Wed. Jan 26th, 2022

The New York Times wants more subscribers. Athletic has many customers but loses money.

So why do you have a two-sentence explanation The Times is paying $ 550 million in cash for Athletic, Five-year-old sports news service.

And now we can go deeper into the new round of media integration. Remember that in the last few months, BuzzFeed has bought the complex, and The site was acquired by Vox Media, Group Nine. Like these deals, it is understandable for both parties up to a point. However, the Times-Athletic Agreement also mentions the challenges that both organizations are now facing. You could call it a chocolate-peanut butter combination, or you could call it a convenience wedding. Or both.

Here’s the deal for both companies:

The Times, which has transformed itself from an ad-supported publisher to a publisher Supported by paying customers, Enjoyed blockbuster growth during the Trump administration and Even the first summer of the epidemic improved. As a reward, the paper has 1 billion in cash and a stock worth 250 percent over the past five years – which has the potential to pay off. Cash $ 550 million For athletics, Axios as the first report. (The information first got the word value of the contract.)

In return, the Times gets a new subscription business that it can market with its core product. It’s a product that doesn’t contradict what the Times does now. The paper has largely ignored sports in general over the past few years, and spends no time covering individual sports teams, which is the whole point of athletics.

Meanwhile, Athletic has already signed up to 1 million paying customers, confusing many skeptics – the guy typing it – who didn’t think there were many who would pay to read about their favorite sports teams. Associating yourself with the Times means that startups enjoy the benefits of a much larger marketing engine. And, importantly, this means that the Times may offer subscription bundles that include both publications, which may reduce the chances of Athletic customers canceling their subscriptions when they are not playing their team / sport – which is why people familiar with Athletic call me a problem company. Now.

On the other hand: That’s why Athletic is selling for $ 550 million – less than that Allegedly wanted $ 750 million company, And its investors thought it was worth it in February 2020, when it last raised money – because it had to.

Such as Jessica Tunkel of The Information Report, The startup has spent more than 100 million in 2019 and 2020. In 2020 alone, when sports were dark for most of the year, it lost $ 47 million in revenue and $ 41 million in revenue. And even its most optimistic estimate is that it will lose money by at least 2023.

So the company needed a buyer or investor; A person familiar with the company told me that Athletic also spoke to the Middle East Sovereign Wealth Fund last autumn. The Times deal solves a problem, but not the solution that athletes are looking for. That’s why we’ve been reading about Athletic for most of last year looking for other deals, lIke a floating plan Combine with Axios And take the merged company public.

And while the Times was fairly proud of its subscription boom in the Trump era, that era is over (for now). It took hard work to find new customers, which was reflected The growth rate is slow At different times last year. If the Times feels more comfortable with its organic growth, it can’t afford to pay a customer roughly $ 500 for athletics.

Instead, it is doing the second largest deal in the history of the paper. The Times bought the Boston Globe in 1993 for 1.1 billion; And in 2005, it paid About 410 million for, its largest digital acquisition to date. None of these deals worked well for the Times. It dropped the Globe to 70 70 million in 2013 and redeemed it for about 300 300 million in 2012 (it sold to Barry Dealer’s IAC, which turned it into DotDash, and now owns a lot of what is now known as Time Inc.).

Past performance never guarantees future results, and today’s Times has a new set of business leaders, so it’s entirely possible. But make no mistake: this is a very big bet, with significant risks and ups and downs – and the Times was not in a position to make it very long ago.

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