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SportsLine USA expects shortfall

The sports media publisher warns that revenues will be below market expectations but also says it is expanding its online partnership with AOL.

Web-based sports media publisher SportsLine USA today warned that revenues for its third-quarter will be below market expectations but offset the earnings warning by announcing that the company was expanding its online partnership with America Online, the world's largest Internet service provider.

The partnership calls on SportsLine to provide sports news and statistics, special features, major event coverage, and merchandise on key AOL brands around the world, and to give AOL prominent CBS Sports on-air promotion.

Under the three-year agreement, AOL will receive in excess of $23 million in the form of cash, common stock, and incentive-based warrants at prices ranging from $20 to $40.

AOL will be eligible to share in direct revenues attributable to AOL promotion of SportsLine offerings on AOL brands once certain thresholds specified in the agreement have been met.

"This major agreement will offer our top shelf sports news through a variety of leading AOL platforms, and will immediately give us a larger global reach," said SportsLine's president and CEO Michael Levy in a statement. "With unmatched access to the world's largest Internet online community, this expanded partnership will continue to build the CBS SportsLine the extremely competitive interactive sports market."

In addition, according to the terms of the agreement, AOL will receive prominent CBS Sports on-air promotion as well as other SportsLine promotion and programming. Through the three-year agreement, SportsLine will receive a number of guaranteed impressions.

"Because we can work with CBS SportsLine across several America Online brands, we can provide them with unparalleled reach in cyberspace," AOL president and COO Bob Pittman said in a statement.

SportsLine, which publishes CBS SportsLine, also reported that for the quarter ended September 30, it expects to post a net loss of approximately 41 cents per share, which meets the consensus estimate of security analysts who follow the company.

SportsLine also currently anticipates that total revenue for the quarter will be approximately $7.4 million, a 106 percent increase over the year-ago quarter, but below the range of analysts' revenue expectations. The company points to weaker than expected advertising revenues for the shortfall, which was partially offset by strong e-commerce results, the company said.

The sports news publisher expects to report approximately $4.2 million in advertising revenue and about $1.1 million in e-commerce revenue. The remaining revenue comes from membership and premium services and content licensing.

"The third quarter has traditionally been one of our weakest periods for revenues and earnings," said Levy. "Advertising sales in particular tend to be lower during the summer months, even for traditional media such as television."

Although the company continued to experience strong traffic over the summer, lower CPM rates and a lower than budgeted inventory sell-through rate affected advertising revenue during this period, Levy added.

"[Because] the Web advertising market outside of the United States has not yet matured, strong traffic generated from our international sites did not result in a corresponding increase in advertising revenue," Levy said.