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Yahoo buys Rivals

Thanks to a time-zone related snafu, a story held in queue on a PR Wire in Europe leaked ahead of schedule.  According to the announcement, which was not meant for release before midnight Eastern Std Time but is now being reported, Yahoo acquired sports news and commentary network


The acquisition is being billed as the first under Jerry Yang’s reign at Yahoo but that’s both immaterial and somewhat inaccurate. A deal with the collegiate sports-fan site has been rumored in the works for months.  In April, rumors of both Rivals being for sale and speculation (first reported on Tech Crunch) that a prior SEC investigation of Rivals CEO for securities fraud (when he was a principal at SGA Goldstar Research) might be in the way of his company’s sale, were picked up on various blogs and news sites.    

At the very least, the acquisition by Yahoo has been formally in the pipeline for several weeks.  While Jerry Yang may be at the helm at the close, the deal has been in development since well before the management change occurred.   Additionally, the deal, which is more content driven than technology oriented, fits with the content centric strategy more attributed to outgoing CEO Terry Semel than the shift back to technology expected with Jerry Yang at the helm. 

The purchase price for the acquisition is rumored to be in the ballpark of $100m in cash.  (Back in April when Rivals was first reported on the sale block, the asking price was rumored north of $120m).  No official price has yet been reported.

Rivals, which is based in Tennessee, operates with both an advertising and subscription based revenue model.  It covers more than 100 colleges and has more than 185k subscribers.  It was founded in 2001.   At its highest peak, it drew more than 2.5m unique visitors in a single month, slightly more than its competitor, News Corp owned  It is billed as the number one destination for college and high school sports fans looking for news and insight. Revenue for 2006 is reported to be in the neighborhood of $20m making the transaction about a 5x multiple of sales. 

The inclusion of Rivals into the Yahoo Sports channel, provided Rivals more die-hard user base isn’t alienated or put off by the new ownership, should help Yahoo gain a little more ground on leading sports site ESPN.  According to Media Metrix audience measurement metrics, Yahoo Sports is running a close second behind ESPN. 

Elsewhere in the  Yahoo universe, rumors and speculation are continuing to float around about both a stock swap deal between Yahoo and News Corp in which Yahoo would exchange a percentage of its’ equity (speculated at about 25%  or an amount equal to more than $10b) to buy MySpace or an alternate deal in which Yahoo might either solely, or jointly with billionaire Ron Burkle, submit a counter bid to Rupert Murdoch (and News Corps) bid for the Wall Street Journal and its parent company, Dow Jones.  At this point, while either deal could be possible, there is little to suggest these rumors are any more likely than the ridiculously unlikely stories that circulated about a possible Microsoft and Yahoo merger a few weeks ago. 

If I were an odds maker, I’d say of the two:  the Dow Jones deal is especially unlikely; particularly, if in fact, Yahoo is strategically refocusing on technology and services and not on beefing up its already solid content position.  As valuable a brand as it is, the price for the Wall Street Journal is likely too high. 

A MySpace transaction, on the other hand, while also against the odds (especially at a rumored $10b plus), could be much more compelling. Such a transaction would allow Yahoo to acquire  a large user community (though there is likely significant overlap between Yahoo and MySpace users).  It would also give Yahoo another channel for user-generated content, including an opportunity to gain ground with video.  As a kicker, if Yahoo were to take over control they could squeeze Google out of a lucrative partnership (Google has paid richly to work with MySpace); and beating back their Mountain View nemesis is just what Yahoo’s shareholders have been demanding. 

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