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NYT To Buy The Athletic for $550 Million

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Chopper

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Holy shit.

https://www.theinformation.com/articles/nyt-to-buy-the-athletic-for-550-million?shared=b085759569312fce

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NYT To Buy The Athletic for $550 Million

By Jan. 6, 2022 7:15 AM PST

The New York Times Co has agreed to acquire subscription sports site The Athletic in a deal valued at around $550 million, according to a person familiar with the situation.

The deal is a major acquisition for the Times, giving it a new pocket of subscription customers to the New York Times, which has set an ambitious goal of reaching 10 million subscribers by 2025. As of Sept 30, the Times reported 8.3 million digital and print subscribers.

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Chopper

Chopper 17235

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The were seeking $750MM for the Athletic but took 550 per the article

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The Athletic has held conversations with Axios and The New York Times, but no deal was reached. In the fall, The Athletic hired boutique investment bank LionTree to explore a sale, hoping for a valuation of around $750 million, as The Information first reported. Front Office Sports first reported news of rekindled talks between The New York Times and The Athletic.

 

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Blotto

Blotto 23513

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1 hour ago, FirstTimeCaller said:

Get seed money.
Hire journalists.
Operate at a loss.
Get huge payday.

If this can be believed, they were actually running at a profit. I've seen far worse acquisitions in terms of revenue and multiples. Obviously, the bigger metric will be what NYT thinks the athletic can bring in revenue in 5 years, either as a standalone offering or bundled into a larger subscription package. 

Quote

The Athletic brought in $47 million in revenue in 2020 but was forced to cut staff and pay during the early months of the pandemic when most live sporting events were suspended, the report said.

The company projected last fall 2021 revenue of $77 million, with cash burn at $35 million, according to the report.

 

Edited by Blotto
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Chopper

Chopper 17235

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37 minutes ago, SimonBolivar said:

Sweet as I already subscribe to both so there's going to be some $$$ for me.

Yeah if you have amex plat and haven't wanted to use their "free" $20/month credit toward peacock, nyt, equinox or sirius, at least there may be a new reason to consider spending that credit on nyt with the athletic. But when I signed up for the athletic for $1 for a year a few years ago I logged into it maybe twice.

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ztejas

ztejas 43452

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38 minutes ago, Blotto said:

If this can be believed, they were actually running at a profit. I've seen far worse acquisitions in terms of revenue and multiples. Obviously, the bigger metric will be what NYT thinks the athletic can bring in revenue in 5 years, either as a standalone offering or bundled into a larger subscription package. 

 

I doubt they were after whatever the athletic's revenue or margins were. Guessing they were primarily interested in the subscriber base (I mean - thats what the article alluded to).

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Blotto

Blotto 23513

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10 minutes ago, ztejas said:

I doubt they were after whatever the athletic's revenue or margins were. Guessing they were primarily interested in the subscriber base (I mean - thats what the article alluded to).

So if subscriptions to the athletic were all free, only requiring registration, and didnt bring in $77 million dollars in revenue, do you think the acquisition price would be the same? Subscriptions are of interest because they drive revenue. out of the population as a whole, there is only a subset that will regularly pay for online print journalism. My guess is that they evaluated both subscriber groups and determined that there wasn't a lot of overlap, so by adding the subscriber base to their own they can grow revenue. 

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Chopper

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They reportedly lost $40MM in 2020 but were "hoping" to be profitable in 2022.

According to axios, the athletic's most recent investment round was in 2020 and those investors basically had 0 cap gains.

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The Athletic was founded six years ago and has raised around $140 million to-date. It last raised $50 million in January of 2020, putting its latest valuation at around $500 million.

 

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Chopper

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Per reuters, the athletic had projected revenue of $77mm in 2021 and a $35mm cash burn.

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The company projected last fall 2021 revenue of $77 million, with cash burn at $35 million, according to the report.

https://www.reuters.com/markets/deals/new-york-times-buy-sports-site-athletic-550-mln-deal-information-2022-01-06

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ztejas

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8 minutes ago, Blotto said:

So if subscriptions to the athletic were all free, only requiring registration, and didnt bring in $77 million dollars in revenue, do you think the acquisition price would be the same? Subscriptions are of interest because they drive revenue. out of the population as a whole, there is only a subset that will regularly pay for online print journalism. My guess is that they evaluated both subscriber groups and determined that there wasn't a lot of overlap, so by adding the subscriber base to their own they can grow revenue. 

Yes. It's basically the same thing. I guess I was looking for clarification for what you meant. 

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SimonBolivar

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11 minutes ago, Chopper said:

Per reuters, the athletic had projected revenue of $77mm in 2021 and a $35mm cash burn.

https://www.reuters.com/markets/deals/new-york-times-buy-sports-site-athletic-550-mln-deal-information-2022-01-06

As to why for the NYT. Their operating profit was $176M last year largely due to improvements in their subscription base with advertising waaaay down.

 

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Thanks to the record-setting growth in our digital subscription business, and despite the loss of $138 million in advertising revenue last year, we recorded a slight increase in annual operating profit. That profit growth was largely driven by a 30 percent increase in digital subscription revenue. Our subscription products — News, Cooking and Games (formerly Crossword) — broke all previous records for annual net additions.

 

https://nytco-assets.nytimes.com/2021/03/Final-NYT-2020-Annual-Report.pdf

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Chopper

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Correction, the Athletic was hoping for profitability in 2023.

Found an article by Dylan Byers that explains why he thinks the deal makes sense for NYT.

https://puck.news/new-york-times-the-athletic-exclusive-sale-talks/

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But the notion of a sale is even more fascinating for the Times for a number of reasons. Most obviously, it would significantly elevate the paper’s relatively lackluster daily sports coverage, allowing it to become a dominant source for local sports teams in major and mid-level U.S. markets. The Times’ sports coverage has been losing altitude for a generation, bleeding elite talent like Howard Beck and Buster Olney to the competition. Internally, the Times has long relied on a strategy commenced by high-minded, if stunty, general interest journalism like Snowfall and publisher A.G. Sulzberger’s pre-C-suite 2012 feature on hang gliding. But that sort of work, while nice, rarely has meaningful business outcomes in a consumer-first world. If the Times endeavors to be the national media company of the center-left world, elite in-the-weeds sports coverage could be a compelling proposition, and a natural fit next to its lifestyle products such as NYT Cooking or its digital games business. It already recommends shows. Now it can recommend fantasy league moves.

Whether or not the Times wants to integrate the business into its core brand, such as NYT Cooking, its subscribers would unquestionably get the added benefit of better coverage and more choice. Times readers in, say, Seattle could rely on the paper for consistent coverage of the Seahawks and the Mariners, rather than the Giants and the Jets and the Yankees and the Mets—a significant value proposition for every potential Times reader outside of the tri-state area. 

More importantly, The Athletic would provide the Times with an immediate influx of 1.2 million digital subscribers, bringing its overall digital subscriber base closer to nine million and inching it closer to its goal of 10 million digital subs by 2025. Such a move might—might—give the $NYT stock, which is down to $45 from an all-time of $55 in November, a tender boost. Surely there are many duplications within those numbers (I’m one, for instance), but an acquisition of The Athletic, at the right price, will very likely help the Times hit its goals for less money than it would spend by marketing itself on Facebook and elsewhere. While many assume that the Times rode to its subscriber goals on the wind of the Trump era and resistance politics, the company’s success is rooted in a technically proficient growth marketing team, and the reality that outside of D.C. and parts of New York, the Times’s biggest business opportunity is as a lifestyle brand. (The Times has been a fierce critic of Facebook, but its beancounters recognize the company’s value. They spend a ton of money there.)

Furthermore, both companies would be able to find efficiencies via a sale, which would create synergies—that cruel word of the consolidating media business. Whatever data Mather and Hansmann and Aryeh are showing Sulzberger and C.E.O. Meredith Kopit Levien, it goes without saying that the human capital-intensive model of local sports reporting is not a cheap business. Every time you want to add a new team to The Athletic’s offering, you have to add a new reporter. The Athletic currently has roughly 600 people covering local teams in the U.S. and Britain alone. The New York Times has around three times that many journalists covering all the news that’s fit to print in 160 countries across the world. The public markets will motivate the C-suite to find efficiencies, even though the unions will have some ideas, too.

Obviously, not all subscribers can be compared like apples to apples. The most important metric for the Times isn’t necessarily total subscriptions but ARPU, or average revenue per user. The Times charges $221 a year for a digital subscription; the Athletic costs $72 a year. While it occasionally takes the street a quarter or three to figure out this discrepancy—see the initial enthusiasm for $DIS due to Disney+ growth, despite the fact that Disney+ ARPU is weighed down by the far less lucrative Disney+ HotStar subscriptions in India—it eventually does. So even if the Times can claim an additional 1.2 million subs through an Athletic acquisition, that’s not the same thing as adding 1.2 million full-paying Times subscribers.

But perhaps the most persuasive reason for the Times to complete the deal is that the acquisition of The Athletic could allow The Times Company, which now also owns Wirecutter, Serial, and Audm, among others, to flex its muscles as the acquisitive holding company of the thinking persons’ media world. The company’s stock is up about ninefold since Sulzberger’s father fired then-C.E.O. Janet Robinson suddenly in late 2011. And, interestingly, it’s on par with its heady era of the early aughts, when it had a broad portfolio that included everything from local papers to About.com to an interest in the Red Sox. For a long time, the Times Company had to shrink to restore its greatness. Now, the market seems to want it to grow. What might be next? If Wall Street wonders, Kopit Levien and Sulzberger might too.

 

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Sal

Sal 1088

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42 minutes ago, Chopper said:

They reportedly lost $40MM in 2020 but were "hoping" to be profitable in 2022.

According to axios, the athletic's most recent investment round was in 2020 and those investors basically had 0 cap gains.

 

Glad my VC deals are going to work out much better than that 

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Vic Mackey

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4 minutes ago, MrBig said:

The Athletic is losing money because they push so hard for pay to read articles while not realizing that you can read all their shit for free if you just turn on Reader on iPhones.

You can also also view them for free by disabling some script/plugin on Chrome. I have browsed it a few times. Not worth the money at all. Not to say it isn't some good reading at times but in today's age of information overload, I am not paying for sports articles. 

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MonkeyDoughnut

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I'll keep paying my subscription at the discounted prices (<$20 yr) as I get enough out of it to justify.  I still can't get over how they were able to get the NYT to value them and buy them for $550M just over a year ago.... that has to have a payback of minimum of 10 yrs to never.

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Blotto

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1 hour ago, Vic Mackey said:

You can also also view them for free by disabling some script/plugin on Chrome. I have browsed it a few times. Not worth the money at all. Not to say it isn't some good reading at times but in today's age of information overload, I am not paying for sports articles. 

Allegedly, in chrome settings you just need to disable javascript for their domain. 

image.png.408356ed68b3f1f14a8f8b8ebb4ac4e4.png

Even  with free access, my google history shows I have visited that domain 4 times this year (probably when someone linked an article from here). That aint worth $70/yr or whatever they charge

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Skipper

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1 hour ago, Vic Mackey said:

 Not to say it isn't some good reading at times but in today's age of information overload, I am not paying for sports articles. 

For high quality Stars/Rangers/Mavs coverage the Athletic is a great value.  Actual journalism isn't free.  The free content is all going to be AI generated garbage by this time next year to the extent it isn't already.

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Texas Wahoo

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19 minutes ago, Skipper said:

For high quality Stars/Rangers/Mavs coverage the Athletic is a great value.  Actual journalism isn't free.  The free content is all going to be AI generated garbage by this time next year to the extent it isn't already.

That was definitely the stated plan when the athletic started. It will be interesting to see how getting rid of a lot of the local beats will affect them moving forward. 

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Skipper

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6 minutes ago, Texas Wahoo said:

That was definitely the stated plan when the athletic started. It will be interesting to see how getting rid of a lot of the local beats will affect them moving forward. 

The only local (Dallas) content I've seen confirmed was Bob Sturm (from the Ticket) who wrote Cowboys articles.  He probably had solid content but I don't really care much about the Cowboys outside of tuning into games so no loss for me.  There is plenty of Cowboys content in this city if I need to seek it out.   For Stars in particular its fantastic as there just isn't much other quality coverage. 

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closetojumping

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2 hours ago, MonkeyDoughnut said:

I'll keep paying my subscription at the discounted prices (<$20 yr) as I get enough out of it to justify.  I still can't get over how they were able to get the NYT to value them and buy them for $550M just over a year ago.... that has to have a payback of minimum of 10 yrs to never.

They’re already optimizing the pricing, they’ve cut expenses considerably and have cut losses by 1/3 before cutting payroll bloat. They acquired almost 2M paying subscribers to a news-related service that has very little native overlap to their own subscriber base. They’ll be cash flow positive by 2026 and they’ve got hundreds of millions of dollars to apply against tax bills due to the net operating losses in prior periods. 

It was, by definition, a strategic purchase by a company that seems to have figured that kind of thing out for their business, digitally. I’m guessing their model had an assumed payback period of 7-10 years with a shit ton of soft value drivers that make it well worth it inside of that range if they execute. 

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Vic Mackey

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For high quality Stars/Rangers/Mavs coverage the Athletic is a great value.  Actual journalism isn't free.  The free content is all going to be AI generated garbage by this time next year to the extent it isn't already.
They just fired Bob Strum. He was the main one I read for DFW sports. Makes me even less interested.
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pubes

pubes 139

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3 hours ago, MrBig said:

The Athletic is losing money because they push so hard for pay to read articles while not realizing that you can read all their shit for free if you just turn on Reader on iPhones.

Joke is also on them because I can’t read 

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Texas Wahoo

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39 minutes ago, closetojumping said:

They’re already optimizing the pricing, they’ve cut expenses considerably and have cut losses by 1/3 before cutting payroll bloat. They acquired almost 2M paying subscribers to a news-related service that has very little native overlap to their own subscriber base. They’ll be cash flow positive by 2026 and they’ve got hundreds of millions of dollars to apply against tax bills due to the net operating losses in prior periods. 

It was, by definition, a strategic purchase by a company that seems to have figured that kind of thing out for their business, digitally. I’m guessing their model had an assumed payback period of 7-10 years with a shit ton of soft value drivers that make it well worth it inside of that range if they execute. 

You obviously know more about it than I do, but I question their decision to move from more local beat reporting to national general interest reporting. I got it for free for a year from T-mobile and the Texas sports and Cubs material was not particularly noteworthy, so I did not renew. 

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closetojumping

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5 minutes ago, Texas Wahoo said:

You obviously know more about it than I do, but I question their decision to move from more local beat reporting to national general interest reporting. I got it for free for a year from T-mobile and the Texas sports and Cubs material was not particularly noteworthy, so I did not renew. 

I’m not going to defend any of their go-forward decision-making since I don’t particularly care for either The Athletic or the NYT, so I don’t have a position for or against those thoughts. I was merely laying out the underpinning for why it wasn’t an absurd deal when it was done. The general tone on the boards and in social media has always been that it was a stupid deal in the first place, and on that I disagree. 

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WBT

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4 hours ago, Texas Wahoo said:

You obviously know more about it than I do, but I question their decision to move from more local beat reporting to national general interest reporting.

I second that.  Their original pitch at launch was to replace the local sports page that has withered away everywhere.  As they go more national and get rid of more and more beat reporters, I don't understand what they think differentiates them from free outlets all over the web.

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Skipper

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13 hours ago, Vic Mackey said:
14 hours ago, Skipper said:
For high quality Stars/Rangers/Mavs coverage the Athletic is a great value.  Actual journalism isn't free.  The free content is all going to be AI generated garbage by this time next year to the extent it isn't already.

They just fired Bob Strum. He was the main one I read for DFW sports. Makes me even less interested.

Did he do anything outside of Cowboys?  Pretty sure he didn't.  And for me, Cowboys, are by far my least local interest while simultaneously having by far the most local coverage.  No loss for me there and I listen to the Ticket and can hear Bob's hot takes there.  The only thing I read of his where his deep dive draft breakdowns which were solid.  But cutting areas where there is already a ton of local coverage makes sense to me.  I enjoyed reading the Texas beat writer they had a few years ago but understand why they cut him considering there are already multiple $9.95 sites on top of everything else.  

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Texzilla58

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Did he do anything outside of Cowboys?  Pretty sure he didn't.  And for me, Cowboys, are by far my least local interest while simultaneously having by far the most local coverage.  No loss for me there and I listen to the Ticket and can hear Bob's hot takes there.  The only thing I read of his where his deep dive draft breakdowns which were solid.  But cutting areas where there is already a ton of local coverage makes sense to me.  I enjoyed reading the Texas beat writer they had a few years ago but understand why they cut him considering there are already multiple $9.95 sites on top of everything else.  

They kept machota who’s the beat writer. Sturm is an analyst. His breakdowns of plays is pretty solid. But that’s not his main gig.

It’s really weak now. I hardly look at it.
Did he do anything outside of Cowboys?  Pretty sure he didn't.  And for me, Cowboys, are by far my least local interest while simultaneously having by far the most local coverage.  No loss for me there and I listen to the Ticket and can hear Bob's hot takes there.  The only thing I read of his where his deep dive draft breakdowns which were solid.  But cutting areas where there is already a ton of local coverage makes sense to me.  I enjoyed reading the Texas beat writer they had a few years ago but understand why they cut him considering there are already multiple $9.95 sites on top of everything else.  

They kept machota who’s the beat writer. Sturm is an analyst. His breakdowns of plays is pretty solid. But that’s not his main gig.

It’s really weak now. I hardly look at it.
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satyanash

satyanash 14486

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Wow. NYT is axing their sports department and replacing it with The Athletic.

Quote

“We plan to focus even more directly on distinctive, high-impact news and enterprise journalism about how sports intersect with money, power, culture, politics and society at large,” the editors wrote in an email to The Times’s newsroom on Monday morning. “At the same time, we will scale back the newsroom’s coverage of games, players, teams and leagues.”

 

Edited by satyanash
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