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Why ESPN Should Buy SB Nation

posted by Shawn Hoffman, on March 10th, 2009 at 09:39 am, in category 1

For those unfamiliar, SBN is a network of sports blogs, mostly covering local teams. They are doing a lot of things right, and quickly becoming a solid alternative to local newspapers (for sports coverage, at least). A few highlights:

  • Outstanding local sports coverage. If you’re a fan of an American sports team, SBN probably has a blog for that team. More importantly, that blog will probably be written by someone who actually knows what he/she is talking about, which is a major step up from most local beat writers.
  • A very low-cost structure. SBN uses equity to acquire their blogs, and then splits advertising revenue with the bloggers. From 24/7 Wall Street: “Total revenue per year is $1.5 million. The operation has a fair number of people for a company its size so operating margins are not above 30%.” Margins “not above 30%” are still pretty robust for a site of this size, which relies on skilled writers to provide content (as opposed to crowd sourcing, like Bleacher Report).
  • A very scalable model. SBN already has upwards of 200 blogs, covering every team in the NFL and MLB, about 25 each in the NBA and NHL, and most of the major college programs. But even if they manage to cover every team in every major sport, there are still countless quality sports blogs out there that are looking to monetize. SBN gives them that opportunity, at very little cost.

That’s a pretty powerful combination, given the current landscape for media and avertising. And it’s one that ESPN could benefit greatly from, given its luckluster efforts in this space.

ESPN.com is a pure up-sell site; it draws you with news and video, and then sells anything else it can think of (along with advertising). Its brand is incredibly strong, and it owns a virtual monopoly on national sports news. But locally, it hasn’t found a formula that works. Fox Sports beat it to the punch on cable (a strategy that may or may not have actually been successful, depending on who you ask), and ESPN.com hasn’t found a way to beat local newspapers in terms of written content.

SBN could fill that hole. 24/7 Wall Street had the company valued at $2.7 million, which is probably a bit light (that assumes a P/E of 6, for a company that is growing very fast and recently raised a “mid-seven-figure sum” in venture capital). But even if it’s worth $15-20 million independently, ESPN would likely make that back in weeks: not only would its scale drive an incredible amount of pageviews, but it could also charge a higher CPM (24/7 had SBN’s at $6).

Yahoo may end up being SBN’s ultimate destination (the two recently formed a distribution partnership), but ESPN is a much better fit. Sports is an important part of Yahoo’s site, but ESPN could make SBN a truly dominant player. And considering the incredible opportunity the worldwide leader will have in local markets if newspapers keep flaming out, this seems like a very natural move.

Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com


5 Existing Comments

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  1. on March 10th at 09:58 am
    Wooden U. Lykteneau said:

    “SBN probably has a blog for that team. More importantly, that blog will probably be written by someone who actually knows what he/she is talking about, which is a major step up from most local beat writers.”

    The evidence does not support that delusion.

    Many? Maybe. Most? Definitely not.

    Virtually all bloggers depend on their local newspapers for information, and few actually go to the games and interview the players. Even rarer, folks that are trained journalists.

    I have no doubt that you’re right - when local newspapers die, they’ll look to cheaper (read: less qualified, untrained) alternatives for content creation.

  2. on March 10th at 02:57 pm
    Shawn Hoffman said:

    Reporting and analyzing are two very different things. The former is being commoditized, the latter is in demand. Beat writers are generally good reporters, but SBN’s bloggers run circles around them analytically.

  3. on March 11th at 02:03 pm
    Wooden U. Lykteneau said:

    The problem is that most of these bloggers think they’re Bill James, but they read, sound, and probably look more like Kevin James.

  4. on March 14th at 07:48 am
    Justin t said:

    Sounds like someone’s a bitter beat writer. Beat writers are good at a few things. They are persistant (constantly harrassing players), creative (literally just making up rumors during the winter meetings), and good writers. Baseball minds they aren’t, unless when it comes to fantasy baseball.

  5. on March 17th at 12:55 am
    Internet content reaching critical mass said:

    [...] For those looking for the “next big thing,” I would put my money on what services or businesses rise to fill the “localization” void which will ultimately be created as newspapers exit the print business and pare down headcount. One example might include the development of localized blog networks like SB Nation. (Shawn Hoffman discussed this possibility much better than I ever could over at Squawking Baseball.) [...]

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