The long saga of Scout has entered a new chapter, with CBS announcing Wednesday that they have “entered into a definitive agreement to acquire Scout Media.” This came in a bankruptcy auction; Scout filed for Chapter 11 bankruptcy back on Dec. 9 after creditors hit them with an involuntary Chapter 11 petition a week earlier, even though internal memos after that said “this does not impact our day to day operations nor the current status of our sales process.” According to Sports Business Journal‘s Eric Fisher, CBS set a stalking horse bid at $9.5 million and saw off a late challenge from former Scout CEO Jim Heckman (who was terminated from that job back in July).
CBS now owns two of the biggest subscription-based sites out there in Scout and 247Sports, but for now, they see them as separate and complementary, not something to merge. CBS’ Jeff Gerttula (senior vice president and general manager, CBS Sports Digital) and Shannon Terry (founder and CEO of 247Sports, which CBS acquired in December 2015) spoke to Awful Announcing Wednesday about the Scout acquisition, the value they expect it to bring, and how it fits in with 247. The most notable comment from that conversation may have been Terry discussing how they’re not currently looking to combine Scout’s and 247’s sites, even those covering the same team.
“[We’ll] absolutely keep running both of them,” he said. “These are two separate brands, two separate companies if you will within the CBS Sports family. Back in technology, marketing, sales, things of that nature, you know, we will share resources, but our first order of business is to give the Scout customers a great product and to stabilize that business for the employees. Fortunately for us, there isn’t a lot of overlap. We’re really strong in a market that they’re really weak in pretty much across the board. We have no plans of shutting down any site or merging them at this time. That’s something that we will discuss way down the road, once we get the business thriving.”
Terry said the two brands can coexist, and their different strengths will make both valuable.
“We’re big believers in the Scout brand,” he said. “247 Sports is quite a bit a different play, and we think that under the CBS Sports umbrella, those brands will do well. Our focus, especially over the next couple quarters, is just to work on the business side and fix those problems and take advantage of the assets and resources that we have in marketing and technology and sales that have been lacking on the Scout side. So we’re big believers in the possibilities of that brand, and we have no plans in the immediate future to do any type of merging those brands.”
Gerttula said they feel Scout will work well with 247 Sports.
“One of the nice parts of this is when we looked at the assets, it complements 247Sports so well,” he said.
Terry said 247Sports excels at innovative products and predictions, while Scout particularly shines for the connections it’s been able to make with hardcore fans.
“What 247Sports does real well is we have a 25-million plus ComScore, it’s a really profitable business,” he said. “We have led the way on innovative products like our crystal ball prediction engine, composite ranking, the newsfeed, so I think we have built a great utilitarian product at the site level for fans to get the news on their favorite teams. Where Scout is really good is that they’re great at focusing and targeting the diehard fan, the fan that lives in the message-board community, the fan that’s engaged, the endemic user.
And so it’s potentially…it’s a Rivals business that we built many years ago (Terry wound up leading Rivals after Heckman was fired, while Heckman started what eventually would become Scout), and it’s on par with if not better than Rivals from an audience perspective, a fan perspective, but it does obviously nowhere near the business that Yahoo bought many years ago. So those businesses complement each other very well, but those businesses are very different in the strengths and the assets that they bring to the table to CBS Sports.”
While Scout may be most known nationally for their college football sites and their recruiting focus, Terry said they have strong sites in other areas (especially college basketball and the NFL) that are connecting well with fans.
“Here’s the thing I really love about Scout, if you ask a fan that’s in a market that has a really strong team presence, that fan’s going to have a different perspective than a fan somewhere that’s lukewarm,” he said. “The beauty of this business, from our perspective, is that it has, when you analyze the 150 markets it’s in, it’s got 35-50ish that are incredibly strong, that have video revenue, display revenue and transactional revenue. That’s big. And in a day and age when people are so dependent on distribution audience through social and search, Scout has this huge audience of these daily users that go to fillinyourteamname.scout.com. There are so many things about this business that really fit well with what we’re trying to do. It’s a team-based business with a strong presence in college football, college basketball and the NFL, and those are our wheelhouses.”
Terry said it’s the people at Scout that really impress him.
“Scout has the deepest talent pool of team-based publishers and reporters of all the networks,” he said. “247 is of course quite a different business model than Rivals and Scout, so I wouldn’t want to put it in that bucket, but Scout is an extremely strong stable of talent. It’s a good overlap with the local talent that 247 has. Scout’s done an exceptional job, and obviously an extensive job, of luring away a lot of Rivals talent over the past year or two. It’s just a diamond in the rough in so many key markets, like North Carolina and Michigan and UCLA, the list just goes on and on.”
Gerttula said a key goal for them is supporting that talent and keeping them on board.
“It’s going to be an integration process for us…but overall, it’s going to be us working to make sure that we’re giving the talent in these local communities the freedom to grow, and the things that have been working for us in our business model, applying a lot of that and the infrastructure and technology to Scout over the long run to make it even a stronger business,” he said. “It’s going to be certainly quite a bit of work for us here out of the gate, but in the end, because the markets complement so well, it’s going to be a really nice fit in a lot of places.”
Terry said he’s optimistic the experience he and his team have in the world of subscription sites will help convince Scout publishers and talent to stay with them.
“We have 20 years of building great businesses in this and being stable and doing what we say we’re going to do and allowing them to be who they are,” he said. “Scout’s filled with a bunch of professional newsbreakers, and we think we can give them the infrastructure and the stability so they can go do their job and not have to focus on these types of headlines. We know we can. That’s what we do.”
Terry said the first key priority for CBS is stabilizing Scout from a business perspective, and they already have a blueprint for that.
“Jeff and Andy [Beal, president of MaxPreps] and myself and a few other people, we’ve been building an ops model based on our 20 years being in the business, and we’ve built an ops model we think will work well for Scout,” he said. “We know that we’ll have to adapt it along the way, but we have a plan to maximize the value there. It’s a lot of day-to-day work, but there’s a good solid business at Scout. We’ve just got to roll up our sleeves and grow the audience and manage costs, the basic stuff.”
Gerttula said they’ll be able to use tools and strategies that have helped CBS elsewhere to boost Scout.
“The team-based play and the personalization pieces that we have across CBS Sports’ digital properties are going to help, where we start to plug in Scout and help distribute that content even more widely,” he said. “A lot of it is going to be using the distribution strategies that are working so well currently to help further the distribution of the Scout content, which, as Shannon described it, is a real diamond in the rough.”
Gerttula said this plan came together quickly after Scout went into bankruptcy proceedings.
“It’s been in the works for I would say a month now, as the writing was on the wall about where Scout was going,” he said. “Obviously we had interest because of the incredible talent they have, the strong community of reporters and insiders that they have, and as we heard there was an opportunity to bid in bankruptcy, our interest was really piqued. Over a month and a half, we’ve been doing a lot of digging and due diligence and meeting the players and doing our best to understand what we like, and coming up with a plan as to what we’d do with it if we had it. It’s been kind of a sprint more than a marathon.”
Gerttula said he thinks this move will help CBS in both the short term and the long term.
“We look at everything in terms of the long-term view of the business, but we think that this business is immediately going to make an impact on our bottom line,” he said. “We always have the long-term view, but beyond even that, we think it’s going to be a good business decision in the short term. The long-term strategic play of it is a perfect fit because of the team-centric nature of it and where we see content consumption going over the next five to 10 years. …We like the short term, but the reason that we were really drawn to it and the reason that we were most excited was about the long-term strengths we think it’s going to bring to CBS Digital.”