13 July 2010
If you are not a college football or basketball fan you probably are not intimately familiar with Scout and Rivals, two competing college sports networks. Although their audience is limited primarily to America's most fanatical sports fan-base, their impact on the online sports digital world and the companies' back stories are somewhat riveting.
Things have been mainly quiet for the two online publishing giants post mainstream media acquisitions. Scout has flown largely under the radar since they were acquired 2005, when they were acquired by Fox for around $60 million although their leadership team moved on in the years since and there was this ugly lawsuit settlement that they somehow managed to keep out of the public's eye.
Picture of Shannon Terry
Rivals too has been eerily silent since Yahoo acquired them back in 2007 for around $100 million dollars. It was reported over a year ago that Rivals' CEO, Shannon Terry was leaving the company, as he seemed a bit reluctant to move to the West Coast to rub elbows with the Yahoo brain trust.
Meanwhile ESPN too has had their own recruiting network problems and I've voiced some skepticism about their affiliate models on a couple of different occasions. Now it seems ESPN's foray into the college sports/recruiting space may be winding down as a handful of their largest affiliates are jumping ship including my other writing home, Bucknuts.com. Along with a lot of former ESPN sites it seems a 24/7 will be plucking a lot of great publishers from the likes of Scout and Rivals for their formal launch which should be happening in the next 60 days.
From Mr. Bucknuts announcement yesterday.
24/7 is a new effort of which Bucknuts is on the ground floor along with another 20 or so of the industry’s largest web sites. It is headed by Shannon Terry, previously the founder of Rivals.com. Terry served as Rivals’ Chief Executive Officer, overseeing the corporate strategy, new product development and day-to-day management. He was named to the Sports Business Journal's Forty-Under-40 in 2006 and 2007, and the Forty-Under-40 Hall of Fame in 2008. Terry was also named to the trade publication's 20 Most Influential People in Online Sports list in 2007 and 2008.
This is quite a jarring splash to the online digital world even outside of college sports and I'll make that connection in just a bit. But before we get to the impact of this new network and what I expect to see from them as well as things I'd want given I'll be writing on their platform, I thought it would be wise to drop some knowledge on the Rivals, Scout, ESPN saga that has been playing out over the last decade. It quite an adventure.
Venture Capital, A Failed IPO, Bankruptcy, Fire Sale Acquisitions, Competition, Big Acquisitions, Lawsuits, and Departures
Let's rewind to the late 90's. Did you have an email address back then? Did you even own a computer? If you did how did you use the web? I bring this up because it was a whole different world, but things were changing and probably a bit too fast.
Jim Heckman, the son of a former Washington football coach, started Rivals noticing that the web was changing how college sports fans were getting their information. Local newspapers did an okay job covering colleges, but the coverage was always a day late and a bit lacking in some areas.
For the real diehard fans, college sports is year round because recruiting is year round and each fan base has a passionate core group of fans who lust for as much recruiting information as they can get their hands on. Its almost kind of a disease as these fans impatiently try to will top recruits to their school and obsessively follow the entire recruiting process for dozens of players every year. Recruiting never stops, developments happen daily, and fans wanted more than what local newspapers and television could offer. They also wanted to add their own two cents about every single development along the way.
With this in mind Heckman started Rivals, hoping to cover the entire college landscape with a site staffed with full time reporters whose job was to constantly dig up the freshest recruiting news, analyze any developments, and encourage discussion in forums. Obviously the coverage of the actual games (football, basketball, other sports) were a part of the content mix, but it was the recruiting information that got recruiting junkies to pay $10 a month to get all the good stuff thanks to a pay-wall that always made overtures to your wallet because you just had to know where the next Joe Montana was visiting this upcoming weekend.
The network filled out. Some of the sites were new and owned and operated by Rivals, but some were independent sites who signed up as a partner to Rivals. Life was good and the company filed for an IPO at the height of the Internet bubble. That's where it gets interesting.
Revenue was coming in the door and the company had raised an amazing $80 million but the dot com bubble ended any hopes of an IPO and worse yet the company was running out of money. Hard to think what happened to all the money but you'd think a lot of capital was spent on hiring writers, signing up sites with bonuses/guarantees, etc, but still that's a massive amount of capital that was spent. You could probably chalk some of it up to the times as startups had no fear of burning venture capital dollars. Another thing to consider is Rivals tried to branch off to other sports which probably inflated overhead and ultimately could have been the fatal move.
With Rivals in danger, Heckman left the company/was fired and Rivals began to wind down operations and filed for bankruptcy proceedings. But Heckman found a new group of investors who wanted to buy the company and mobilized to do so.
"I will dedicate my life to making this company work for all of you, because I understand that you are the only important people in this idea. I feel that was lost, but I ask that you allow me to bring our family together again for one more try," writes Heckman, who founded Rivals.com in 1998 but then was ousted as CEO last summer. He then goes on to ask publishers for just nine months to prove his concept."
Things got interesting though as a group led by Shannon Terry and Bobby Burton also wanted to buy Rivals now that it was a firesale price and succeeded in doing so in 2001. The details of the takeover are shaky at best but from what I've gathered, Heckman and his group were real close and there was a lot of loyalty to him by the handful of people still running Rivals in its finals day, but in the end the Tennessee group won out and Rivals had new life.
Picture of Jim Heckman
But Heckman and his group moved on undeterred and you have to tip your cap to Heckman who raised more money despite losing over $80 million at Rivals and getting fired as he raised $1.8 million almost immediately after the loss of Rivals and subsequently dozens more millions in the years to come.
Initially Heckman named the company The Insiders but it later changed to Scout and up until today the companies share a fierce rivalry. In fact the two companies went to court over publisher recruiting tactics as both companies looked to scoop up the best and biggest sites on the web.
Tension between Rivals and Scout resulted in a series of lawsuits several years ago centered on tactics used to lure individual team site publishers after the original Rivals folded. The companies settled in 2003 by agreeing not to disparage each other and to abide by publishers' contracts, according to the Seattle Post-Intelligencer.
''It's very heated between them,'' said Drew Champlin, who worked at Rivals.com's BamaOnline site for six months. ''On a scale of 1 to 10, it's probably 100.''
Scout again went down the path of spreading a wide net of covering multiple sports while Rivals stayed focused on college sports. Both companies matured, began to bring in 8 figure annual revenue, all while growing their audience. There were rumors of ESPN, AOL, Yahoo, and Fox looking at both companies but in the end Fox purchased Scout on the heels of their acquisition of Myspace in 2005 for around $60 million. This acquisition really flew under the radar to most but was a larger development than it showed on the surface.
By 2005, the economy was beginning to churn again and in particular online advertising was beginning to become a major growth market. ESPN was entrenched on television, SI owned print, but who would conquer online? ESPN had the lead, Yahoo was making some noise, CBS had made some moves, and now Fox thought they could make a splash by adding Scout. Not only did they pad their audience by several million monthly visitors (cutting the ESPN lead dramatically), they now had a large network to grow out various local offerings as well promote the larger Fox Sports.
But things got real hairy pretty quickly for Scout. There was talk that Fox wanted to somehow make Scout "MySpace Sports" but apparently someone with an IQ over 100 put the kabosh on that. Scout's leadership team also began to leave and with the company in Seattle and Fox in LA, it seemed to further stagnate any type of progress with the company. Technology seemed to become a pain point as well as a cataylst for an exodus of some of their largest publishers including Bucknuts (this actually in a round about way led to me writing for them).
The publishers banded together and sued Scout claiming Scout was skimming online advertising revenue and subscription revenue in addition to a lot of other gripes that would fall under general breach of contract. Scout/Fox settled the lawsuit to the tune of $5 million+ , a rather large admission of guilt. It was about at this time that Fox was getting publicly trounced for their inept coverage of the BCS bowls (Fox had no NCAA games all year but somehow had the BCS bowl rights in another zinger of an idea). Between the BCS broadcast debacles and lack of any substantive progress with Scout as well College Football News (also acquired by Fox), you have to wonder if the suits at Fox just decided to focus elsewhere. The 5 million dollar settlement combined with the legal fees and the realization they bought a lemon of a company has seemingly dampened any chance of Scout being an intricate part of Fox's digital strategy going forward. Its the black sheep of Fox digital at this point while Myspace is merely just the very public black eye.
Heckman actually stayed with Fox and rose the ranks making inroads with Rupert Murdoch being his lead negotiator in the infamous Google Myspace seach deal. That's a story for another day, but at a high level Heckman and Fox flat out jacked Google to the tune of $900 million and Myspace has been lazy ever since as the checks kept coming from Google. Years from now this maybe looked at as the turning point in Facebook vs myspace and with the deal ending very shortly, myspace's future is very much up in the air with an incredible amount of people leaving the company/jumping off the sinking ship.
Heckman would later leave to start 5to1 media, an online advertising company with a good concept but with a lackluster reputation in the online advertising world.
Meanwhile that group in Tennessee led by Shannon Terry did a pretty solid job with Rivals and eventually became profitable. In 2007 Yahoo made a bold move and shelled out $100+ million for Rivals. With better technology and a more focused vision, Rivals outpaced Scout and more importantly avoided any litigation issues. Yahoo who was breathing down the neck of ESPN in terms of online dominance thanks to superior fantasy offerings, a new war chest of writers, and a growing emphasis on sports blogs after hiring Jamie Mottram away from AOL. The Rivals acquistion now gave Yahoo a larger audience than ESPN, a distinction that helps greatly with online advertising sales.
By the time ESPN realized that being second to a West Coast internet company was hurting their online monetiztion, they rolled out a collection of initiatives all of which are ongoing and somewhat controversial. ESPN partnered with Bucknuts as their first external affiliate and later locked down a lot of the other large Scout publishers who left and sued. ESPN city sites like ESPN New York as well as blog networks like SweetSpot and True Hoop were additional attempts to build their aggregate number to retake the online lead away from Yahoo. If you've read my stuff in the past, you know I am very critical of ESPN affiliate models and the lack of value they provide to publishers. That being said its no surprise that Bucknuts and a very large chunk of the ESPN affiliates are now leaving to join 24/7.
More than a year ago Terry left Yahoo (probably when his non compete ended). Just like Scout and Fox, it seemed Rivals being so far away from the parent company in Yahoo really impeded growth.
Fast forward to today and 24/7 sports is on the verge of launching with a very impressive dozen or so publishers, many of which have announced their new direction similar to Bucknuts. These aren't just websites, but in many cases the number 1 website for some of the most vibrant fan communities in the country. Many of which seem to be disgruntled Yahoo/Rivals publishers or maybe they're just enamored with Terry and the team in Tennessee.
Besides various conversations I've had and some internet chatter on sites that are joining, there really isn't a lot of information about 24/7 at this time. I reached out to them for a couple of reasons including to get more info but haven't heard back. Between their website, photo account, and twitter acount I've been able to piece these facts together:
- Shannon Terry is CEO.
- Bobby Burton maybe joining
- Ronnie Sanders a former SEC recruiting Director is also involved
- They've raised a sizable amount of capital
- They're located in the same area as Rivals initially was (Brentwood, Tennessee)
- They are working around the clock on the engineering side. It seems the goal is to get the sites all on a new platform including message boards by the start of the season. The idea of migrating so many large sites, users, forum posts, articles, etc spanning multiple platforms almost makes my stomach turn.
- The network will not only launch with size-able reach but will put a dent into Yahoo and ESPN whose number will go down because of the defections
- In addition to a tremendous list of sites, they've added recruiting gurus Gerry Hamilton, JC Shurburtt, and Bryan Matthews to the fold.
View of 24/7 Sports office from their photo account.
Frankly with ESPN, Scout, and Rivals you think this would be a crowded space, but really this is a smart move. There is a lot chatter that Scout is going to be slimmed down substantially as many sites are losing money, ESPN's network is basically imploding thanks to 24/7 Sports, and Rivals while viable is also taking a HUGE hit.
A lot of startups like SBN, Yardbarker, FSV, Bleacher Report, along with media companies like CBS and NBC actually benefit from this as it looks like the front of the pack in Yahoo, ESPN, and to a lesser degree Fox will be losing some ground in terms of network audience size.
This opportunity only exists because 3 major media companies in Fox, Yahoo, and ESPN have failed to really find a model or a technology offering that is viable to publishers, advertisers, and most importantly visitors and subscribers. Blogs have also been eating away at these recruiting sites for quite awhile, but at the end of the day you still need full time people calling and constantly tracking the thousands of high school recruits spanning both football and basketball.
Obviously Terry and his people didn't like Yahoo's execution and plan with Rivals and decided to have another run at it. I am sure Yahoo is extremely irked that the guy that sent a huge check to buy Rivals is now jacking some of their biggest properties, but regardless whatever value proposition 24/7 is shopping, investors and publishers are eating it up.
Without anything to review its hard to say just how they'll be different from the legacy recruiting networks and just what they've promised to publishers in terms of things like equity in the new company, cash buyouts/acquistions, advertising guarantees, bonuses, etc. Potentially some site owners were offered full time employment as deal clinchers.
I'd surmise some amount of capital was spent to get these larger publishers on board in hopes it would spur smaller publishers and even just talented journalists to give 24/7 a look.
In terms of technology, I am on pins and needles to see what they came up with and when they'll be rolling out the platform. Rivals and Scout particularly have really failed here and technology, especially web applications, and programming languages have made major advancements since Scout and Rivals were architected.
I am hoping to see major upgrades in terms of message boards, recruiting databases (Google Maps Mashup please!), commenting, video, mobile apps, and live chat (seriously just use CoveritLive... Scout and Bucknuts use the worst chat programs known to man). They'd also be wise to fully utilize web 2.0 technology like custom widgets (no network has grasped this concept yet), blog syndication/promotion, twitter, Facebook, and social sharing options. Reading between the lines, it looks like a lot of this is in the works.
When the curtain is pulled back (who knows when that will be), they'll be live with some of the most passionate fans in the country and an audience that should span 2 million+ and maybe much higher. Its hard to say if 24/7 will conquer this niche, flush out competition, or fall somewhere along the way.
Either way I am excited to see a new burst of innovation/competition in the space as well as departing ESPN, a company whose digital ineptitude was souring my ambition to create content on Bucknuts. I'll probably do a follow up piece with more thoughts post launch. Until then, best of luck to the guys there as I know they're burning the midnight oil racing to get things just right for the launch.
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