SBJ/November 10 - 16, 2003/E Sports
Subscriptions finally lead Rivals to profit
Published November 10, 2003
Rivals roundtable (from left): Jerry Cover, chief financial officer; Shannon Terry, president and CEO; Greg Gough, chief technology officer; and Will Woods, vice president.
In May 2001, only scraps remained of what for five years had been Shannon Terry's personal and professional passion.
In the late 1990s, Terry helped build a network of college team and recruiting Web sites on a subscription model that at the time was a distant and foreign concept for Internet companies.
That work failed because of unrealistic expectations, but Terry never stopped believing that when the money, the IPOs and the advertisers disappeared, he still had a business model that would prove that sports content on the Internet could stand on its own.
Validation came early this year, when Rivals.com, built back up by Terry and his associates using the same model they started with in 1996, turned its first profit, according to Terry, the company's CEO.
More than 80,000 people spend $10 a month for access to recruiting information and other content from the company's network of 63 independently produced Web sites, Terry said.
July figures from The Intermarket Group, a tracking company for the Internet and technology sector, ranked Rivals.com No. 22 among all Web sites in number of paid subscribers. The only sports sites ahead of Rivals were cbs-sportsline.com (No. 12, with 240,000 subscribers), nascar.com Track Pass (No. 15, with 162,000 subscribers) and ESPN Insider (No. 19, with 130,000 subscribers).
Subscription revenue, combined with a spawning collection of A-list advertisers that are starting to take notice of the company's quiet growth, will have Rivals.com "approaching the eight-figure mark" in revenue for 2003, Terry said.
David Card, a senior analyst at Jupiter Media, said Rivals.com has managed to emerge from the ashes by doing what, even today, few Internet companies can accomplish: build a proven, loyal base of users first and let the advertising dollars fall in line.
"Getting consumers to pay for content is still brutally difficult," Card said. "But that's one of the things that Rivals is nailing. They have a [relatively] small base of users, but they're very, very loyal. That's an audience that marketers like to reach."
Rivals' current position as a market leader and profit generator completes a circuitous route for a company that was virtually left for dead when the Internet bubble burst.
Terry and current Rivals chief technology officer Greg Gough in June 1996 founded their original company under the name AllianceSports. Alliance hired writers in major college markets to provide information on recruiting and other news related to each school's teams.
"Obviously, there was a lot of reluctance to anyone selling content on the Web," Terry said of the widespread notion that Internet businesses had to be primarily ad-supported. "But we believed in what the cable [television] model had done. We built this business on the premise that content was king."
The company's success in identifying a loyal market of college sports fans brought Alliance competition in late 1998 in the form of Rival Networks, which provided similar services but also sites devoted to professional and high school teams.
After raising more that $70 million, executives from Rival Networks, led by founder Jim Heckman, in January 2000 convinced Terry and Alliance's co-founders to sell Alliance to Rivals. But things quickly went south, as it became clear to many inside the company that the Rivals board was not committed to the subscription model and instead was relying on advertising revenue that would never support expectations.
"We completely sold out for advertising, and when the market tanked virtually no revenue was there," Heckman said.
In May 2001, Rivals — which at its peak employed nearly 200 people, operated a network of 700 independent sites, filed for a $100 million IPO and sponsored the Hula Bowl in Hawaii — went out of business in a well-documented demise.
"It was very emotional," Terry said. "I had put my heart and soul into building AllianceSports. Part of selling the company was that properties we had built could go on to bigger and better things. As soon as they purchased us, it didn't take 30 days to realize that the wheels were falling off."
Unwilling to walk away, Terry, Gough, current Rivals.com executive vice president Bobby Burton and others purchased some of the remnants of the Seattle-based company, including the publishing system, trademarks, source code and many of the hundreds of partnerships the original Rivals had with sports site publishers.
Within a few months, the executives relaunched the company out of Brentwood, Tenn., under the Rivals.com brand. Through a partnership with the College Sports Publishing Association and more than 120 full-time staff writers, Rivals.com now produces independent sites covering all 63 major conference football schools (ACC, Big East, Big Ten, Big 12, Pac-10 and SEC) and Notre Dame.
Rivals.com's primary competition is Seattle-based TheInsiders.com, which was started by Heckman and others from the original Rivals, under a subscription model, shortly after the Rival Networks folded.
TheInsiders.com, which charges a monthly fee of $7.95 for access to more than 100 college and NFL sites, has between 50,000 and 100,000 subscribers, Heckman said.
Rivals.com executives expect to have 100,000 paid subscribers by early 2004. And while advertising thus far has accounted for only a fraction of the company's revenue, the prospects of a more balanced income stream are good thanks to an industrywide advertising rebound and recent accounts that include Volvo, Pepsi, Maxim and SBC.
Ken O'Donnell, interactive media director for Euro RSCG Circle, which handles online ad buying for Volvo, said Rivals was one of the first properties the auto manufacturer tapped when it launched its latest campaign for the XC90, an SUV tailored for the college-educated, 25-54 demo.
"You can get the Coaches' Poll [and other college sports content] on USA Today, but the [lack of] depth and the stickiness of the content isn't going to allow for much branding," O'Donnell said. Rivals.com visitors spend, on average, more than 54 minutes on the site, ranking it fifth among all sports sites, according to September figures from Nielsen/NetRatings. "On Rivals we're able to get a duration of involvement and a high level of interaction."
Rivals.com's primary weakness, most in the industry agree, is a failure to market itself adequately. To that end, Rivals, which provides certain information for espn.com's Campus Insider, recently completed plans to run at least three 30-second commercials on each ESPN GamePlan telecast during the final four weekends of the college football season.
"We've had a lot of success, and we've had a lot of [advertisers] that have sought us out this year," Terry said. "We're very excited about the future."