Shares of SportsLine rose 11.7 percent to reach as high as 19 in early trading today, but ended the day down 5/16 to close at 16-11/16. The online sports site got a 25 percent jump in its share price yesterday, when it ended the day up 3-3/8 a share following an analyst's report that the company would get a financial boon from the Winter Olympics.
Operators of sports-related Internet sites said that, although special events like the Olympics provide a spike in revenues as traffic increases, the fourth quarter traditionally has yielded large advertising dollars for sport-related ventures because of the number of various championships, in both professional and fantasy sports leagues, culminating during that time. Nevertheless, SportsLine's success serves as a strong indicator that sports-related sites, serving a niche market, will be big money-makers as use of the Internet becomes more widespread, industry watchers say.
SportsLine's rocketing share price followed an announcement today that traffic on its Web sites averaged 2.8 million page views per day during the fourth quarter, compared with 800,000 a year ago. During the previous quarter, the company averaged 1.7 million average daily page views.
"SportsLine USA's traffic growth is the direct result of strong strategic relationships with distribution partners like CBS Sports, America Online (AOL), Microsoft (MSFT), and Netscape (NSCP), combined with the traditionally strong fourth-quarter sports season," SportsLine president and chief executive Michael Levy said. "Our distribution agreements should continue to support strong traffic levels in 1998, particularly with the CBS coverage we will receive during the Olympics in February and during the NCAA basketball tournament in March."
SportsLine competes directly with such sports-world titans as ESPN SportsZone, CNN/SI, and The Sporting News. Unlike its competitors, however, SportsLine started out as standalone site, not part of a larger broadcast entity. SportsLine also is the only sports site that is publicly traded.
"Fourth quarter is at the heart of the football season, and we also catch the World Series in October for baseball, and the start of the NBA and NHL leagues and college basketball," Levy said, noting that the fourth quarter is typically the biggest time for revenues. "Summer is a tough quarter. That's when the colleges let out and the only thing we have going is baseball or golf."
Doug McFarland, a general manager of research firm Media Metrix, said traffic at sporting sites first picks up during August, then levels out through the rest of the year.
Media Metrix found that 2.9 percent of Internet users clicked on SportsLine during the month of July. That figure rose to 3.6 percent in August, and went up to 4 percent in September. Competitors like ESPN SportsZone tracked a similar pattern, McFarland said.
When Media Metrix looked into the August rise, the firm found that it was largely driven by people signing up for fantasy leagues, McFarland noted.
Fantasy leagues allow fans to create a team in a specific sport and draft players. The players' performance is tracked during the season and fans' teams compete against one another in the fantasy league, said Eric Handler, spokesman for ESPN Internet Ventures
SportsZone, which charges fees for entry into fantasy leagues, finds that such leagues are one of its greatest revenue-generators, surpassing the revenue generated by ecommerce transactions.
But for SportsLine, advertising is still the big money maker, Levy said. Investors who track SportsLine may find that the first quarter will build on fourth-quarter results, which will be announced in February. That first-quarter performance is expected to get a boost, in part because of the Superbowl later this month and also because of the start of the Winter Olympics, analysts said.
SportsLine is expected to generate sizable traffic and revenues as CBS sportscasters point to the Web site for additional information on the Olympics, said Keith Benjamin, an analyst with BancAmerica Robertson Stephens. Last March, SportsLine and CBS entered into an alliance in which CBS received $62 million in the company's stock in return for promotion and revenue-sharing on ads.
Benjamin, who released a report on SportsLine, said he believes the company will be the best performing stock in the Internet group during the first quarter thanks to the CBS agreement and the Winter Olympics. Promotions during the NCAA basketball games are expected to give the stock a boost as well.
SportsLine is expected to receive 30 seconds of CBS spots every hour, providing a total of more than an hour of Winter Olympics promos, Benjamin said.
Under the terms of SportsLine's agreement with CBS, SportsLine will receive 40 percent of all advertising that appears on its Winter Olympic pages. CBS also is bundling its television and Web advertising, marking one of the first cases in which advertisers will be given a chance to reach a mass market of television and Internet users through a single advertising agreement.
"I think SportsLine will receive $500,000 to $1 million in ad revenue, but it's hard to say since [CBS] is still selling ad time," Benjamin said, noting that sports enthusiasts visiting the site likely will use it to purchase Winter Olympic paraphernalia as well to get the latest Olympics news, generating additional revenues for the company.
SportsLine will gain additional exposure via the CBS promotions, the benefits of which are expected to carry over even after the games are over, Benjamin said.
"They'll get an audience who will bookmark their site," he said. "This quarter will be a defining quarter in that strategy. The Olympics will be the single biggest promotion to impact Web usage. Never has there been as big a push in a concentrated time to promote a Web site."
SportsLine is expected to post fourth-quarter revenues of $4 million, up from $1.3 million a year ago and $3.1 million during the previous quarter. The company is expected to post a loss of 48 cents a share, as it did a year ago, and a narrowing of its loss over the previous quarter's 75-cents-a-share results. It expects to report fourth-quarter results during the first week of February.
As for the future, and the inevitability of competitors stepping on to SportsLine's field, Handler said that the Internet sports arena has room for everyone.
"As the Internet grows, there will always be more entertainment, news, and sports sites," Handler said. "There will be more sports sites, but it will be the niche sites, rather than another SportsZone. They'll be sites dedicated to players or teams."