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By 2005, Viacom (NYSE: VIA) could own SportsLine.com of Fort Lauderdale.
SportsLine has to pay CBS and parent company Viacom $20 million worth of stock each year as part of the branding relationship that created CBS SportsLine. Its most recent payment gave Viacom a 40 percent stake in the company.
If the stock price hasn't improved measurably when the 2005 payment comes due, Viacom would control the company and be in a position to buy out the remaining shareholders, said SportsLine CEO Mike Levy.
"We're in a business that to survive we had to make deals that don't look so great today, but were necessary for survival at the time we did em - and that was the CBS deal," Levy said.
A five-year, $60 million deal was made in 1997 when SportsLine wasn't a household name among Web-surfing sports fans. SportsLine needed the might of the network to solidify its brand in heated competition with ESPN. Under the terms of a five-year extension of that deal, struck in February 1999, SportsLine began annual payments of $20 million in stock to CBS last year.
While SportsLine is motivated to get its stock price up to forestall a takeover in a few years, the CBS deal has been a drag on the stock Levy said.
"At the time we did the deal and the stock was at $40, it didn't seem like a bad deal, but at $2 it's not so great," he said. "The main thing we need to do here is make sure that the results are strong and that the stock price goes higher so we don't have to give them as much stock. Our job is to continue to build revenue and get a strong bottom line." Levy believes SportsLine gets good promotional value from CBS. For the $20 million it pays, he estimates the company...