SportsLine's 'Insider' Ties Represent Big Credibility Gamble

SportsLine has severed its online links to its Vegas Insider unit, but the gambling-related site represents a small but lucrative revenue stream.
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Late last month,

March Madness

dwarfed this little news item: Online sports site

SportsLine USA

(SPLN)

, at the behest of minority owner

CBS

(CBS) - Get Report

and the

NCAA

, put on the block the Internet address it leased to

Sportsbook.com

, an offshore sports gambling site.

CBS -- which recently boosted its stake in SportsLine to 18% from 12.5% -- can breathe a sigh of relief for disassociating itself from Sportsbook. After all, one of CBS's major sports franchises is men's college basketball, and the NCAA has a stringent policy against anything related to gambling. So CBS's alliance with SportsLine put the network too close to Sportsbook, at least for the NCAA.

But SportsLine

owns

another site called

Vegas Insider

, a sports betting information site that charges users up to $149.95 a month for up-to-the-minute "live" gambling odds from Las Vegas, although Vegas Insider doesn't accept bets. In fact, SportsLine CEO Michael Levy's first vision of the company was as an online sports gambling enterprise, and its main site, CBS SportsLine, was directly linked to Vegas Insider as late as

last summer.

Although SportsLine severed its online links to Vegas Insider, the gambling-related site still has the same look and feel of the company's main sports news site and represents a small but lucrative revenue stream for the Fort Lauderdale, Fla.-based company.

Rob Martin, an Internet analyst at

Friedman Billings Ramsey

, estimates that Vegas Insider generated up to 4% of the company's total revenue in the first quarter, or $400,000 out of total revenue of $10 million. But look at the revenue per subscriber: 5,000 Vegas Insider subscribers pay an average of $25 per month, compared with the $8 per month the 50,000-plus subscribers pay for regular CBS SportsLine membership, notes Martin, who has an accumulate on the stock. His firm has no underwriting relationship with the company.

SportsLine officials don't see Vegas Insider as a problem. "We're in the information business," says Larry Wahl, SportsLine's director of investor relations. "There are a lot of places both online and off-line where people can get betting information."

CBS Sports spokeswoman LeslieAnne Wade says there's a clear separation between SportsLine's main site and Vegas Insider. "Our main business with the company is with cbs.sportsline.com, and there are no links to gambling sites there," she says.

The perception that the network was indirectly linked to a gambling site, however, was what prompted the NCAA to alert CBS to SportsLine's affiliation with Sportsbook. CBS demanded that SportsLine sever its ties to the gambling site and was so concerned that it had CBS Sports anchor Greg Gumbel read this disclaimer before the start of its

Final Four

coverage on March 27: "CBS was unaware of SportsLine's connection to Sportsbook, and the network was very concerned and took immediate action." SportsLine has sold the Sportsbook URL, says a company spokesman.

Now, the NCAA -- which urged a national commission studying gambling to ban Internet gambling in February -- is expected to set its sights on Vegas Insider. "Both sites

sportsbook.com and vegasinsider.com are related to sports wagering, so we would have concerns about both," says Bill Saum, NCAA's director of agent and gambling activities. Saum, whose office alerted CBS about SportsLine's link to Sportsbook, notes that the NCAA is familiar with Vegas Insider, and "it's something we need to address with CBS in a timely manner."

SportsLine's Wahl says the company has not been contacted by the NCAA about Vegas Insider.

So why does SportsLine hold on to Vegas Insider? "From a media perception or in terms of legitimacy, it wouldn't be a bad idea to get rid of it," says Martin at Friedman Billings.

After all, CBS SportsLine itself is one of the more successful Internet sites and the No. 2 provider of sports news behind

Disney's

(DIS) - Get Report

ESPN.com

, according to the latest Web traffic numbers from

MediaMetrix

.

ESPN.com has a daily line of betting information, but no gambling advertising or links to gambling sites, according to Geoff Reiss, ESPN Internet Ventures' senior vice president of programming.

"There is a cost of entry to the relationships we have with the

NFL

, the

NBA

and

Nascar

," says Reiss, whose company operates the

NFL.com

,

NBA.com

and

Nascar.com

Web sites. That cost, he stresses, is to respect these various group's concerns about having relationships with gambling-oriented sites.

Time Warner's

(TWX)

CNN/SI

, the No. 3 online sports site, doesn't even have a daily line, according to a spokeswoman.

SportsLine doesn't run gambling ads on its main site. But Wahl says links on Vegas Insider to gambling sites such as

WallStreetBets

will remain. And Vegas Insider will continue to run ads from Sportsbook, Wahl says.

"We just don't know what we offer at Vegas Insider that is anything different than the kinds of things ESPN offers when it brings on a Hank Goldberg to discuss the betting line," he says. Goldberg is a football analyst for

ESPN2

and

ESPN Sports Radio

.

While SportsLine doesn't think sports betting is an issue, "Sen. Jon Kyl does," says Martin at Friedman Billings. Kyl, an Arizona Republican, has long been a thorn in the side of online gambling sites, having introduced S.474 "The Internet Gambling Prohibition Act" in 1997. The bill has been reintroduced into the Senate and has been altered to go after gambling enterprises or sports bookies, and not bettors, according to Vince Sollitto, Kyl's press secretary.