Athletic, Axios talking merger?

[daemon]

Why purchase the Athletic for that purpose, though? If they're interested in getting into broadcast space, there are enough free agents like Kenny Mayne and Trey Wingo floating out there that they could just bid for them. I doubt Apple has much interest in an online content business, since AFAIK they haven't tried to do an Apple News or anything like that, which would seem like a first step.

Also, as Ragu has pointed out, given the VC money that's been dumped into the Athletic, if it's for sale right now it's probably not at an especially affordable price - the VC people want to get out, with a return on their investment, or a slight loss. The only combination of "deep pockets" and "need the talent" that makes sense to me as a buyer would be ESPN, ironically, which would be like when Dundler Mifflin acquired the Michael Scott Paper Company. I think ESPN would rather see the Athletic fail though, and then just re-sign columnists they lost.

Exactly. In the old world, when you bought a media company, you bought the Brand's audience, and its book of advertisers. The Athletic has no advertisers. All its revenue comes from subscriptions, and its subscriber base is basically a coalition of readers loyal to one or two individual writers. All you are purchasing with The Athletic is a bunch of contract obligations and subscriber info. Any company with the capital and incentive to buy The Athletic could recreate The Athletic on its own in one or two years.

 

[The Big Ragu]

Their readers aren't loyal to the writers. They are loyal to the coverage of their favorite sports teams or their favorite sports. The writers and editors matter if they provide good coverage. But I'd guess that for most readers, it's not the writer that got them to subscribe. It's the sports coverage.

"All you are purchasing with The Athletic is a bunch of contract obligations and subscriber info." In other words, what someone would be purchasing is more than a million steady paying customers (i.e. revenue) that a business has managed to attract and retain due to the quality of the work produced by the people working for the company.

That is all any business is.

You seem to think there is no value in that, or that it is easy to do. Apple has customers for the iphone and some hardware and software engineers. Can someone with a boatload of capital and the incentive just recreate what they are doing, because no biggie there?

I think you are so wrong about it being easy to recreate what the Athletic has done. Being first has to have had immense value. They came along at a time when there was a lot of writing and editing talent being shed by traditional outlets, and they hired a lot of those people and put them under one umbrella. There isn't a similar roster of talent that can be so easily poached anymore. That has to have a lot of value to someone. Secondly, with the decline of those traditional news outlets, they saw a hole for the niche they have tried to fill. Whether it is a good enough niche to support a profitable, growing business is still a big question. But putting that aside, they were trying to fill a largely untapped niche when they came around. Anyone looking to get in now is looking at competition; a niche someone else is already addressing. And given that the actual question that is difficult to answer about the Athletic at this point is if it is a lucrative enough niche to be viable (are there enough customers willing to pay enough money), stepping in to compete with them would probably end up being incredibly stupid. If something without competition is not yet profitable, multiple outlets trying to compete within that space are going to dilute that potential profitability and possibly guarantee failure for everyone.

If it would be so easy to recreate the Athletic in one or two years, have you asked yourself why nobody has done it, yet others are talking about merging with them or acquiring them (what you do when the cost of recreating something is likely to be much greater than the cost of acquiring them)? You said that "any company with the capital and incentive" could do it. The incentive anyone with capital has to deploy it is the opportunity to profit. ... to find the best opportunities to grow that capital. I think anyone who thinks the Athletic is a good investment, has probably thought about what it would take to recreate it, and sees a lot of difficulties you are sort of glossing over.

 

[Severian]

All its revenue comes from subscriptions, and its subscriber base is basically a coalition of readers loyal to one or two individual writers. All you are purchasing with The Athletic is a bunch of contract obligations and subscriber info.

I can totally see people dropping subscriptions after the supposed acquisition because they don't want to support the "The Fake New York Times."

 

[Sports Barf]

All you are purchasing with The Athletic is a bunch of contract obligations and subscriber info.

Trust me. All the different ways you can get in front of a customer these days — events, podcasts, webinars, paid social, organic social, youtube, direct mail — you'd trade them all for an email send list.

 

[ChrisLong]

All I want to say about this is, they haven't had an Angels writer for about 3 weeks, since Fabian Ardaya switched to the Dodgers. Molly Knight wrote a couple of Angels stories the first week, but she is pathetic, and is supposed to be a columnist. Nothing else since then.

I sent an email to the "CONTACT US" link on The Athletic web site. I said they need so start offering a reduced rate if they can't cover a major league baseball team in the second biggest market in the nation. I got back a form letter with instructions on how to cancel if I wanted, depending on all the different ways you can pay for it.

BTW, the Angels have the best player in the game and the most popular player in the game, who also is pretty damn good. They probably deserve to be covered, don'tcha think?

 

[daemon]

Their readers aren't loyal to the writers. They are loyal to the coverage of their favorite sports teams or their favorite sports. The writers and editors matter if they provide good coverage. But I'd guess that for most readers, it's not the writer that got them to subscribe. It's the sports coverage.

"All you are purchasing with The Athletic is a bunch of contract obligations and subscriber info." In other words, what someone would be purchasing is more than a million steady paying customers (i.e. revenue) that a business has managed to attract and retain due to the quality of the work produced by the people working for the company.

That is all any business is.

You seem to think there is no value in that, or that it is easy to do. Apple has customers for the iphone and some hardware and software engineers. Can someone with a boatload of capital and the incentive just recreate what they are doing, because no biggie there?

I think you are so wrong about it being easy to recreate what the Athletic has done. Being first has to have had immense value. They came along at a time when there was a lot of writing and editing talent being shed by traditional outlets, and they hired a lot of those people and put them under one umbrella. There isn't a similar roster of talent that can be so easily poached anymore. That has to have a lot of value to someone. Secondly, with the decline of those traditional news outlets, they saw a hole for the niche they have tried to fill. Whether it is a good enough niche to support a profitable, growing business is still a big question. But putting that aside, they were trying to fill a largely untapped niche when they came around. Anyone looking to get in now is looking at competition; a niche someone else is already addressing. And given that the actual question that is difficult to answer about the Athletic at this point is if it is a lucrative enough niche to be viable (are there enough customers willing to pay enough money), stepping in to compete with them would probably end up being incredibly stupid. If something without competition is not yet profitable, multiple outlets trying to compete within that space are going to dilute that potential profitability and possibly guarantee failure for everyone.

If it would be so easy to recreate the Athletic in one or two years, have you asked yourself why nobody has done it, yet others are talking about merging with them or acquiring them (what you do when the cost of recreating something is likely to be much greater than the cost of acquiring them)? You said that "any company with the capital and incentive" could do it. The incentive anyone with capital has to deploy it is the opportunity to profit. ... to find the best opportunities to grow that capital. I think anyone who thinks the Athletic is a good investment, has probably thought about what it would take to recreate it, and sees a lot of difficulties you are sort of glossing over.

Their whole model is built on subscribers being loyal to specific writers. When they did their first big round of hiring, they targeted writers who had loyal followings. If each one brought 2,000 subscribers, they'd bring X dollars of revenue. It's not a whole lot different from Substack. Difference is, The Athletic hired a whole bunch of people who don't bring in enough subscribers to pay for all of their salary. That's why the Athletic isn't profitable, and it's the big difference between it and the "any businesses" that you mention. The number one reason to buy any business is its profit stream. The Athletic doesn't have one, and it's limited in its ability to scale up by the same thing that has made it "successful": it has a bunch of good writers. It has to pay those writers. It's fully staffed now and not turning a profit, but it has already hired most of the writers who would bring in enough subscriptions to create net revenue. The Athletic is pretty much just a writers co-op. You aren't buying any capital-intensive means of production or real estate or infrastructure. The app and the website, neither of which is complex. Companies get a lot of their value from their marketplace's barriers to entry. Not saying the Athletic doesn't have value. I just don't see why another subscription media company like the NYT would value it enough to pay eight or nine figures for it. The Athletic is already bare bones. There aren't any synergies to be had. It needs new revenue streams that offer more bang for the buck than writers' salaries do. The subscriber access could be worth a lot to a company looking to transition from a free model to a subscription model - just not sure who that company is.

 

[The Big Ragu]

Their whole model is built on subscribers being loyal to specific writers. When they did their first big round of hiring, they targeted writers who had loyal followings. If each one brought 2,000 subscribers, they'd bring X dollars of revenue. It's not a whole lot different from Substack.

I really think you are confusing the chicken with the egg. Most people subscribe to the Athletic for sports coverage. Not because of loyalty to specific writers. If they targeted writers to hire who had "loyal followings," it's because those followings would have been indicative of reporters who covered a beat or a sport well. Which is what would have attracted those readers. It's a heck of a lot different than Substack, in that regard, which is a portal without any particular niche. Replace Rick Carpinello with someone else covering the Rangers in hockey for the Athletic, and I am not going to stop reading because Rick Carpinello is gone. To the extent he has a following, it's because he does a good job covering the beat. The sports coverage is what matters to readers, not him personally being the one to provide it. Put someone else in there who covers the team just as well, and the Athletic doesn't lose anything because his name isn't on the stories. Its the sports coverage that people are paying for, first and foremost.

The number one reason to buy any business is its profit stream.

Then why do startups with no profits get bought (quite often, actually, and often for a lot of money)?

The number one reason to buy any business is the potential for future profits. What a business earned (or didn't earn) yesterday benefited (or cost) someone else. I do not know if the Athletic has a lot of future potential, but I do know that anyone seriously thinking about purchasing it would think it does. They'd estimate growth that is not being tapped yet (it is still a relatively young business) that can bring about profitability, and / or they'd see ways they could leverage the business they already have to bring about efficiencies or squeeze out costs that can bring future growth and profitability.

Not saying the Athletic doesn't have value. I just don't see why another subscription media company like the NYT would value it enough to pay eight or nine figures for it.

This isn't what you said in the original post. The price tag would have to be well into 9 figures. ... because of where the earlier venture capital valued it. And I agree, that price tag for what you are getting is going to be the main impediment to getting a deal done. It's something like 6 or 7 times revenue, which in a normal time in which assets weren't being inflated to insanity by a phony interest rate environment, would be absurd for a media company. Even within the current ridiculous environment, that is extremely, extremely rich. But saying that the price tag may be too high to get a deal done isn't the same thing as what you said about someone being able to recreate what they have done in one or two years. Precisely because of what I said in my earlier post. By being first, the Athletic benefited from some serious advantages that aren't available now.

The Athletic is already bare bones. There aren't any synergies to be had. It needs new revenue streams that offer more bang for the buck than writers' salaries do. The subscriber access could be worth a lot to a company looking to transition from a free model to a subscription model - just not sure who that company is.

If anyone buys it, it will be because they disagree with you about synergies (I hate the word, FWIW). The way you are talking about it, it is as if you are certain that it is already a mature company that can't possibly grow its subscribers anymore or derive more sales and income. ... beyond where it has gotten to in just 5 years. You may be right. Maybe this is all the potential it has. But I also don't think it's a foregone conclusion the way you seem convinced, either. And anyone kicking the tires right now is doing it because they have access to info about the business that you and I don't, and they are trying to figure out just how much potential is there and whether the cost for it makes sense.

 

[wicked]

They aren't mutually exclusive.

The Athletic could hire someone who has a larger Twitter following, he gives out his promo code for six months, and those readers are hooked and pretty unlikely to cancel that subscription — then for whatever reason a change could be made.

 

[Songbird]

The Athletic doesn't have one, and it's limited in its ability to scale up by the same thing that has made it "successful": it has a bunch of good writers.

In due time, sooner likely than later, The Athletic will go the way of Yahoo Sports. Look at Chris Long's post. He's right. Angels have modern day Mickle Mantle and Babe Ruth and The Athletic still doesn't have the wherewithal to write worthy stories (or any stories) that get people talking and sharing and buzzing and all that jazz.

My idea would be to make Athletic content free and let the brainiacs and bean counters figure out how to pay the writers and generate any kind of profit (or suck it up and accept there will be little to no profit). But it probably shouldn't even be about profits. NYT would be smart to buy The Athletic and offer free content (by the same [mostly] quality writers) so that readers are always connecting The Athletic with the NYT. Athletic-type sports coverage would be akin to the NYT cooking section that everyone from the chic to the hipsters to the middle class fraus seems to love.

 

[The Big Ragu]

The New York Times earned about $100 million last year, which was down close to 30 percent from the year before. Which is why it is trying to plot new income streams. The Times is profitable and a cash cow still, but it's not a behemoth earner.

It's in no position to give away the Athletic like some kind of loss leader. The Athletic lost some undisclosed amount of money last year, on $80 million in revenue. Even if it had broken even, you'd be talking about giving away $80 million of potential revenue on earnings of only $100 million. If it's losing say $20 million a year still, it would drain everything the entire New York Times earned last year.

If the Times were to buy it, it would be to try to get a return on the investment by making it profitable and bundling it with other things it offers. That NYT Times cooking section contributes to the bottom line. This would have to, also.

 

[Severian]

Could the NYT afford to pay the exorbitant salaries of Athletic writers?

 

[Sports Barf]

Could the NYT afford to pay the exorbitant salaries of Athletic writers?

They pay Nikole Hannah-Jones, don't they?