3rd February 2022

The New York Times’ acquisition of The Athletic is a bullish bet on subscriptions


Last month, The New York Times (NYT) completed the acquisition of loss-making sports journalism website The Athletic for a fee of approximately $550 million.

The past 12 months have been a busy period for media consolidations, and analysts expect this trend to continue well into this year. Most recently, Axel Springer acquired Politico, Buzzfeed acquired Complex Media, and digital publishers Vox Media and Group Nine Media merged.

Other notable acquisitions include NYT investments in media software firm OpenWeb and Serial Productions, the production house behind the hugely popular ‘Serial’ podcast.

Media’s subscription-led future

Commentators have described the NYT’s acquisition of The Athletic as ‘a bet on subscriptions’, one with the potential to expedite the paper’s goal of hitting ten million digital subscribers by 2025.

After years of struggling to contend with falling print circulations and digital advertising budgets cannibalised by Big Tech, many traditional media titles have come to realise that a subscription-led business model represents the most viable path toward long-term profitability and stability.

In this space, the NYT is one of the leading torch bearers for digital subscriptions. It has enjoyed an unprecedented 24 months of growth. It recorded a 30 per cent jump in subscription revenues in 2020 and has had further double-digit growth in 2021, closing out the calendar year with 8.4 million subscribers (1 million of whom are outside the US) and an operating profit of $65 million in Q3.

While these numbers solidify the NYT as the world’s largest English language paid-for digital publication, it still has a distance to travel to meet its stated target of 10 million subscribers, particularly in light of the post-‘Trump bump’ slowdown in new subscribers.

Enter The Athletic. The sports media start-up’s $550 million price tag brings with it a ready-made opportunity for the NYT to cross-sell to its 1.2 million paying subscribers. According to Meredith Kopit Levien, NYT chief executive, the deal will ‘give people another reason to turn to the Times’ products as a separate subscription or as part of the Times Bundle.’

Athletic co-founders Adam Hansmann and Alex Mather. Mather in particular has courted controversy for his cut-throat attitude to media, particularly local journalism.

Why The Athletic is selling

Founded in 2016 by San Francisco-based Alex Mather and Adam Hansmann, and employing 450 journalists across the US and Britain, The Athletic has had remarkable audience growth in a very short space of time. It is now the fifth-largest English language online paid-for news publisher in the world.

Despite its rapid audience growth, it had supposedly been on the lookout for a buyer for some time. Over the last 12 months it was linked with US news website Axios, a Middle Eastern wealth fund, and gambling companies Flutter Entertainment and DraftKings.

The Athletic has been a source of both fascination and wariness within the media industry since its inception. Some hailed it as a potential saviour of sports journalism, while others viewed it in more hostile terms, particularly in light of co-founder Alex Mather prophesying that his business would ‘suck’ local newspapers dry of their top talent until they were the ‘last ones standing’, ironically in a NYT interview in 2017.

Yet despite The Athletic’s impressive audience growth and heavyweight roster of editorial talent, it closed out 2021 a long way from profitability, recording losses of $55 million, with little by way of market confidence to suggest this would change anytime soon.

Furthermore, while its headline figure of 1.2 million subscribers is impressive, at least anecdotally, vast numbers of these subscribers are signed on at heavily discounted promotional rates, and this typically goes hand in hand with high-churn rates. Meanwhile, those of us who have abstained from signing up have probably become all too accustomed to their relentless promotions across Facebook and Instagram.

In short, there are clear merits to the deal for both parties. The Athletic had an audience but no money, the NYT money and needs to grow its audience.

Daily habits still up for grabs

The NYT occupies a unique space in the international media landscape. To quote NYT reporter Edmund Lee, ‘Wall Street investors and news executives consider the Times to be both a bellwether and a standalone’. Its recent double-digit digital growth ‘shows what’s possible for a news media organisation in the age of Facebook and Google, but not everyone in publishing will be able to emulate its success’.

However, the deal aligns with a growing recognition among media outlets big and small that consumers will pay for expertise and quality analysis, if not breaking news. Traditional broadsheet titles are moving quickly to reflect this in their product offerings.

That said, subscription fatigue is a very real challenge, and there are only so many potential paying news subscribers to go round. Media executives are aware of this — and of the merits of first-mover advantage.

Speaking to The Wall Street Journal last November, Levien estimated that there were ‘at least 100 million English-speaking, college-educated people who would pay for digital journalism’ and ‘about half of them live outside the US’. According to her, now is the time to invest in aggressively growing the NYT’s market share while ‘daily habits are up for grabs’.

The NYT has spotted another online phenomenon: Wordle. It purchased the word puzzle game for an undisclosed 'low seven-figure sum' earlier this week.

Staking their positions

Recent market analysis echoes this sentiment. According to PwC (2021), media and communications deals totalled $233 billion in 2021, up 27 per cent year-on-year. ‘No one is sitting on the side-lines. They know that we are in an era that is going to set the stage for the next 10 to 20 years,’ PwC partner Bart Spiegel said. ‘This is the time when everybody is staking out their positions.’

For the NYT, The Athletic deal represents its biggest investment since its costly $1.1 billion acquisition of The Boston Globe in 1993 (it was later sold for just $70 million in 2013).

However, with an existing database of over 100 million non-paying registered readers, the NYT’s core challenge now, aided by its newly expanded audience reach and roster of products, is to convert these readers into paying subscribers.

About the author

With his intelligent communications skillset and extensive media connections, Paddy helps clients build stand-out messaging and achieve their business objectives, whether they’re a start-up raising seed capital or an established player pushing for industry reform or telling their employer brand story.  Paddy has been published in a number of national publications, including the Business Post, Irish Independent, Fora.ie, and The42.ie on the theme of strategic communications and reputation management.

(This article was originally published in The Business Post on 15 January 2022.)

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