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ESPN tackles NFL Net deal

Disney's ESPN SportsZone wins a bidding war against Web sports rivals to renew its contract with the NFL.

In an instance of the Web imitating TV and generating a multimillion-dollar deal in the process, SportsZone has emerged the winner of a bidding war to partner with the National Football League online.

Sources close to the negotiations told CNET's NEWS.COM that ESPN SportsZone, a subsidiary of Disney, won out over bidding rivals CBS SportsLine and News Corporation's Fox Sports.

The NFL, SportsZone, and SportsLine declined to comment on the reports. Fox Sports could not be reached for comment.

The NFL, however, said that it would make an announcement on its selection of a production partner on May 27.

The NFL has for the past two years partnered with SportsZone to produce the NFL site. In addition to collaborating on content development, the companies shared in ad sales and revenue, according to NFL spokesperson Mary Griswald.

Two years after that relationship commenced, the dynamic between the NFL and its partners has shifted, said Griswald.

"Now we're looking at a situation where those companies are coming to us," she said. "We're at a point where the developer would pay us for Internet rights, and two years ago that wasn't the case."

Griswald declined to disclose more details of the expiring deal between the NFL and SportsZone. But analysts say the major differences between the expiring contract and the one that has just been agreed upon are the bidding and the big bucks.

"Sports event Web sites are becoming very valuable digital properties," said Jupiter Communications analyst Adam Schoenfeld. "A lot of the leagues have been throwing in the online rights with the television broadcast rights. But when you treat them as separate properties, you can get some very high bidding on them."

The expiring deal between SportsZone and the NFL is thought to have been worth less than a million dollars per year, compared to today's $10 million, three-year contract.

Bidding is not the only factor in the inflation of the partnership's value, said Schoenfeld, who noted that the Internet's growth as a content platform in the past two years is another important factor.

While securing its second NFL contract is a victory for Disney's SportsZone, it isn't without complications. The losers in the upcoming partnership will miss out on ad revenue, but they will be able to focus on promoting their wholly owned sites. SportsZone, by contrast, will have to devote much of its marketing resources to a site with which it may or may not be affiliated in three years' time.

Whether the NFL contract is worth the extra millions is a question that will be answered the next time the contract comes up for renewal.

"If the next contract is for $20 million or $50 million, that means that the digital rights model has been validated," said Schoenfeld.

SportsLine shares fell 13.4 percent to close at 26.6 on news of the deal.