Sports Biz

This post is from CNBC sports producer Tom Rotunno:

It’s the unlikeliest of business success stories. Three complete strangers meet on an NBA message board and decide to start an Internet site. They don’t live on the same continent. The timing? Couldn’t be worse. It’s June 2000 -- the year of the dot-com bubble burst. They love the NBA, yet two of the three have never seen an NBA game in person. They won’t meet face to face until their first pitch meeting. None of that will matter. Over the next couple of years, they will create one of the most popular NBA web sites and a software program that many league general managers fully admit they couldn’t live without.

For Ryan Hoak, Michael Benbow and Todd Essman, the idea for RealGM.com was simple. Instead of just debating potential NBA trades on a message board, wouldn’t it be cool if there was a software program that let you find trades that would work under the terms of the actual collective bargaining agreement? The site could also be a source of NBA news and information, but the trade simulation program would be the thing to set it apart.

So despite the fact that Hoak was in southern Illinois and Benbow in Australia, RealGM.com was born. Essman, from San Francisco, would join later after reading about RealGm.com on, you guessed it, an NBA message board. As the site and software developed, it became apparent the group was putting together something that league professionals might want to use. “We intended to create a more advanced program for teams later but it turns out they began to use it before we even started creating the more advanced stuff," says Essman.

The group started to pitch NBA teams to license the software. Indiana Pacers GM David Morway was the first general manager to return their call. “I was sold on the concept I just didn’t know if they’d be able to execute it," Morway told us.

Execute they did. Working with Morway and others, they began to tweak the software to fit a GM’s needs. The result is a comprehensive program and database of the CBA and other insider NBA info. Team officials can enter specific conditions, limitations, and deal parameters and the system generates a comprehensive and complete list of deals and players that fit within those conditions.

Want to know how much money and years are left on a particular players contract? Easy. Want to see mid-level exceptions and how teams have used them? No problem. What about how many players have suffered Achilles injuries in the last two years? Done.

The software is now used by more than half the teams in the NBA, with teams paying $30,000 to license the program.

Morway says he checks the site five to six times per day and admits that, while all the information is available elsewhere, RealGM makes it easy to find and use.

“I asked for a way to track injuries and within two months they had it down”, he says. “It is so much beyond what I expected and asked for. I can now look at all current injuries, injuries that are healed, today’s injury reports, yesterday's reports. If I wanted to look up all the guys that have had an Achilles injury, a back injury, a chest injury, I could do that, by team and see when it was first reported, the date of recovery, injuries by age, how many games people have missed, how many have missed more than 20 games. It saves you a tremendous amount of time and time is invaluable in this business and in our positions.”

Mike Winger, the basketball operations manager for the Cleveland Cavaliers is also a convert.

“In trade discussions internally and externally, it creates options for us in aggregating salaries," Winger said. "So rather than brainstorming and asking the question, 'does this work?' the software’s functionality displays all of the deals that work based on certain parameters we might select such as positions, players, salaries, etc.”

Winger says the program not only finds deals, it sometimes kills deals that would be doomed from the start. “Instead of spending time in a think tank brainstorming deals that might work and then crunching the numbers, the software displays all of the deals that do work within our parameters, which allows us to analyze them from both a basketball and economical perspective in sufficient time to negotiate– or in many cases forego– a deal.”

While the software gets the bulk of the groups attention, the web site is now the main financial driver for the company. The site contains a tweaked version of the licensed software. Once the group started formally working with NBA teams, all salary information was removed as a courtesy to the NBA league office. There is now too much sensitive information in the program to keep the exact software on the free site. Fans can use the tweaked version of the software that’s available to NBA teams.

"It's a rudimentary way to see if I can trade player X for player Y," Essman says. "It does the first step of what the advanced software does. It’s a nice fun tool for fans to use and it spurs discussion.” As a result, RealGM.com’s message boards have become some of the most trafficked NBA discussion web sites.

While the website gets the traffic and brings in the dollars, it’s the software that is a labor of love. The Pacers' Morway says it shows in the results.

“Over time they’ve continued to develop a product that has evolved to the point where the depth of information on the site is remarkable,” Morway says. It has also taken these NBA obsessed fans beyond contract minutiae.

That first pitch meeting? Where the group met face-to-face for the first time? Morway got them tickets to their first NBA game. Courtside.

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