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SBJ/March 26 - April 1, 2001/E Sports
NBC splitting from Quokka deal if Web producer can't sell, find partner
Published March 26, 2001
Quokka Sports' efforts to stay afloat suffered another blow March 14 when NBC and the Salt Lake Organizing Committee forced it to sign an agreement that would dissolve the NBC/Quokka joint venture on May 1 if Quokka has not arranged a sale or strategic partnership. The deal would have to be with a company that can produce saltlake2002.com and nbcolympics.com for the Salt Lake Games, and NBC's Olympic site in 2004.
The details come from a Quokka SEC filing on March 14.
Sources said the move stems from concerns by SLOC and NBC that if Quokka failed, the Olympic Web rights could be tied up in Bankruptcy Court. Quokka restructured a $77 million debt vehicle last month and had as little as six months' operating capital at the time. This month it announced it would seek a 1-for-50 reverse split to avoid delisting by Nasdaq.
The agreement, a compromise after NBC informed Quokka on March 9 that it was unilaterally dissolving the partnership, sets narrow parameters for companies Quokka can sell to or partner with. No competitors of NBC or Olympic sponsors are allowed, and any buyer/partner must have a market capitalization of $500 million if publicly traded.
The companies have drawn up a list of potential buyers, according to the SEC filing. Quokka CEO Alvaro Saralegui and Gary Zenkel, NBC Olympics senior vice president, wouldn't comment. Sports Illustrated is an Olympic sponsor, but it is not clear whether parent company AOL Time Warner is considered a candidate or a competitor.
FANTASY IS NOT GAMBLING: The sports world and those who monitor it keep using soft logic when it comes to online fantasy sports and gambling. The fact is that an online fantasy game that doesn't charge for entry, or that charges a nominal administration fee and doesn't peg prizes to entry revenue, is not gambling.
That's the law, understood by everyone from sports leagues, who run such games, to Congress, which has provided carve-outs for fantasy games in its evolving gambling bills.
Yet recently when Bob Knight — at that time not employed as an "educator" by an NCAA school — endorsed a sandbox.com brackets pool, the NCAA and the Indianapolis Star raised their eyebrows.
Bill Saum, NCAA director of agents, gambling and amateurism activities, worried that the large prizes possible in online games send "mixed messages."
But where the law is concerned, he's got no case, and that's clear from this statement to the Star: "Obviously, Coach Knight is not employed at an NCAA institution. If he was, we'd talk to him and his athletics director about this involvement with sandbox.com."
And if my aunt were named Joe, she'd be my uncle.
Equally off the point but more misleading was the Star's framing of the Knight interview. "Knight sidestepped the gambling issue" on a promotional conference call, the article said. Thing is, if it's not gambling, there's no "gambling issue."
Sandbox.com co-founder Bill Carey made this point when he stepped in for the side-stepping Knight: "The reason this isn't gambling is because it's an absolutely free site," Carey said.
The fantasy industry has convinced Congress of this; next it should sic the lobbyists on the media and general public.
Where the NCAA may have leverage is in negotiations with network Web sites. ESPN will begin renegotiating its women's NCAA basketball TV deal next month, and Saum told Bloomberg News that espn.com's brackets pool — which had 830,000 entries — "will definitely be brought up." SportsLine.com minority owner CBS, expected to compete with ESPN, will surely hear the same thing.
Or will either company hear anything? Insiders suggest the NCAA wouldn't take less money if a network promised to soft-pedal its brackets pools, nor would it get more for agreeing to quit carping. But a Web site's approach to fantasy might help break a tie in favor of its network. That could be why the NCAA is making noise right now.
Noah Liberman can be reached at email@example.com.