Sporting News Paid AOL Millions To Drop Fanhouse

Last Thursday I reported on the essential elimination of AOL Fanhouse, with the Fanhouse brand being folded into a Sporting News portal that AOL CEO Tim Armstrong elected to install as its website’s new sports content provider.

Sporting News Headline

 (Sporting News paying AOL millions? That’s no typo.)

After the Sporting News on AOL partnership was announced last Thursday, David Kaplan of had this from Armstrong on the prospect of Fanhouse job cuts:

During the Q&A session following Armstrong’s intro, our Staci D. Kramer asked what the cost savings would be and how many jobs might be affected. Armstrong said that a “couple dozen” jobs on the high end might be lost at FanHouse. He did not divulge how much the company would save by aggregating this outside content. He later added that there was no decision yet on job cuts at FanHouse. “It could be none,” he said.”

On the contrary, I’ve learned that of around 100 fulltime positions at Fanhouse, less than 10 will be retained by AOL. Kevin Blackistone, Terence Moore and Lisa Olson will be among the precious few kept on. The other surviving positions are likely to be staffed by columnists. Of roughly 100 AOL Fanhouse jobs, 26 included benefits.

The Sporting News will likely decide if it will hire any of the former AOL employees by the end of next week.

During his conference call to announce the effective dissolution of Fanhouse, Armstrong said of AOL handing over its sports biz to Sporting News: “Partnerships are based on our ability to offer partners (Sporting News) traffic. … (AOL) will make money doing it.

That is essentially why the deal happened.

I’ve been told that in exchange for becoming AOL’s exclusive sports content provider, Sporting News will pay AOL around $5 million per year.

I’ve also learned that Sporting News outbid another sports content provider for the deal with AOL. In the competing offer, leveled by a prominent sports blog network, much of Fanhouse’s editorial staff would have remained intact. But AOL’s Armstrong opted to take the annual cash payouts from Sporting News parent American City Business Journals while jettisoning over 90% of AOL-paid Fanhouse positions.

The night AOL announced its new partnership with Sporting News, I Tweeted that I had learned that the vast majority of Fanhouse jobs would be lost as part of the arrangement. My Tweet was the only reportage on the subject of Fanhouse job cuts when this email from AOL Media Division President David Eun was sent to all Fanhouse and AOL site employees:

“(AOL CEO) Tim (Armstrong) said it yesterday in the All Hands and I just wanted to reiterate that we are both available to talk if anyone has any questions or concerns about the strategy. These types of announcements can be blown way out of proportion, especially in the blog world, and I wanted to assure you all that are strategy has not changed and that with all of your help, we are poised for success in 2011.”

In the current issue of NEW YORKER, Ken Auletta wrote in a profile of AOL CEO Armstrong:

By 2010, Armstrong had begun to boast of “the AOL turnaround,” but AOL’s numbers did not improve in the first nine months of 2010. Armstrong predicts that the company’s health will improve in 2011, but there are few signs of that happening.

Until AOL produces content that truly gives the user a compelling reason to visit its sites, sports or otherwise, the company’s demise is assured.

Throwing Fanhouse, a brand in which AOL invested heavily, overboard for what essentially amounts to a nominal bottom line bump is the kind of hasty deck-chair rearrangement that often signals the end of once-relevant companies.

Speaking of once-relevant, here’s a quote about Fanhouse uttered a year ago this Friday.

“AOL is committed to the younger demographics that most newspapers ignore while very much serving the middle-agers who have had e-mail accounts for 10 years (such as me). It’s all about advertising, and given the economic condition of the country,

“I’m impressed by AOL’s ad growth and general business model on its various platforms. AOL is positioned for a boom era when the economy cooperates. Management gets it. The arrow is pointing up, not down.”

So, who exactly said that?

Of course he did.

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