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Understanding Turner’s Acquisition Of Bleacher Report

The four founders from several years back

Following months of speculation that a deal was imminent, Turner Broadcasting has pulled the trigger on a reported $175 million acquisition of online sports portal Bleacher Report. The deal does not include the $20 million in cash the company still had which will go straight back to investors and essentially pushes the transaction to somewhere near the $195 million neighborhood.

In terms of an online sports exit, the sale price is the highest the industry has seen nearly doubling the reported $100 million sale of Rivals to Yahoo in 2007. Eric Fisher from Sports Business Journal did point out that Rivals achieved their exit requiring far less capital, as Bleacher Report had been funded to the tune of $40 million. 

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There has been a lot of coverage of the liquidity event although a lot of it just piggybacks off of the press release. I thought Matthew Ingram on Gigaom had a pretty solid take while Sarah Lacey took some flack from Jamie Mottram, myself, and others for her write-up and labeling of Bleacher Report as a blog. Lacey's article also has a passionate defense of Bleacher Report by one of it's founders responding to criticism in the comment section. It's a solid read that ends with a pretty bold statement saying, "You can have whatever opinion of Bleacher Report you want, but facts are facts. We are the new challenger to ESPN's crown, and I like our odds." 

However, one thing that struck me is that there wasn't a lot of analysis on the move and given how many people are talking about and asking me about it, I've decided to dust off my sports 2.0 blogging skills and share some thoughts on the move. For those unfamiliar, I used to write about this kind of thing on benkoo.com extensively. This included a lot of coverage of Bleacher Report and other sports startups. In the past I've covered their partnership with CBS, their good standing on Google News, funding rounds, and some of their strategic pivots. I think they'd agree that I've been pretty fair to them over the years. With that said, as a disclaimer I also am the CEO of Bloguin (Awful Announcing's parent company) and there is some level of overlap here and there. Thus, my point of view probably has some bias or spin along the way, but I've tried to be as fair as possible in this analysis of Turner's acquisition of Bleacher Report. 

Why Did Turner Buy Bleacher Report? 

One of the interesting things here is that the agreement says Turner Broadcasting acquired Bleacher Report and not Turner Sports. From a corporate structure perspective that may hint at some changes down the road at Turner.

At first glance the deal is kind of odd. Turner has a portfolio of cable channels, some of which air sports every once in awhile with TNT, TBS, and TruTV having rights to the NBA, MLB, NCAA tourney, among others. 

They don't have an all sports television channel (they do run NBA TV) and they don't have much interest in the online content space. 

But at one point they did.

In 2010, realizing that Turner was running a handful of large pro league websites like PGA.com and NBA.com , Time Warner thought the Turner gang could add some expertise to Sports Illustrated's website which had for a decade basically tailed ESPN.com from a distance while the likes of Yahoo, Fox, and NBC zoomed by.

But the arranged marriage didn't seem to do much as SI reasserted control of the property in the end of 2011. Turner got a taste of the business and was basically told, "It's not you, It's me," which as we all know is just being polite.

I'd imagine the guys at Turner stewed a bit. There is generally a feeling that ESPN is vulnerable on the portal front and I'd imagine getting told they were unfit to mount a strategic push for a more popular SI.com led to some motivation of doing it on their own.

In fact, there was a lot of chatter that even without the acquisition of Bleacher Report, Turner was going to enter the portal space. 

At the end of the day, Turner decided they wanted a seat at the table and probably a seat directly across from the Sports Illustrated guys for a vicious stare off. 

Wanting to be in the portal game, other than Sports Fan Live's The Post Game which is currently affiliated with Yahoo and probably has a first right of refusal, Bleacher Report was the only real sports portal with meaningful scale.  We'll weigh the pros and cons of acquiring B/R in just a bit.

Is Bleacher Report Really Worth That Much? Isn't Turner Aware Of The Stigma of The Brand They Are Buying?

Bleacherreport.com page views as measured by Quantcast

I find myself asked this the most being from the blogger side of the fence. People just cannot fathom a site that has been the target of ample criticism being worth such a high price tag. 

However you feel about the content, the bottom line is that b/r's metrics and technology support such a high valuation. Basically, if you look at the amount of monthly visitors to Bleacher Report, page views, time on site, and revenue, and build a valuation around those metrics $175 million is not crazy. 

A Comscore audience number of 10 million monthly visitors (higher than Sports Illustrated) and on pace for $30 million dollars in annual revenue are numbers that are probably only bested on 2-3 other sports portals. 

Also, Bleacher Report's technology spanning the website, mobile app, and newsletter program are all way ahead of the pack here. The architecture and platform is newer and on a more flexible programming language (Ruby on Rails) while the other major sports portals site frameworks are built on legacy proprietary solutions that require a lot of maintenance and general developer TLC. 

In particular, Bleacher Report's app and newsletter program are wildly successful and while not their core business, both serve as popular touch points with sports fans and allow for heavy engagement with users. These assets alone could probably be pegged for 25% of Bleacher Report's total value. 

If you're an individual thinking the content isn't worthy of such a big valuation, the fact is Bleacher Report's content, however dicey it maybe, garnered a large audience which in turn translated to investors, advertisers, and technology adoption.  If Turner got duped, then advertisers were duped first, and investors before that, and so on. 

Perhaps it's the wildly popular bar that a lot of people hate but is always busy. Regardless, the metrics and books are reflective of a healthy and growing business.

What To Keep An Eye On Going Forward

There is always a lot of chest thumping after every acquisition regardless of the circumstances. Turner is saying you'll see b/r promoted on television and Bleacher Report will get access to more events and video highlights.

Bleacher Report is saying there will be more paying gigs than there are now (after a round of talent acquisitions of some notable names from the blogosphere) and that it will continue to operate in San Francisco with the same management team running the show.

First and foremost it will be interesting to see what the writing talent looks like in the year going forward. Currently armed with 6,000 writers, the bulk of which are unpaid, will Bleacher Report's content become more top heavy leaning on the top tier of talent and bringing in big names similar to FanHouse in its latter years?

Or will they continue to embrace the power of crowds and play more of a frequency game with continued emphasis on a large output of content a day (currently 1,000 articles)?

Another key thing to look at will be what will become of Bleacher Report's recent and strong push into producing video content? Believed to be getting paid $5 million a year by Google/Youtube to produce professional video content, the jury is still out on how viable this component of the business is for both Bleacher Report and SB Nation. 

But the thing is here that Bleacher Report now works with a cable company and there definitely is synergy on this front. Will b/r Youtube talent and show concepts cross over onto Turner cable channels at some point and will the content change with Turner personalities like Charles Barkley now part of the same parent company? More access and more known personalities could provide a nice second wind for the foray into video.

Another big question if is Turner is willing to pivot any of their cable channels to be more male/sports orientated. Currently TBS has a little bit of MLB and is focused on comedy. TNT is drama and has basketball. TruTV is largely for idiots, but they skew male and they do have NCAA tourney games. At some point you may see Turner try to morph one of these channels into something like a poor man's FX which is adding sports to male focused content. 

That's rather unlikely I'd say, but at the same time I still don't get why Turner has all of these sports rights and spreads them around like war rations during a siege. 

The 2 Narratives That Come Out From This Deal

This is a fun one because you can see both sides of what this deal says.

You can embrace the transaction as sports media being disrupted by a tenacious upstart. It's hard not to like this story:

Four former high school classmates start a company right before an economic implosion. They persevere and grow. Things get a bit bumpy as the first guy brought in to be CEO doesn't work out, the venture markets become difficult to navigate, and criticism builds over the quality of the product. One of the founders leaves. 

A new CEO joins and efforts are made to turn around the quality of the content and the perception of it. Millions of ad dollars and investment follow while good technology acquires new users and retains them at an impressive rate.

A company with a lot of folks under 30 get rewarded when Turner decides this is the best way for them to get into their competitors weight class quickly, similar to buying a Kentucky Derby horse a month or so before the big race. 

On the flip side, if you're not a fan of Bleacher Report, this is the validation of a type of content and style that is detrimental and distracting to sports fans. For some of our readers, it's the same type of bewilderment that continues to see the star of Skip Bayless rise at ESPN regardless of the ire he draws from many people.

For those involved in other sports media ventures like myself, some have taken this like losing a presidential election in which you were really passionate for the losing candidate and despised the winning candidate. 

Really, it comes down to personal taste as Bleacher Report is a very polarizing company that has found a very high level of success. 

Broader Implications

Does this hurt or help Turner's chances in keeping their MLB and NBA rights? 

How will other major players like USA Today, CBS, Fox, Yahoo, and NBC react? 

What effect will this have for the likes Bloguin and SB Nation? 

Will this spur activity on the funding, acquisition, and IPO front for other content companies in other content niches? High Gear Media, Gawker, Buzz Media, Pop Sugar, and others are also well along at this point in time and may look to leverage this event.

Congrats

I think I've personally met and spend time with a dozen Bleacher Report employees. Some of them trace back to my childhood and I see quite often. Perhaps a slideshow is order of top ten ways to celebrate your new found wealth with me is in order? 

All kidding aside, that's a nice chunk of change and b/r's founders should be proud of standing tall throughout the journey.

Ben Koo

About Ben Koo

Copying and pasting my Twitter bio. I'm also refusing (for now) to write this in the third person. This is me - CEO of @Bloguin, GM at @AwfulAnnouncing, world's greatest chinese jew, proud Buckeye, funny dude, and sports and digital media zealot.

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