Business Profile: RotoWire.com
Saturday, November 27th, 2010
Company: RotoWire.com
Launch date: January 1997 (RotoNews.com); March 2001 (RotoWire.com)
Became full-time operation: 1998
No. of employees: 10 full time/85+ part time
In its two iterations, RotoWire (part of Roto Sports Inc.) has been a leader in fantasy content — from providing the basic template for the now-ubiquitous player update to saturating the annual list of Fantasy Sports Writers Association award nominees. President Peter Schoenke recently took the time to tell FSB.com about the company.
1. Were the three founding Northwestern grads classmates (and/or college friends)? If so, how much talk was there of going into business before the 1997 launch of RotoNews.com?
Herb Ilk, Jeff Erickson and I lived near each other in Chicago after graduation and were in the same fantasy baseball and football league I started in 1990 while at Northwestern. I quit my day job to join an Internet startup in the futures industry in 1996, and Herb was obsessed with starting a web business of his own. I learned Internet programming at the startup job and came up with the RotoNews idea during that time. I built it on the side with Herb’s help along with Jeff (who I roped in because he was the most knowledgeable fantasy player). Back then not everyone had a computer, so I actually started an Internet company with two guys who didn’t own a computer. They did things at the library and on the side at their day jobs.
2. What business(es) were the three of you in before that launch?
I was a reporter for Dow Jones, covering the futures markets in Chicago and occasionally getting my byline in The Wall Street Journal. Herb was an environmental engineer. Jeff had just graduated from law school.
3. What kind of startup costs did RotoNews generate, and how did you come up with the initial capital? How and how well did you cover the costs of the business back when your offerings were free?
Initially it was all sweat equity, and I just paid the hosting costs (which were not much) out of my own pocket. Then in 1998, when we exploded (climbing into the top-10 most trafficked sports websites), we bartered server and office space with a company who had management I knew from my work at the futures industry startup. We were just so busy with the site we didn’t even have time to raise money. It took off that fast. Whenever someone has a business plan in fantasy sports or an Internet startup idea, the first question I often hear is “what’s going to happen when I get so much traffic my servers crash?” That never happens. It’s always the opposite problem. I’ve seen only a few exceptions, and RotoNews.com was one of them.
4. How did you turn the site into a sellable commodity so quickly at a time before fantasy had really been accepted into the mainstream?
We helped lower the barrier to entry for fantasy sports by providing users with an ability to quickly get information to manage their teams and later low cost software to run their leagues. We were one of the sites at the forefront of the movement that made the hobby mainstream and it resulted in a surge of traffic that made us a valuable business.
The whole idea of “player notes” just took off, and the way we presented them with the “news” and “analysis” for each update quickly became the industry standard. Then in 1998 we added free commissioner services for baseball, football, basketball and hockey. We were the first site to offer league hosting for free and our traffic exploded.
5. Why did you sell RotoNews in 1999, and what involvement did the founders have under the new ownership? Things certainly seem to have worked out well, but do you guys ever regret selling?
We were chasing the dot-com riches like everyone else and just wanted to get public quick. But it didn’t go well. We were one of the top-10 trafficked sports sites on the Web, and I estimate that we hosted as much as 60 percent of all fantasy football and baseball leagues online. But the management at Broadband Sports ended up just using us to pad their traffic numbers and didn’t realize what they had. (Their focus was on athlete web sites for such players as Brett Favre and Anna Kournakova.) What would that share of the fantasy sports market be worth today?
We ran RotoWire.com for the parent company but saw very little of the $60 million they spent before going bankrupt. It was just a crazy time, like a lot of dot-com failures, with big expenditures on office space, unnecessary hiring and tons of waste. It was just insanity, but we sort of stayed off in the corner, below the radar, and kept running the site. When Broadband Sports went bankrupt, we basically lost the commissioner business, since NBA and NHL leagues went without stats during the bankruptcy process and since we couldn’t launch a baseball product in time for 2001. By that time in 2001, Yahoo! and CBS (for a season) went free and users moved there. So the opportunity we had to dominate the commissioner business was gone.
6. What went into the virtual relaunch as RotoWire in 2001, as far as necessary capital, staffing, rebuilding a reputation, etc.? Basically, how much were you able to pick up where Rotonews left off and how much had to start again from scratch?
After Broadband Sports went bankrupt, Jeff, Herb and I decided we wanted to keep RotoNews going, so we kept all the employees of the unit and literally walked across the street and started it back up. We had to change the domain name due to legal complications (later on we got RotoNews.com back), but most of our customers found us right away due to word of mouth. Other than the domain change, everything else was basically the same. We were able to raise the funding we needed based on our prior success.
7. How much difficulty did you have building the subscription base once the site content went to a pay model?
It was a difficult and somewhat radical decision to switch to a pay model in 2001. After all, we were the champions of free fantasy everything when we were RotoNews.com. But we quickly realized after the dot-com crash that advertising just wasn’t paying the bills. We went mostly pay in the fall of 2001 and probably lost 90 percent of our traffic. But it worked. We instantly became profitable, and it’s been a business model that has consistently worked for us since. Plus, it really allowed us to invest more into the quality of the product since adding even the smallest improvement or new content area would add a small amount of paying subscribers that would make it profitable (unlike a free site, which doesn’t have much to gain from the little extra traffic they get for smaller content additions).
It’s funny because I used to get mocked at the FSTA conference for being the “free” guy. We’d have panels where all the commissioner and game providers would basically yell at me for offering the product for free. Now at the same conferences I’m the pay guy and most of the commissioner products are free. The free vs. pay debate continues to rage in the fantasy sports business (and elsewhere on the Web, if you’ve seen all the articles about Wired magazine editor Chris Anderson’s new book, “Free: The Future Of A Radical Price,” such as Malcolm Gladwell’s piece in the New Yorker). I’m definitely a former free guy who’s seen the light of the pay model.
8. How much does RotoWire rely on subscription fees for revenue, and how much is supported by advertising and business partnerships, such as the farming out of player updates?
Selling subscriptions to RotoWire.com is our primary revenue source. We’re focused on offering products that fantasy players are willing to pay for to give them an edge in their leagues. We do have additional revenue sources, but they’re byproducts of keeping the content strong enough that people will pay for it.
9. RotoWire has won a slew of fantasy writing awards. How do you manage to lure, discover and/or retain such high-quality writers?
I think that’s where our lengthy experience in the business has paid off. We’ve made a lot of good connections and have figured out how to build and manage a large, skilled staff. But really it comes down to the quality of the staff we have that manages our writers.
10. RotoNews/RotoWire has given us such things as the player news template, the first free online commissioner product and the first mobile player update feed. What kind of innovations can we expect to see from you in the near future?
There are three areas where we try to constantly innovate. The first is delivering our fantasy news via new technological mediums. The hardest part of the business is keeping up with the technological innovations. We used to just have our website. Now we’re sending news via SMS text alerts and we’re on Twitter, Facebook and mobile platforms. It’s all an effort to get the fantasy player the news he needs where he can best put it to use. We just launched a Blackberry app, and an Iphone app is on the way.
The second is the way technology is altering how fantasy players prepare for their drafts and how they play the game. An example here is how our draft software continues to innovate in how to process the vast amount of information and news you need to sift through to beat the competition during a draft or auction.
Lastly, we constantly try to expand the depth of our coverage and to add new sports.
I think as the fantasy hobby continues to grow it’s going to catch fire in other sports, particularly soccer/football. As a result, we’ve become the leading fantasy soccer resource, covering the sport on a global level. We think that will pay dividends in future years as fantasy games find formats to better connect with soccer fans and international fans learn from their American friends that fantasy sports is a way to enhance their fandom. We’ve also ramped up college football since I think that sport is set to grow with major media sites now running leagues.
For the established sports, we’re adding new areas of coverage such as international baseball where we expanded our Japanese and other foreign league player news and have international player rankings.
You’ll continue to see new ideas from us in all those areas.
Fantasy football writers can start mailing it in a little earlier this year.
