NEW YORK (CNN/Money) -
In mid-March, employers are usually concerned about productivity falling off a cliff because of March Madness: the NCAA men's basketball tournament.
That's especially the case on the first two days of the tourney, a Thursday and Friday that feature a total of 32 games...starting at noon no less. Instead of working, people that didn't have the foresight to call in "sick" would be sitting at their desks hitting the refresh button every other second to get scores from sites like SportsLine.com. (At least that's what people tell me. Not that I'd do that.)
But the harsh reality of war in Iraq has dulled the usual fervor surrounding the tournament. TV ratings were down from a year ago as CBS wound up transferring some games on Thursday and Friday to cable network ESPN due to war coverage. And people were more interested in reading stories about the progress of the war than checking in on say, the exciting Penn-Oklahoma State first-round matchup. (Alas, my beloved Quakers lost on Friday. Sigh.)
The war should be bad news for SportsLine.com in particular, which operates CBS's sports site CBSSportsLine.com, because it is a publicly traded company that pretty much has one business: online sports news.
The other two major sports news sites are both extremely small parts of larger media companies: ESPN.com is wholly owned by Walt Disney (DIS: Research, Estimates) and SI.com is owned by AOL Time Warner (AOL: Research, Estimates), which also is the parent of CNN/Money.
According to Nielsen//NetRatings, SportsLine.com is the second most popular sports news site -- including traffic from the Web sites of the National Football League and Professional Golfer's Association, which SportsLine.com runs -- with 7.3 million unique visitors in February. ESPN.com was first, with nearly 11.8 million unique visitors.
Fantasy is the future
Not surprisingly, the stock has taken a huge tumble during the past few years as investors soured on pure play online media companies that rely mainly on advertising. Shares of SportsLine.com (SPLN: Research, Estimates), which hit an intraday high of $83.25 on December 23 1999, now trade for just 98 cents, giving the company a tiny market value of $37 million.
Michael Levy, SportsLine.com's CEO, said that the company's advertising sales for the entire tournament (which lasts until April 7) are higher than last year. But he conceded that traffic might be a bit lower than last year because fewer people watched the tournament games on TV. (CBS promotes SportsLine.com during its sports telecasts) That could impact future ad revenues.
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Still, SportsLine.com has taken steps to diversify its business, mainly through fee-based fantasy sports services.
To the uninitiated, fantasy sports are a way for sports junkies to pretend to draft and trade players, in baseball for example, and compete against others in a league that is based on those players' actual statistics. Fantasy players usually pay a fee, which could cost more than $100 a season, to participate in such leagues and have sites like SportsLine.com keep track of performance.
Once again, not that I would know anything about this.
Last year, 18 percent of SportsLine.com's $62 million in revenues came from its fantasy business. This year, Levy said he expects fantasy revenues to increase at least 50 percent, to about $17 million, and make up about 25 percent of total sales of about $68 million to $70 million.
The hope is to build this business up in order to make SportsLine.com less dependent on fickle advertising trends. After all, SportsLine.com's fantasy business is expected to increase this year despite concerns about consumers pulling back on spending.
Profitability a long way off
Still, the company has lost money since inception and is expected to do so this year and next. The company finally reported its first quarter of positive cash flow in the fourth quarter of 2002 and Levy said that SportsLine.com is on track to break even on a cash flow basis for the full year.
But the one thing that the company does have in its favor (as opposed to other struggling online media companies like Salon.com for example) is that it has big bucks backing it. CBS, a unit of media giant Viacom (VIA.B: Research, Estimates), owns 31 percent of SportsLine.com.
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CBS receives shares of SportsLine.com in exchange for advertising and promotion on the TV network and other Viacom properties. And SportsLine.com is due to make another issuance of stock to CBS on April 1, which will lift CBS's ownership stake to about 40 percent.
Levy said there are currently no discussions about Viacom taking a majority stake in SportsLine.com but that can't be ruled out in the future. The next issuance of stock to CBS after next week is due in July 2004.
Even though SportsLine.com should be able to survive the tough world of online content, it probably is not the wisest investment. There is only one analyst following the company. The market cap is Little League-sized, and the stock is thinly traded.
So don't expect SportsLine.com's stock to be the market's version of Butler, the Cinderella team that has somehow found its way to the NCAA's Sweet 16.
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