Even with a new lease on life, Linens ‘N Things online faces a tough fight.
The new e-retailing reality sacks the MVP-SportsLine deal
Editor in Chief
MVP.com, the online sporting goods retailer, has been yanked from SportsLine.com’s starting lineup. However, the retailer says this is not a signal that its playing days are through.
SportsLine.com Inc., an Internet sports media company and publisher of CBS SportsLine.com, terminated its portal agreement with MVP.com because MVP has not made its overdue payments for the right to market through SportsLine. MVP.com has operated the e-commerce site for SportsLine.com since MVP’s launch in January 2000.
Gomez Advisors Sporting Goods Analyst John Lovett says MVP bit off more than it could chew when it agreed to pay the quarterly sums. “It’s kind of a reality check,” he says. This over estimation of how much could be earned in the e-retailing deal was indicative of the online sporting goods industry as well as other e-retailers, Lovett says. It was a reflection of the optimism of late 1999 and early 2000. Early projections were that online sporting goods sales would have a growth rate of about 3% more than what is now projected; 45% through 2004. “Everybody’s forecasts were up there,” he says.
Lovett notes that deals like the 10-year agreement between MVP and SportsLine were more common in the early part of 2000. But, as investors’ confidence in e-commerce waned, long-term deals between content and commerce sites became rare.
MVP.com remains overdue with its scheduled payment for the fourth quarter of 2000, SportsLine says. In mid-October, SportsLine recorded a one-time non-cash charge of $114.3 million to write down the value of online investments; MVP accounted for the bulk of that write down. As part of the agreement, MVP is to pay SportsLine each quarter for the right to sell merchandise on the SportsLine web site. MVP paid $13 million through the first three quarters of 2000. MVP gave SportsLine $100 million in MVP stock for promotional services and the right to sell on SportsLine. MVP would not say how much it owes SportsLine or if non-payment is a result of a refusal to pay during negotiations or an inability to pay. MVP says SportsLine does not represent a majority of its sales.
Last month MVP laid off 79 workers-39 from Boulder, Colo., 20 from Chicago and 20 from Austin, Texas. The company closed its Austin and Boulder offices, consolidating its operations at its Chicago headquarters.
Such deals are not likely to go away, but change shape, Lovett says, noting that online sporting goods sales accounted for about 2% of all sporting goods sales in 2000, but by 2004 could equal 10%.