The New York Times wants more subscribers. Athletic has a lot of followers but is losing money.
So here is your two-sentence explanation why The Times pays $ 550 million in cash for Athletic., a five-year sports news service.
We can now delve deeper into the latest round of media consolidation. Remember that over the past few months, BuzzFeed bought Complex, and Vox Media, which owns the site, acquired Group Nine. Like these deals, this deal makes sense for both parties, to a certain extent. But the Times and Athletic deal also highlights the challenges both companies are facing right now. You can call it a chocolate and peanut butter combination, or you can call it a marriage of convenience. Or both.
Benefits of the deal for both companies:
The Times, which went from an ad-supported publisher to a paid-subscriber publisher, enjoyed tremendous success during the Trump administration and even flourished in the first summer of the pandemic. As a reward, the paper has $ 1 billion in cash and the share price has risen 250 percent in the past five years, which means it has solvency. $ 550 million in cash for Athletic, as first reported by Axios. (For the first time, the information received information about the value of the transaction.)
In return, the Times gets a new subscription business that it can sell alongside its main product. It is also a product that does not contradict what the Times is doing right now. Over the past several years, the newspaper has largely ignored sports in general and paid little attention to individual sports teams, which is the essence of Athletic.
Meanwhile, Athletic has already signed up 1 million paying subscribers, baffling many skeptics, including the person who typed this letter, who didn’t think there were so many people willing to pay to read about their favorite sports teams. Joining the Times means the startup is taking advantage of a much larger marketing mechanism. And crucially, this means the Times can offer subscription packages that include both publications, which could reduce the likelihood that Athletic subscribers will cancel their subscriptions when their team / sport is not playing – people familiar with Athletic tell me that this is a problem for the company right now.
On the other hand, the reason the Athletic sells for $ 550 million is less than the model. The company reportedly was looking for $ 750 millionand around the value that investors thought was worth in February 2020 when he last raised money – because it was necessary.
As Jessica Tunnel of The Information said reportedThe startup spent over $ 100 million in 2019 and 2020. In 2020 alone, when the sport turned dark for most of the year, it lost $ 41 million on $ 47 million in revenue. And even according to the most optimistic forecasts, he lost money until at least 2023.
So the company needed a buyer or investor; a person familiar with the company told me that Athletic also spoke to Middle East sovereign wealth funds last fall. The Times deal solves the problem, but it wasn’t the solution Athletic was looking for. This is why we kept reading about Athletic looking for other offers for most of the past year. llike a floating plan combined with Axios and make the combined company public.
And while the Times is rightfully proud of its subscription boom during the Trump era, that era is over (for now). To find new subscribers, you have to work hard, which affected slowdown in the growth of the number at different times in the past year. If Times felt more comfortable with its organic growth, it might not have to pay roughly $ 500 to subscribe to Athletic.
Instead, he makes the second-largest deal in newspaper history. The Times acquired the Boston Globe in 1993 for $ 1.1 billion; and in 2005 she paid $ 410 million for About.com, the largest digital acquisition to date. None of these deals worked for the Times. He dumped Globe in 2013 for $ 70 million, and got rid of About for $ 300 million in 2012 (selling it to Barry Diller’s IAC, who turned it into DotDash and who now owns much of what was formerly called Time Inc). …
Past accomplishments never guarantee future results, and there is a new set of business leaders in the Times today, so it may well work. But make no mistake: this is a very big bet with significant risk and upside potential – and until recently the Times could not have made it.