Ready to score: you could say that SportsLine, Inc. has made a first down and is driving toward the end zone. Or you could say that is has just hit a line drive down the middle. Whatever the analogy, current financial results spell good news - Information Technology

South Florida CEO, April, 2003 by Johanna Marmon

With the collapse of most things Web-related at the end of the 1990s, the mere existence of SportsLine can be considered something of a win. Now, eight years after its founding, the Fort Lauderdale-based Internet company has finally achieved that elusive benchmark called positive cash flow. During the fourth quarter of 2002, SportsLine--devoted to covering sports via its various Web sites--achieved positive EBITDA of $2.2 million.

True, SportsLine has yet to turn a profit; it lost $8.3 million during the same quarter, with yearly losses totaling $48.2 million. But generating cash is no small feat for any Internet company--even one that has a big brother.

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As founder and CEO Michael Levy explains, a critical component of the company's strategy is its relationship with television network CBS, which owns a 39 percent stake in SportsLine and runs promotions for the Web site cbs.sportsline.com during its televised sports events, such as Sunday football games.

"We learned early on that to be successful in online sports coverage you had to have an alliance with a television partner that carried major sports events," Levy says. "And it's more than just promotion of the site during the events on TV." It has also proven critical in garnering advertising, and in leveraging major professional sports organizations. "We had zero success in dealing with the NFL until we became a partner with CBS, and CBS got NFL rights," he says. "It was huge for us."

The company's agreement with the network, which began in March 1997, runs through 2006. It calls for SportsLine to make yearly common-stock payments worth $20 million for the duration of the contract in exchange for television promotion.

SportsLine also publishes NFL.com (the football league's official Web site), pgatour.com and sports content for Web portals such as Yahoo and AOL. It recently took over all the official sites for the National Collegiate Athletic Association. Perfect timing: March Madness was in full swing.

Beyond its core content of news, scores and stats, SportsLine's fantasy sports--in which users can assemble football, baseball, hockey or basketball teams of real players and compete in virtual leagues--are becoming increasingly important for the company. Indeed, Levy says SportsLine has well over a million teams just playing fantasy football on its sites, each paying $139 or so for the season. "Overall, between all of our sites, we have about five million teams," he says. The numbers are telling: fantasy sports accounted for more than $11 million in 2002 revenue, out of a company total of $62.1 million. "It's becoming just huge for us," Levy says.

And the market is growing. Greg Ambrosius, editor of Fantasy Sports Magazine, points to surveys showing that 5 percent of American adults--between 10 and 15 million people--play fantasy sports, about 93 percent of them in football leagues. Levy projects that Sportsline's fantasy sports revenues this year will nearly double, crossing $20 million.

"SportsLine and ESPN are definitely the leaders in online fantasy leagues," says Lee Black, a senior analyst with Jupiter-Media Research. "It's going to continue to play a significant role for them."

The big wrinkle for the company is its flattened stock price. Shares of Sportsline are currently hovering around $1, down from a 52-week high of $3.50 and an all-time high of $63. This has affected the company's ability to make its annual $20 million in stock payments to CBS. A portion of this year's payment was deferred by CBS until 2004; at such deflated prices, the number of shares required would have given CBS more than 50 percent of SportsLine, something that both partners want to avoid.

Among other things, CBS wants to leave Levy in charge of management. A Gainesville native who grew up in Miami, Levy has years of experience with technology and sports. An electrical engineer by training, in the late 1970s he co-founded Lexicom Corporation, a leader in language translation devices. One of the company's divisions, Sports Tech International, developed the video-editing systems that most NFL and collegiate football teams use today to analyze their opponents. Levy sold his interest in the company in 1993 and planned on taking five years off. "That was June of 1993. By December I had the idea for SportsLine," he says.