The Athletic’s journey as an independent company will soon be coming to an end, with this week’s news the six-year old sports media outlet has been acquired by the New York Times for $550 million. The Athletic’s exit comes as no surprise, as the company had hired investment bank LionTree back in September to lead the effort to find a buyer for the company. In the months predating the LionTree news, The Athletic was reportedly in talks with Axios on a merger and with the New York Times about a sale of the company, but both conversations didn’t materialize, with The Athletic’s valuation of $750 million deemed to be too rich for both companies.
Reportedly unprofitable and not projecting a profit until 2023, it’s not hard to read between the lines of what motivated the sale of the company at a bit of a discount compared to the $750 million pricetag floated this past spring. The Athletic was losing money, felt like an IPO was a reach, was unable to raise more money at a stomachable valuation (their last valuation was reportedly $500 million with investors). Selling the company was clearly chosen as the preferred route opposed to steering the company to profitability which would have likely caused a lot of upheaval via layoffs, losing subscribers, and negative press. You don’t have to look far to find two other media darlings (Vox Media and Vice Media) who also raised hundreds of million dollars and opted to ween themselves off of venture capital, but years later are still figuring out how to deliver on investors’ expectations.
On the way from a quaint startup to half a billion dollar appendage to The New York Times, The Athletic shattered the mold for VC-backed sports media startups, an extreme rarity in the venture capital space. Historically, and especially in the digital age, sports media startups haven’t excited VCs, whose model is to go 10-20 percent investing in companies they think will be worth a billion dollars or more, while either striking out or getting their money back in the rest of those that don’t hit. Even industry successes like Bleacher Report and Rivals have more or less confirmed VCs’ beliefs that media is not a good investment category (which is why every media company describes itself as a tech company).
Comparing The Athletic’s recent funding round to large rounds from other sports media companies
But there was something intoxicating about The Athletic…at least to investors. I wrote about The Athletic’s insane funding trajectory in early 2018. Two years into the company’s existence, The Athletic had raised four rounds of investment totaling over $30 million. They were bringing in much larger rounds of capital and these rounds were coming more frequently than any sports media company had ever seen before and continued through early 2020.
For some, the millions poured into the company was a turnoff (we’ll get to that soon). But it was another early event in the company’s history that, for some, seemed to play a bigger role in cementing the company as a bad actor in the growingly harsh media space. In a 2017 New York Times feature meant to be a coming out party feature for the young company, CEO Alex Mather, inexplicably kicked over a hornet’s nest causing an unforced controversy that still lingers to this day.
“We will wait every local paper out and let them continuously bleed until we are the last ones standing,” Alex Mather, a co-founder of The Athletic, said in an interview in San Francisco. “We will suck them dry of their best talent at every moment. We will make business extremely difficult for them.”
The quote became the focal point of the story, the headline, and provided low-hanging fruit to detractors who viewed the the company as yet another Silicon Valley tech bro-based company chipping away at an already decaying traditional media ecosystem.
How it started
How it’s going pic.twitter.com/aFH2wjeQWL
— Darren Rovell (@darrenrovell) January 6, 2022
But the PR faceplant had no real bearing on the company’s trajectory, other than expediting the hiring of a PR head for the company. The Athletic would go on to raise over $120 million, the vast majority of their total funding, after the publishing of the viral quote. From June 2018 to August 2019, the company went from a modest 100,000 subscribers to 600,000 subscribers on the heels of their expansion into the UK. Despite most media startups never getting in the general vicinity of an IPO, The Athletic was to many seemingly accelerating towards that outcome.
However, despite the impressive growth, others shared a much more pessimistic view of the company, with plenty of detractors actively questioning the company’s outlook and in some cases vocally rooting against the company. Mather’s comments were a large part of that, but for others, there were things about The Athletic that either didn’t add up or rubbed them the wrong way. Some of these grievances include:
– Many felt the company, unprofitable through its entire existence, didn’t deserve the millions of dollars it raised. They felt the company was heading towards some type of WeWork, Theranos, and Fyre Fest-like implosion.
– Some thought the growth was mostly smoke and mirrors, fueled by aggressive Facebook ad spending and heavy discounting of subscriptions.
– Writers that were found on free platforms on existing popular brands and platforms were now being uprooted to The Athletic where continued reading would now cost money.
– Some writers in traditional media would often feel slighted when The Athletic would launch in a new city and the company would not target them as a hire. Others at traditional outlets felt that The Athletic’s recruiting was further destabilizing outlets that were already struggling.
– The acceptance of subscriptions was significantly lower when The Athletic started, so many found it off-putting to pay for some content when similar and perhaps even better content was still available for free.
– The company was not doing anything remarkably new or innovative to warrant the millions and millions of dollars being thrown its way from investors.
– Many believed journalists would not share in the success of the company and the company was setup primarily for the company’s founders and investors to be enriched by the company’s success.
Because of all of these objections, The Athletic’s fate became the LeBron vs. Jordan debate between fellow sports media nerds with really no industry topic ever getting anywhere near equal amount of discussion and analysis. I was asked about my opinion about The Athletic by at least 50 people, with the vast majority of them inquiring to see if my opinion matched their extreme skepticism of the company. In 2019, I tried to distill the common belief that The Athletic would never just evaporate into the ether, a fate outlets like The National, Fanhouse, and Grantland unfortunately met.
But what seems to be the most plausible threat continues to be the one that skeptics have pointed to since the company’s founding. With the company currently not profitable, and monthly expenses continuing to increase, it certainly is a possibility, if not an outcome that could happen within the next year. This has long been the outcome many have predicted: the company would sink into the sea and 500 employees, the majority of which would be editorial, would be shit out of luck.
Even if the company stubbornly continued to spend until it couldn’t get any additional investment or loans, many media companies or hedge funds would swoop in to buy The Athletic at a discounted price. The credit cards of a million or so subscribers renewing every month or year is a valuable commodity, and it is the company’s de facto insurance policy, which could bring a diverse group of potential buyers.
Essentially, one million subscribers and $100 million of annual revenue gives the company a significant amount of insurance for a rainy day that could come down the road. This is just too big of a business for it to cease to exist and for existing investors to simply walk away from.
While the piece quoted above spelled out what I thought the most likely outcome was for the company, the bulk of the article explored the possibility that The Athletic could actually IPO and become a billion dollar company. It’s quite interesting to look back at that article now, especially with the quotes I got from founder Adam Hansmann, who spitballed what that path might look like.
The Athletic is worth $300 million, but can it become a billion dollar company?
“We absolutely believe we can build a billion dollar business here. The basis of that belief is we believe there are tens of millions of avid sports fans globally that will become readers and listeners of our content.”
“The New York Times, The Washington Post, the Wall Street Journal. Two of the three of those companies are publicly traded. We see differences in the models and the applications of what we are trying to do, but fundamentally those businesses focusing on news and politics have attracted enough subscribers and driven enough revenue over the years to be at that scale. We don’t see any reason to see why we can’t get there in sports.”
“A business like this is capital intensive, but there is a payoff when you have a subscriber base and an “editorial moat” where we have the best talent covering every team and every sport. That’s a hard thing to build. It’s costly. But it’s something that will be very valuable in a decade. That’s honestly the time frame that we think in. It’s going to take a decade to build this business the way we want to build it.
“I think we’re intrigued by the possibilities internationally beyond the UK. English speaking markets just naturally are a little more accessible for us, so that’s probably the key difference between the UK and the rest of Europe. I think we see a similar opportunity in other European countries.”
“It’s probably hard to think of a billion dollar media company out there just in one vertical, whether its sports or something else. I don’t hate the idea. So whether that’s us someday exploring other things or whether other publishers are going to take up the banner launching other subscription models, we are sort of bullish either way.”
A few months after this interview, The Athletic raised $50 million in additional funding at a $500 million valuation (in January 2020), giving the company a $550 million post money valuation (the exact pricetag reported yesterday). Not long afterwards, the pandemic started. When sports returned, The Athletic’s trajectory was never the same. On paper, The Athletic’s value stayed flat for all of 2020 and 2021.
No more money was raised. Some writers left the company (or were laid off) and weren’t replaced. The various regional writers that were the initial focus of the company were seemingly becoming a secondary focus to the big-name national writers. National writers began to become more of the primary focus of the company, especially in the wake Fox Sports entirely moved away from written articles on their website, with many of their big names landing at The Athletic (Jay Glazer, Stewart Mandel, Ken Rosenthal, etc).
Reading between the lines, 2020 was the year The Athletic came to the realization that the venture capital spigot would no longer fund the company’s growth. 2021 then became the year of trying to find a place to land the plane knowing they were running out of gas. The price tag was too high though. The urgency grew, and the price tag came down. Ultimately the plane landed, with them finding a pretty good landing spot at The New York Times. For now it seems that all aboard survived.
As for what happens next, these things are always very tricky and hard to predict. The batting average on these deals working out is not great. Kevin Draper, the author of the original NYT article on The Athletic, had a tremendous thread with insights into the motivation behind the acquisition from the NYT side as well as what we may see in terms of integration and strategy going forward. Vox’s Peter Kafka likewise had a strong piece outlining the motivation for the move on the NYT side.
Ultimately, The Athletic didn’t grow to become a billion-dollar company, but it also didn’t implode and go to zero. It split the difference right in the middle. Like most things today, you can warp that outcome as either a massive success or a massive failure depending on where your original rooting interest was.
For me, The Athletic can only be viewed as a great success. How many jobs within sports media were lost over the last six years? How many more would be lost and how many talented voices would be selling insurance or doing corporate marketing if The Athletic didn’t exist? How much great content and original reporting and analysis did the outlet put out?
Beyond that, The Athletic played a huge role in normalizing subscriptions and paywalls. ESPN, SI, Defector, and plenty of newspapers have taken the plunge in terms of making pay products for their written content. Substacks and Patreons have allowed hundreds if not thousands of other sports content creators to monetize their work in a meaningful way. The bleeding may have not fully stopped for written sports content, but it certainly has slowed considerably, and a lot of that improving picture is because The Athletic played a pivotal role normalizing the idea that sometimes for good content, you have to pay a few bucks a month (or maybe just $1 for 12 months if you sign up now).
While I understand all of the ways that The Athletic was off-putting to so many and that the outcome in many ways fell well short of what it’s believers thought would happen, I find it quite a reach to say it was a failure. Sports media is in a better place partly because of their journey. We’ll probably never have a billion-dollar sports media company, especially one focused on written content. The Athletic tried and failed to get there. But it also succeeded immensely along the way.