John LevyTibor Kolley/The Globe and Mail
John Levy is one appy man.
After spending the last decade building theScore Inc. into the type of scrappy television network that Rogers Communications Inc. felt it had to own, Mr. Levy is back in startup mode as he tries to build a new company with the mobile app division Rogers didn't include in the deal.
TheScore's apps are among the most popular in the world. They do a lot of things well, and are indispensable to sports fans around the world who use them to track their favourite teams and athletes, but making money isn't one of them. The newly spun-out digital company posted a $1.8-million loss in its fourth quarter, on revenue of $1.3-million.
"This is not going to happen overnight and the first iteration won't be the last," Mr. Levy said as he talked about the prospect of a string of quarterly losses as he tries to monetize his sports data apps that run on smartphones and tablets. "We see a huge opportunity. We may lose money for the first couple of years, but I'll bet we'll have enough capital to do that in exchange for rapid growth."
But it also has some promising metrics – the company has 3.5 million monthly active users and its apps run 120 million user sessions each month (an increase of 164 per cent over last year). Apple Inc. named the iPhone version the best sports app in the United States and Canada in its 2011 look-back, ahead of industry giants such as ESPN.
While Mr. Levy was able to fund the company's digital side projects with television profits for the last four years, he's lost his safety net as he tries to reinvent the company as a mobile app developer. It's not the first time he's taken a chance – he built the television network after selling his family's cable business and buying a sports channel that only showed text updates of scores.
He has enough money to see him through a year, but will need to find a way to convince investors to stick around long enough for his mobile dreams to come true. His company's shares have moved off the TSX and now trade on the TSX venture exchange.
"There's a land grab going on in this space and we've got a good head start," Mr. Levy said. "Our goal is to grow quickly, and to do that we'll probably require a further injection of capital in the next 12-18 months. We need to assess how we're going to do that – there's lots of capital out there for this type of activity."
That could be optimistic. Canada's Information and Communications Technology Council released a report this year that identified access to capital as one of the major problems facing app developers in this country. The sector is expanding rapidly, and the 50,000 Canadians working on apps are competing with millions more around the world.
"The sky seems to be the limit, but things are going to get more competitive," said chief policy adviser Jeff Leiper. "The challenge is to do something that is really different and innovative. For those in Canada trying to stand out from the crowd, the ability to access capital is critical. It's always been a challenge."
The Canadian market is also relatively small. The ICTC estimates the Canadian app market is worth about $675-millon a year – $257-million on in-app purchases, $149-million in download fees, $141-million in advertising and $128-million in subscriptions.
Fortunately for theScore, 70 per cent of its app users are in the United States.
Rogers announced in August it was buying theScore's television network. It didn't buy the company's digital division, but did take a 10 per cent stake in the newly spun-out company and has secured permission to use the apps developed by the company.
While the deal is completed, theScore is being run as an independent trust until the sale is approved by Canada's broadcast regulator. But there's no going back for Mr. Levy – if the deal is ultimately rejected by the Canadian Radio-television and Telecommunications Commission, the television network will be put up for sale.
The new Score Digital has all the trappings of a fledgling digital business – the company's 70-some employees are moving out of the company's high-profile office and studio space in downtown Toronto into something a little more modest, and its leader talks about "secret sauces" instead of firm plans.
It also has some original content. Rogers didn't buy the company's stable of bloggers, including The Basketball Jones blog which The Score transformed into a popular television segment. It intends to use the content the bloggers generate to drive traffic to its website, and ultimately its apps.
"Nobody has figured out how to do mobile news yet in the sports world," Mr. Levy says. "The app is pretty addictive during game times when people need data that complements what they are watching. We need to make it addictive 24/7, and how we do that will be our special sauce."