Part two of our interview with SportsFanLive founder and CEO, and former CBS and Yahoo executive, David Katz. Today we talk about SportsFanLive's approach to original content, its new site devoted to athletes on Twitter, and Katz's thoughts on how his former employees are dealing with the new reality of business on the Internet.
For more on Katz and SportsFanLive, see part one of our interview.
BF: Let's make sure I know the "we" behind this company: how many people do you have working, and is it all kind of your own funding, or have you been outside raising money?
DK: I funded it myself for the first year, while I built the site and assembled the team, because I wanted to be able to go to the community and not just say, "Here's a business plan and here's my background, back me," and have that wonderful conversation with potential investors. Instead, I said, "I believe in this. I'm going to invest a certain amount of my own capital in this, and then a year-plus of my life to demonstrate the value I think it has." We built it. Then we went out to private investors, high net worth individuals, people of strategic value to us, people who are in the sports, media, Internet, finance and advertising worlds, and we got them to invest. We did a full Series A Preferred round, raised several million dollars, and kind of capitalized that last year.
We're well-funded, and we're going to be good for the next several years, on top of the fact that we've been generating revenue, and we were almost cash-flow positive last month. We're in good shape. Now, our goal going forward is to figure out, "Are there big enough opportunities that we may want to double-down on investment," in which case we might require more strategic partnerships or investments.
BF: And about how many employees do you have?
DK: We are very lean. The core team is under ten people. We do have access to a fair number of contractors, depending on what the project is, and we make excellent use of interns.
BF: Do you put any effort into marketing or SEO or anything to get people to the site, or at this point are you more focused on building tools which you use on your site and can then distribute?
DK: To date the focus has been on tool and product development, and on building relationships with advertisers. We have an advisory board of some very senior ad sales executives in this industry, and we want to demonstrate one value to them and use their leverage and their help. I think we've demonstrated through the deals that we've closed and through the great conversation we've had even with people we haven't closed, that we represent something a little different than what they'll find when they get the normal sports site pitch. That's been our focus to date.
Going forward, we're really now focusing on partnerships and distribution of those tools, and we're seeing an interesting trend out there. We've got sites, big and small, who are feeling a bit of the crunch right now, and realize they need to keep evolving and adding compelling content and functionality, but they don't have the resources to do it themselves.
BF: And is it clear how to make money doing that? Do you need to get a revenue share, or do you get sponsorships, or are you figuring...
DK: We're open to a lot of relationships, but one of the most surprising things for us are these small companies. You think you'd go to a bigger company and they'd want to control the ad sales components and all that. A lot of them are overwhelmed, so in many cases they say, "You guys are having such success selling it; sell it, and cut us in on the backside." We're open to any kind of relationship with that – everyone's different – but we're working on a couple of large opportunities.
BF: It sounds like if you go only this direction, you might be more of a platform than a site, but you talk about content, and having original content.
DK: The thing I've learned, I think, is that the platform thing is great. We've seen it with Twitter. They build a great platform, and it took two years for people to really discover it through a whole amazing series of events, and then all of a sudden it explodes. A platform is only as good as its distribution buzz and viral aspects.
I don't think we can, one, put all of our eggs in the platform basket and expect that lightning's going to hit us like that. I've always been a believer that platforms are only as good as the content that flows through it, and I would argue that it's the same with Twitter. It was the celebrities, and the content they were posting, and the mesmerizing content that was actually being pushed through that platform, that all of a sudden people started saying, "I get that platform; I see what it's good for again."
Whether it's CBS or Yahoo, I've always been a believer that ultimately, content will drive the ubiquity of these platforms.
Phase one was always to demonstrate the platform. Phase two is now that the structure of the house is built, let's start adding the wallpaper, the furniture, and all the stuff that people are going to be comfortable in and around and will make them want to spend more time there. My personal belief is that sports-related content on the Internet is very uninspired.
You've got the AP articles, and the news articles that are broken by the sports sites and the newspaper sites, great. There's a huge need for that, and we respect it. Then you've kind of got the talking-head, short form expert analysis video stuff that's being propagated by all these sites, and it kind of looks like cheaper worse television to me, and I'm not really inspired by that, and I don't think people have really grabbed some of the unique elements this medium has to offer and created some more cool and innovative programming around that.
We have a lot of video-oriented experiences that we are looking to take out with partners, and we have a lot of text ideas and editorial ideas that we want to have some fun with.
BF: And will you be looking to compete in terms of having the best content producers, or do you think there's a big network of amateurs or bloggers that you can take advantage of in certain ways?
DK: I think right now that when it comes to the world of sports writing, the video production is a little too incestuous. People tend to go to the same people and recirculate the same folks. A lot of them are enormously talented, and that's why they are at that level, but there are only so many places for those people to go, and they'll pass from site to site or company to company, and I believe that we're not going to be able to compete on price.
Let ESPN and [Sports Illustrated] and Yahoo Sports fight that battle, and go for the big names. You'd be amazed how many big names there are that are interested in doing something with a smaller site, where they can have a little more autonomy and control, but at the same time we think there are a lot of fresh voices and undiscovered talent that can be brought to the fore. I think that's one of the things I've always been most excited about in this medium, so I value maybe a slightly different skill set than the other folks.
BF: With that in mind, when you look forward to what you want the company to be in a couple years, do you want SportsFanLive.com to be really big and get a lot of traffic as well as all your platforms, or do you see SportsFanLive, the destination, becoming a less important part of the business?
DK: I'll be honest: I spent so many years trying to be an entrepreneurial executive inside of a larger organization, and now I'm doing the entrepreneurial thing kind of in-and-of-itself, and one thing I've learned is I can't tell you the answer to that. I've got my hypothesis for how it's going to go, but we also have a slightly different approach. We're playing with a lot of different businesses. There are a lot of people who say, "We're going to do one feature, or one blog, do it as well as we can, and pray that the world coalesces around that being important." Our view is a little different: "Let's build the experience that, as a sports fan, we would want to experience," comprehensively, see if any of those particular areas takes off more than the others, and then double-down in that space.
I'll give you an example: I started registering URLs around the Twitter concept about sixteen months ago. I had first heard about it probably two years ago; I was working with a product guy that I had hired that was one of the early guys on Twitter, using it amongst their friends, so I kind of knew about it early on and I said, "This could be kind of cool." So I went out and registered some really good, beachfront property URLs around Twitter, and I had all these concepts around Twitter, but I was like, "You know what, the platform has half a million uniques right now, let's wait on that." A year ago, I never would have said Twitter could be an interesting part of what we're doing.
Cut to a month ago, or six weeks ago when I'm looking at what's happening, and I'm like, "Now is the time. Let's move fast," and we had this good real estate, so we were able to launch very quickly a site like , and we've got a lot more Twitter-oriented ideas in the pipeline that will be coming out soon.
BF: Are they all around sports?
DK: I personally have a lot of ideas around what people could do for Twitter in general, but my focus in my current role is built on sports. It is possible that we might license out some of the technology we've built, for people who might be interested in doing this in other platforms, be it entertainment or any other genres, but right now our focus is primarily on sports. But I think we've just begun to see what that medium can provide, and that we're just beginning to see what those companies who are starting to feel a little bit of the competitive threat of what Twitter is doing, realign themselves to compete better with where that whole space is going. We're pretty excited about that, and AthleteTweets has gotten a fair amount of attention in the last two days just with our launch.
Twitter is one of those things where – you probably know the numbers better, ten million people on it right now, versus two million a couple months ago – but there are 100 million plus sports fans online in the U.S. every month, so by definition the majority of sports fans are not on Twitter. A lot of them have heard about it now, so the attention it gets outstrips the utility, for people. I believe there is so much compelling content flowing through that space, but it's not packaged in a way that's interesting to a lot of people. So that was the question: "Can you build something that highlights the value of it for fans, without them having to log in and register and everything?"
BF: So let me ask you: In the entertainment space, certainly, there's a lot of question and concern about, "We're putting this stuff online, we're kind of monetizing it; it's not even a fraction of what you can make for the same content on air," and people like Jeff Bewkes are like, "Well maybe we should pull back, and not give away all this stuff for free. Maybe they have to be subscribers, or we're going to lose our business model and be destroyed." From your perspective, is that feasible, or is it done and you can't pull back?
DK: I think the cat's out of the bag, for the most part. I think there are certain areas where people have made the decision to have that authentication take place, or subscription requirements. I personally find it frustrating, and think they're limiting the space, but at a time like this, you look at it and say, "Oh, it's another dual revenue stream," and it makes a lot of sense. Cable's in a much better position than broadcast, and I think their job is to focus on doing everything they can to preserve that model and get the year-over-year subscriber increases they can get. At the end of the day, they need to be focused on one thing: delivering the best content experience to consumers. I think everything else will ultimately take care of itself, but we could be going through a five to ten year period where there is a dip as one medium takes over for the other, that doesn't more than make up for it.
There's always been something new that makes up for something old. This is the first time that there's kind of creative destruction going on. I think it's almost do it at your own peril, restrict access to this stuff at your own peril. But at the same time, I think what should be encouraging to people is that people want to watch full-length, high-quality television programs on the computer, and through these digital channels.
To me, that was always an open question: Would people want to sit there? Would the quality experience be good enough? If I were them, I'd be breathing a sigh of relief that the content we produce and the formats we've come to develop around comedies and dramas and talk shows, etc, still work in this new medium. Because everything's going to be IP-delivered at some point.
BF: Do you think it's still an open question whether or not the portals, such as AOL, Yahoo, etc, have a clear future and a clear business?
DK: I don't know if anyone's future is clear at this point, big or small, but I'd much rather be attacking that problem that everyone's facing with 500 million unique users a month, who still come in every day to check their email and look at the news and finance and check their sports scores. I think the portals still have a huge competitive advantage. I think they need to reinvent themselves in this new medium, and I think they need to figure out what their focus needs to be, because they were probably in too many businesses, a jack of all trades and master of few. I wouldn't say none, but I would say few.
I think the future for Yahoo, just looking at it, is extremely bright. It may not have the cool, edgy view of a Facebook or a Twitter, it might not have the kind of commanding revenue stream that a Google has, but they place significantly in so many businesses and they have a goodwill with the consumer that you cannot buy today.
I think it's interesting to watch what an AOL is doing, focusing a little more on original entertainment, original content. I agree with that strategy, and think there's an opportunity there, and I obviously agreed with that from a Yahoo perspective, because that's why I wanted to go over there. So I still believe that these portals have vast competitive advantages, and I do believe that they're not going away. There might be consolidation, and pieces combined, but the future for those companies – once they get through this period of angst that everyone's feeling – is going to be very bright.
BF: So now that sports is your full-time job, does this make you even more of a sports fan, or are you sick of sports?
DK: I've always loved sports and entertainment equally; when I went to Yahoo, it was my dream job because I had a chance to manage both. When I left Yahoo, and I kind of started writing in a journal what I do every day – because I was looking at some opportunities that were entertainment-related, some that were sports-related – I realized that the first thing I do when I come home is turn on the ESPN, I go online and I'm checking the local scores and reading my local newspapers back in Baltimore for the sports-oriented stuff, and I realized I was spending so much time doing the sports thing – and I had the worst college basketball career in the history of the NCAAs, I don't know if you know this, but I scored a grand total of three career points for the University of Pennsylvania Fighting Quakers. We did win an NCAA tournament my senior year, in '94...
BF: I assume you got to go to that?
DK: I was literally the last guy on the bench. Literally.
I've always been a sports fan, never really gotten that out of my system, and for a relatively short, white Jewish guy, this is the way, I can live out my sports fantasies. It's been a lot of fun, and I love it, so I think I'm a bigger sports fan today than I even was before, because I realized I could find a way to get paid to do what I love and do anyway.