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SportsPrize Entertainment?Inventor Of A Better ?Web Trap? To Snare An Internet Audience
By Robert Cardwell
Our last GF Alert, published December 17, featured a recommendation of SportsPrize Entertainment. These days, it takes a lot to get us excited about a new Internet site. While the future of the Net is huge, there are already hundreds of would-be content providers fighting for eyeballs.
SportsPrize looks different. There are plenty of sports sites, but none that are doing quite what this company intends. SportsPrize has a strong business plan, capable management, and is likely to have powerful partners. Combine that with a very low market capitalization, and you have a dynamic speculation.
The company does not yet have all its financing in place, and the launching of its major promotion campaign has been delayed for a few weeks. For these reasons, the stock is still near the lows. This gives us another chance to accumulate at favorable prices. But we expect all the pieces to be in place soon, which should jump start this stock.
It seems quite likely that the Internet will prove the biggest money-making opportunity of our lifetime?for entrepreneurs and for investors. But in every gold rush, there are more barren claims than bonanzas. If your game is providing Web content, you first need to attract users and then figure out how to make money from them.
So in the Net business these days, the buzz terms are ?sticky? technology and ?sticky? content. That just means features that will induce viewers to stick around. If they click right through to another site, the revenue possibilities are limited at best.
SportsPrize has one of the stickiest plans we have seen. There are a number of sports sites, to which fans go for scores and other information and in some cases to ask questions or chat about their favorite players or teams. SportsPrize has created a big improvement on that model. In addition to the usual information, it features interactive contests on a variety of topics in each of a number of sports.
This will appeal to millions of sports fans, particularly younger, affluent men, which happens to be a desirable group for advertisers. In addition to advertising, revenue will come from merchandise sales, sponsorships, joint promotions and possibly licensing the content plus other deals.
Sports-related sites are already among the most heavily used on the Web, with the leading ones getting over a million hits a day. These are the properties of large media companies. There are few independent pure plays in this field, and none that we know of with the potential of SportsPrize. In fact, the company?s combination of information, contests, and e-shopping is unique.
The company?s Tournament is an interactive game of analysis and prediction in a broad range of sports?all the major sports that are in season, with both college and professional divisions. If the concept takes off, we can envision further segmentation?down to virtually any sport (regional or global) in which people are interested. The beauty of the Internet, as opposed to print or broadcast media, is that even small audiences can be served efficiently.
Anyone can access the Web site and test his knowledge and skill. You can check it out at sportsprize.com. But to win prizes, users must register?which will give the company an invaluable data base of names together with information on interests and demographics. For example, those playing the golf games are candidates for golf equipment, golfing vacations, etc.
Each week, registered members will be able to play in sports tournaments with a chance for a variety of prizes. They will also be offered discounts on a wide range of sports merchandise. Prizes will be awarded locally and then participants will be entered in wider contests?i.e., city, state, national and world. An annual $1 million grand prize will be awarded, in a drawing, to one of the weekly winners. Many prizes, large and small, will help keep users interested?weekly, monthly and quarterly prizes, random drawings and instant prizes.
In addition, there will be ?prizes money can?t buy,? such as a trip to the Superbowl in the company of famous football players. SportsPrize has already recruited a number of well known athletes and will sign more. They will help promote the contests and be part of the ?can?t buy? prizes.
Part of the plan is to create an online community, or a large community composed of many sub-communities, focused on particular sports or particular locations. A number of interactive features will help foster this. Members may organize private competitions among at least five friends. Tournament rankings will be available online. Members will be able to communicate with professional athletes, as well as other Tournament players, in SportsPrize chat rooms.
We expect that word of mouth will bring in a lot of players. In addition, there will be a specific member referral program. When a member refers another individual who becomes a player, he will have extra chances to win prizes.
There will be no charge at all to register and play the SportsPrize games. Income will come from advertising aimed at the company?s highly desirable and segmented audience, which should command high rates. In fact, this is an advertiser?s dream. A merchant would be able to reach, for example, people between the ages of 25 and 40, interested in tennis, and living in Northern California. This sort of thing has previously been possible only with direct mail, and the Internet will be faster, more efficient, and should elicit a better response.
E-Commerce Potential
SportsPrize participants should prove a ready market. The company plans three shopping malls of its own, with approximately 14,000 items of merchandise. Few objections to this commercial side of the operation are expected, as the malls will be a convenient place to obtain gear related to member interests?and attractive discounts will be offered.
Online auctions (like eBay) have been one of the big success stories of the Internet. SportsPrize also plans an auction mall, which will feature unique sports memorabilia among other offerings.
Finally, the company plans a very active program of promotions and sponsorships. In general, these will allow SportsPrize to promote its site at little or no cost, or will actually pay the company cash in addition to promoting its online offerings.
This year, the Olympics will present a huge opportunity for extended promotion. In addition, SportsPrize plans event-driven promotions around The Final Four, major Golf and Tennis tournaments, The Triple Crown, major boxing events and the Daytona 500 and Indy 500.
Management is actively pursuing corporate sponsorships which would bring in regular fees as well as new Web visitors. Just as an example, a company might sponsor a season?s coverage of baseball or pro football. It would pay SportsPrize to be featured on the Web pages devoted to that sport. And in its other advertising the sponsor would direct people to the SportsPrize site.
SportsPrize already has a toe in the water with General Motors. The Oldsmobile Web site recently featured a link to SportsPrize and promoted a chance to win a trip to the Superbowl and meet Boomer Esiason.
The company has an ?in? with GM through its relationship with Kaleidoscope Sports and Entertainment, which is helping in brand management, advertising and sponsorship sales, promotions, and relations with sports celebrities.
This is an important partner for SportsPrize. Kaleidoscope has very valuable contacts and expertise in the sports world?and it is 50% owned by General Motors. It handles all GM?s sports-related promotions.
Corporate Tie-Ins
We expect to hear about some significant GM participation in SportsPrize, and also look for additional corporate sponsorships to develop. Talks are going on with a number of companies and such deals would be win-win situations.
The company has other significant partners. Frontier Global, one of the prime Web hosting outfits, is responsible for delivering the content. Interactive Marketing, whose clients include Microsoft, Netscape and Yahoo!, is providing strategic marketing and operational guidance. DBC sports, a division of Data Broadcasting, will provide all the necessary statistical information as well as develop questions for the Tournaments.
Not long after we put out our Alert, the pesky ?e? landed on the SportsPrize stock symbol?meaning that the company had not fully met financial reporting requirements. We believe the company?s books are in order?that this is merely a matter of bureaucratic nit picking at the SEC. Management assures us that they should have SEC clearance and become a fully-reporting company within a very short time.
Soon after that happens, some substantial financing is likely from two or more private investment groups that are waiting in the wings. This in turn will enable SportsPrize to roll out the major promotion campaign that it has planned.
Try The Site
Meanwhile, the site is up and running with a limited number of members, allowing the technical people to work out any kinks. New content is continually being added as well. And the company is starting some small-scale promotion. It?s a sponsor of the Winning Way sports program in Los Angeles, which at small cost brings a series of promotional mentions on local media outlets, signage at Staples Center, and a number of other opportunities.
As a brand new company in a very competitive field, SportsPrize is definitely a speculation. Further, the company has limited working capital at present and we can?t be certain it will get financing?although we think the chances are very good. As with almost all Ground Floor recommendations, there is some risk but much more potential upside.
The stock is volatile. Most of the shares are restricted or closely held, so the float is only about 10% of the total capitalization. Our limit price is the most we would pay, but we?d like to get it cheaper. Use limit orders.
Robert Cardwell is Director of Research at the Hirsch Organization.
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