Still On Their Feet - online sports sites - Internet/Web/Online Service Information

Industry Standard, The, July 23, 2001 by Terry Lefton

AMONG SPORTS SITES, ONLY ESPN.COM AND SPORTSLINE ARE PLAYING FOR KEEPS. THEY MAY YET TURN A PROFIT.

The business of sports on television has a wonderful simplicity to it. The leagues sell the rights to TV networks for billions of dollars, and the networks broadcast the games.

It hasn't quite worked out the same way on the Internet. Despite high hopes, the leagues haven't been able to get anything close to TV money for their Web rights -- until now. Last week the National Football League announced it had negotiated a five-year, $110 million deal to sell its online rights (with promotions and other services adding another $215 million). The last time those rights were up for grabs, five years ago, ESPN.com snapped them up for a mere $10 million.

But here's the weird part: The landmark deal comes at a moment when online sports sites look weaker than ever. This time around, for example, ESPN found the NFL's asking price too high. Other major players, like CNN/SI, Sporting News and Fox, are no longer serious sports players on the Net. But the league found a buyer in SportsLine, an ailing company whose stock was trading last week at under $2 a share. With backing from its content-sharing partner AOL Time Warner, along with Viacomowned CBS (Viacom's stake in SportsLine is 20 percent), SportsLine showed that the battle over sports on the Internet now has two major combatants.

There used to be more contenders in the game -- a lot more. A year ago, fans of even the most obscure sports could feed their obsessions on the Web, skipping from the big mainstream sites to an assortment of content and retail startups -- Quokka, Total Sports, Broadband Sports, Rivals, MVP.com, eFanShop.com, FogDog.

Then came the elimination rounds, and all those sites went the way of the XFL. Along the way, they burned through more than a half-billion dollars. Excluding the "league sites" (which operate under a different business model), only ESPN.com and SportsLine act as if they're playing for keeps. They are the ones with significant traffic (ranking first and second, respectively). Disney-owned ESPN keeps going because its franchise is so highly prized by its parent company. (The Mouse House has shrunk its other Web ventures.) SportsLine, on the other hand, pursued the NFL deal with its survival at stake. Neither site has turned a profit, but both now claim they can emerge as that most rare of creatures -- Net content properties that make money.

The Web's ability to galvanize communities should have been a perfect fit for sports and its audience. Fans are a loyal, devoted bunch who seek an endless stream of results, statistics and historical information -- perfect for the medium. Most important, the sports audience -- men between the ages of 18 and 34 -- is a marketer's dream. The Net was supposed to be a slam dunk for advertising.

But the advertisers aren't buying. It's not paltry numbers that are holding them back: ESPN is the perennial front-runner in online sports, with around 5.3 million unique visitors in May. SportsLine has a respectable 3.7 million. Even with its 2.3 million, CNN/SI has less clout, which is reflected in the fact that AOL excluded it from the NFL negotiations.

The SportsLine-NFL alliance suggests that both parties believe there's still money to be made in online sports. For SportsLine and its partners, the appeal is the drawing power of limited online-video rights (never before granted by the NFL), a potentially larger audience and a better case to make to advertisers. The deal could make SportsLine an attractive acquisition target.

But for now, the advertising drought that has devastated the Internet is forcing SportsLine and ESPN to downsize even as they try to bulk up subscription revenue. They have some decent offerings: ESPN's editorial quality is much praised (featuring Hunter S. Thompson as a columnist), and both sites run fantasy leagues as well as dabble in e-commerce with sports merchandising. But ultimately it's all about ads. "Everyone still feels that the big advertising dollars in sports will flow very naturally to the biggest sports sites," says Tonya Antonucci, director of production for Yahoo Sports.

Sports fans may crave stats and trivia, but what they want most is the game itself. And they won't get it from the Internet until -- and everyone is sick of hearing about it -- broadband access becomes ubiquitous. "When you open it up with broadband, you're likely to see new players," says Mark Mariani, SportsLine's president of sales and marketing. Before then, "the challenge for us is to be so well-established as a brand that [advertisers) have to come to us."

Powered by its name recognition and the promotional muscle of its TV parent, ESPN.com has always had an edge in traffic over SportsLine. What SportsLine has going for it is an uncanny ability to package and sell. When SportsLine ran the NFL's SuperBowl.com site this year, it hit a record $4 million in ad revenue. SportsLine has also been more adept at direct marketing. "It's our secret sauce," adds Mariani. A prime example is the company's successful e-mail campaign to 1.7 million registered NFL fantasy gameplayers that backed a Frito-Lay Super Bowl promotion last January.