While recruiting sites were racking up big traffic numbers on signing day, attorneys for Scout were readying a $5.274 million proposal to settle a class action lawsuit brought against the Fox-owned property.
In 2007, a group of publishers and former publishers, led by Scout sites that covered Ohio State, Texas and Stanford — some of the more heavily trafficked sites in the Scout network — filed the action claiming that Scout accounted for revenue in ways not consistent with prevailing contracts. The group further alleged that Scout had endeavored through inadequate disclosure of information and accounting methods to hide its transgressions.
It has been a downhill ride for Scout since Fox bought the company for $50 million in 2005. Ben Koo of Koo's Corner writes that "it's pretty clear the publishers had a strong case if an already negative cash flow Scout was willing to part with $5 million in this bad economy. This combined with the fact that publishers across the country took place in the lawsuit all harping on the same issues leads me to believe the boys up in Seattle weren’t acting in good faith."
Fox was on a buying spree at the time, also purchasing College Football News for an undisclosed amount and entering a partnership with the Big Ten Conference for about 50% ownership of the Big Ten Network. Koo again:
"With no real growth, functionality improvements, or cool integrations with Scout and CFN, the BTN’s distribution plateauing off, BCS bowl games leaving the network to the delight of college football fans, falling adverting rates and subscriptions, the growth of blogs and other sports networks, and now a multimillion dollar settlement, Fox is most likely having a very difficult moment of truth: We spent a lot of money, we lost a lot of money, our strategy to monetize interest in college football didn’t really make any sense, this economy is going to break the camels back, and we should get our resumes ready."
As one person with a knowledge of legal law tells us, "You could probably buy [Scout] for a pittance of what Fox paid for it."
In the short term, Koo writes, expect Scout to "do a dramatic cost cutting (as if the message boards and UI wasn’t terrible enough), and bunker down during this economic atomic winter while upstart blogs and competing networks nibble on their market share."
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