The troubled outlook for Sports Illustrated is of big concern to its current publisher, Arena Group Holdings, which missed a year-end royalty payment and now faces the likelihood it will lose the ability to publish SI and, for its troubles, hand over $45 million.
For SI’s owner, Authentic Brands Group, the situation is less dire. The SI brand is just one among dozens Authentic controls, from seedy to luxurious, niche to mass market. They include Frederick’s of Hollywood, Juicy Couture, Reebok, Volcom and a minority position in Shein, the low-priced fast fashion brand flooding the American market for Instagram-driven consumers.
“SI is a valued part of our family of brands, and as is the case for all our IP, we are steadfast in providing stewardship that ensures the brand’s integrity and longevity,” Authentic said in a statement to Sportico. “As we continue discussions with potential publishers for Sports Illustrated, we remain resolute in finding a partner who will continue its legacy of excellence and trust within its audience.”
Unlike every other owner in SI’s vaunted history, Authentic isn’t a publisher, but a collector of brands—and just their intellectual property, no hard assets. Authentic was founded in 2010 by Jamie Salter, a veteran of the private equity sector where firms buy up distressed brands to wring new revenue streams from them, usually by licensing them to others who do the heavy lifting. Authentic’s primary shareholders include private equity firms CVC Capital (which also has an investment in LaLiga), HPS, BlackRock, Jasper Ridge and Singapore’s sovereign wealth fund GIC, according to data compiled by S&P Global Market Intelligence.
In 2019, Authentic bought the SI brand—its trademarks, photo archive, book inventory and other assets—for $81.9 million and a provision to pay up to $20 million more to the seller by 2027 if certain undisclosed benchmarks were reached. That represented just a fraction of the $300 million annually Authentic spent on acquisitions in the years before and after buying SI, according to data contained in a 2023 note from S&P Global Ratings, which rates ABG’s billions of dollars in debt.
And best evidence suggests the SI brand contributes a small part of Authentic’s overall business. In the year ended June 2023, privately held Authentic generated nearly $1.2 billion in revenue, according to Moody’s Investors Service. Its leading brand is Reebok, which Authentic bought from Adidas for $2.5 billion in 2022, followed by Nautica.
By comparison, the Sports Illustrated publishing business from Arena probably generated a bit over $15 million annually for Authentic, based on the fact Arena disclosed it missed a $3.75 million quarterly payment to end 2023, its minimum royalty (most financial terms are redacted in SEC filings detailing the license agreement, and Arena doesn’t disclose SI-specific revenue in its reports). A senior Authentic executive told Sportico the publishing income is now a minority of the brand’s revenue—with events and licensing for things like sportsbooks, resorts, youth sporting events and nutritional products providing the majority.
Still, even if non-publishing revenue is double what Arena paid for the magazine rights, SI isn’t even 5% of Authentic’s overall sales. In 2020, SI and four other brands—Barney’s, Brooks Brothers, Lucky Brand and Volcom—generated revenue of $42.3 million as a group, according to financial information disclosed when Authentic planned to hold an IPO. It elected not to go public. In the years since that filing, Authentic has added another 16 brands, including David Beckham, which is now the company’s third best-revenue producer.
These days, the SI brand, though profitable, is a small component of Authentic’s overall health. Take for example SI Sportsbook. It’s licensed to 888 Holdings, a publicly traded betting and casino company best known internationally for the William Hill brand. In the U.S. people can access SI Sportsbook in Colorado, Michigan and Virginia, according to SI’s own December review of SI Sportsbook. As of last summer, SI Sportsbook held 1% market share in Michigan, according to 888.
It’s uncertain how well SI Sportsbook is doing today for 888—and by extension Authentic: In its recently released results for 2023, 888 reported its business outside the UK fell 16%, even as it saw “double digit growth” in core markets of Spain and Italy. It didn’t address the U.S. market specifically in the report, but the company says growth in America is robust.
“We’re continuing to see strong demand for SI Sportsbook’s iGaming and sports betting products from the players. In Michigan, for example, we’re seeing great momentum, and have seen similar stories across other states. This has led to two consecutive record-breaking months in terms of the revenue, which reflects the continued strength of SI Sportsbook,” Howard Mittman, president of SI Sportsbook, said in an email.
Authentic’s real business is in fashion and suburban mall marques. Before acquiring Reebok, more than 80% of Authentic’s sales came from retail brands, which also include Forever 21, Nautica, Nine West and Aeropostale. The entertainment segment of the business, which includes SI, contributed less than 20% of sales, including from image rights for Shaquille O’Neal, Marilyn Monroe, Dr. J and Muhammad Ali, among others.
This year Authentic probably will generate $1.5 billion in royalty revenue from some $30 billion in retail sales from its more than 1,600 partners. Rounding out its top five brands are Eddie Bauer and Aeropostale. The setback with Arena probably means SI is a long way from approaching those brands’ returns.
“Most people look at SI and think about the iconic magazine,” Authentic said in its July 2021 draft IPO prospectus. “What they don’t see is the brand’s huge potential to grow horizontally: digital, sports gaming, event ticketing and world-class immersive events.”
So far, the SI brand still seems like a lot of unfulfilled potential for Authentic.
(This story has been updated in the ninth, 10th and 11th paragraphs with details of SI Sportsbook’s business and a quote from SI Sportsbook president Howard Mittman.)
