MVP.com formed an alliance with CBS, in which the network will provide $85 million in advertising, promotion and other considerations over a period of four years, in exchange for an equity stake in the company.
In a related transaction, MVP.com will acquire and operate the retail business of SportsLine.com, an online sporting news and commerce site. MVP.com and SportsLine have entered into an exclusive, 10-year, $120 million marketing arrangement, giving SportsLine.com an equity interest in MVP.com.
The company also received more than $65 million in financial backing from Benchmark Capital and Freeman Spogli. MVP.com will also get some retailing advice from Galyan's Trading, a sporting goods retailer.
The move highlights the continued blurring of lines between new media companies and e-commerce players. CBS has taken many strides over the past year to acquire or invest in health and financial information sites that also sell products and services to consumers. CBS owns about 15.5 percent of SportsLine. Healtheon/WebMD has made similar arrangements to sell health products through its site.
"[Today's deal] has set the paragon example of how to monetize media traffic into e-commerce potential," said Phil Leigh, an analyst at investment firm Raymond James who follows SportsLine. "[SportsLine] is getting paid for generating traffic for MVP and at the same time eliminating its concerns about order fulfillment and service because it has turned all that over to MVP."
Leigh added that Jordan also owns a stake in SportsLine.
With no clear leader in the crowded playing field of online sporting merchants, the arrival of MVP.com is likely to shake up a market that until recently was fair game to even the smallest niche players. MVP.com will be facing off against several players, including Gear.com, in which online retailing giant Amazon.com owns a 49 percent stake; Fogdog.com, which filed to go public in September; and Lucy.com, a sporting goods store aimed at women.
Traditional retailers including Wal-Mart, Kmart and Footlocker as well as brick-and-mortar sporting goods giants such as Sports Authority are also in the running blocks, ready to sell sporting goods on the Net.
MVP.com said it hopes to avoid getting mired in a price-cutting war with its online competitors by concentrating on providing strong service for high-end sporting goods products.
Though it faces strong competition, superstar power is one thing MVP.com does not lack. John Elway has won the last two Super Bowls in NFL Football, Michael Jordan dominated basketball, and Wayne Gretzky set nearly all records in ice hockey. All three athletes retired in the past 2 years. MVP.com is banking on their names and the belief that consumers may value sporting goods that come with a stamp of approval from these athletes.
Former Sears, Roebuck senior executive vice president John Costello, who has been appointed MVP.com's chief executive, said that the global market for sporting goods is about $150 billion annually.
These companies are competing for an estimated $77 billion for both the online and offline domestic markets, according to 1998 figures from the Sports Business Research Network. Forrester Research projects that roughly 8 percent of sporting good sales will be made online by 2004.
"Our alliance with MVP.com significantly enhances SportsLine's ability to capitalize on the enormous e-commerce market for sporting goods," said Michael Levy, chief executive of SportsLine.com.
MVP.com will provide a selection of sports apparel and equipment, with advice from the three former professional athletes who were chosen as Most Valuable Player (MVP) in their respective leagues during their athletic careers.
MVP.com also hopes to capitalize on its land-based partnership with Galyan, which has 20 stores in nine states, to reach shoppers online and offline.
"We believe we have the best of both worlds with MVP.com focused squarely on the Internet space and Galyan on the bricks-and-mortar space," Costello said. "MVP.com will be feature in all Galyan advertisements, and eventually we'll roll out kiosks in their stores."
Costello added that people who have purchased goods from MVP.com will be able to return or exchange merchandise at Galyan stores. He added that the company has several distribution facilities in place.
The new company, set to launch in January, is slated to hit the public market some time next year.
Elway will serve as chairman of MVP.com, leading the board, which will include Jordan, Gretzky and Costello.