SoCalHoops Internet Recruiting News

Daily Dose: Rivals.com Update,
More Trouble, No Buyer?--(Apr. 12, 2001)

As we reported yesterday, several papers reported that Rivals.com, the troubled sports website which features such recruiting websites as Bob Gibbons' All Star Report, Pac-WestHoops, Fast Break Recruiting, and others, is still operating, but appears to be skating on the thinest of ice.  Apparently no bankruptcy will be filed, and Jim Heckman, the founder of the company who evidently still has a large stock equity interest, continues to search for a buyer.

But the board of directors of the company on Monday voted to shut down the company and to sell off the assets.  And, according to a report in today's Puget Sound Business Journal, it looks like a "sale of the assets" as that term is used, will not include the "independent" publisher sites which actually form the base of the content for the entire network.   

As noted in the story below, "A small staff plans to keep the site, http://www.rivals.com operational until the assets can be sold" according to the company's CEO Saul Gamoran.  "He does not plan to file for bankruptcy.  Independent publishers that were a part of the Rivals network will retain their Web sites and continue operations independently." 

So, apparently the "assets" to be sold will not include the rights to the sites, which would seem to explain why no potential buyers were willing to part with much more than the depreciated book value of the hard, physical assets and the installed software base.   And can you blame them?  With a monthy "burn rate" (overhead and fixed expenses, such as salaries, rent, etc) of more than $5 million a month, and no assurance nor guarantee that you'd actually own anything more than just those same hard assets, and no guarantee there would actually be any publishers tied in to the network, no one was willing to pay more than a reported $5 million.  Rivals was reportedly asking $20 million in the Nike deal which fell apart this past week.  As board member Mike Slade put it, "At the end of the day, no one wanted to buy it." 

And while the sites and servers still remain functional, many of those same "independent publishers" have already announced plans to leave Rivals and open up shop elsewhere.  Bob Gibbons' All Star Report is probably the first one, and his ASR has now opened up it's own new, independent website, so update your links. Others are sure to follow, and there is talk that many of the regional sites will link up in their own subscription network.  Of course many of those same publishers could link together and purchase some of the hard assets themselves and attempt to take on the task of effectively becoming truly independent.

Here's the latest news from the Puget Sound Business Journal:

RivalNetworks stopped short in last-minute drive

M. Sharon Baker
Puget Sound Business Journal

RivalNetworks Inc.'s last "Hail Mary" pass felt short.

The Internet sports site's board voted to close the company this week after a last-minute attempt to hook up with Nike Inc. failed, said chief executive Saul Gamoran. 

While talks between the Seattle company and the Beaverton, Ore., shoe company progressed quickly, in the end Nike "felt it was not a significant enough transaction to do it," Gamoran said. 

"Nike was a 'Hail Mary' pass, a shot in the dark that went further than anyone thought it would go," he said. "We just ran out of time." 

"Between Ann, Jon and I, we trekked this thing to everyone we could think of," said board member Mike Slade, referring to fellow board members Ann Winblad of Hummer Winblad Venture Partners and Jon Lazuras of Softbank Capital Partners. 

"Everyone knew it was for sale. News Corp. wasn't interested at any price. At the end of the day, no one wanted to buy it." 

A Nike spokeswoman was unavailable for comment. 

The Nike deal was a last ditch effort engineered by founder Jim Heckman to keep his idea alive. Heckman founded the Internet sports site three years ago but was ousted last summer. 

The company raised $75 million in equity and debt in an effort to attract advertisers and subscribers to its network of college and professional sports sites, which provide in-depth information on topics including the latest recruits, pregame maneuvers, and other player developments. The company employed about 80 until it closed. 

A small staff plans to keep the site, http://www.rivals.com, operational until the assets can be sold Gamoran said. He does not plan to file for bankruptcy. Independent publishers that were a part of the Rivals network will retain their Web sites and continue operations independently. 

Gamoran earlier was unable to close a buyout deal with Yahoo! Rivals was also shopped to ESPN Internet Group, SportsLine.com and Global Sports Interactive. 

Heckman founded his Web site in 1998, planning to offer unique content by partnering with independent publications around the country that would serve as his editorial team, a move that made his business model less expensive that others. The plan from the beginning was to sell advertising and later begin charging visitors a subscription fee. 

Initial success drew $60 million in equity investments from Softbank Capital Partners, Hummer Winblad Venture Partners, News America, Intel Corp., Seattle's Phoenix Partners and private investors.

The company's 500 or so sites drew nearly 1 million viewers a month, enough collectively to put the company in the Top 10 sports sites on the Internet. Executives filed documents with the Securities and Exchange Commission a year ago to raise $100 million in an initial public offering. 

Success also led the company to sign a three-year deal to sponsor the Hula Bowl and hire Denver Broncos coach Mike Shanahan as a spokesman. 

But like other Internet companies pinning their hopes to advertising revenues, the company has watched its revenue stream fade with a downturn in the economy. The window for IPOs slammed shut just a month after Rivals filed. 

In June, "we were within 60 to 90 days of running out of cash," Gamoran said. "We were like a locomotive running out of steam."  

Since November, Rivals has been existing on $10 million in bridge financing from two of its large investors, Softbank and Hummer Winblad. 

Executives have taken steps over the past six months, including two rounds of layoffs that eliminated 65 jobs, to trim the company's huge burn rate. At one point, the company was losing more than $5 million a month, Gamoran said. That number was subsequently slashed to about $500,000 a month, he said. 

According to Street & Smith's SportsBusiness Journal, a sister publication of the Puget Sound Business Journal, Rivals had been asking potential suitors for $20 million, and counteroffers came in as low as $5 million. 

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