency earned on every bet and spendable across betting, tickets, merch, collectibles), plus 'free insurance' that removes an injured player from a parlay in the first quarter. The thesis: if the value prop is genuinely better and you didn't have to pay to acquire the customer, you can take share from a duopoly over time.
- Attack a market where the incumbents' dominant cost is the thing you already have for free.
- Spend the structural advantage on a better product/value proposition, not on outspending incumbents on ads.
- A loyalty currency that is actually burned (not hoarded) recycles customers across all your verticals.
- Being the underdog against a duopoly is a feature — 'people telling us we have no chance, that's love language.'
Used to justify the betting-and-gaming entry in 2021-2023. Fanatics reached ~7.5% US sports-betting share roughly 20 months in, versus FanDuel/DraftKings' combined ~75-80%, having bought only PointsBet (Sept 2023) for its trading platform rather than building share through paid acquisition.