Why the New York Times bought Athletic

The New York Times needs more subscribers. The Athletic has many subscribers but is losing money.

So there are two sentences from you explaining why The Times will pay $550 million in cash to acquire the Games, A sports news service with a five-year history.

Now we can learn more about the latest round of media integration.Remember, in the past few months, BuzzFeed acquired Complex, and Vox Media, which owns the website, acquired Group Nine. Just like those transactions, to some extent, this transaction is meaningful to both parties. But the Times-Athletic transaction also highlights the current challenges facing the two companies. You can call it a combination of chocolate peanut butter, or a convenient marriage. Or both.

These are the benefits of the transaction between the two companies:

The Times transformed from a publisher supported by advertising to a publisher Paid subscriber support, Enjoyed blockbuster growth during the Trump administration, and Even thrive in the first summer of the pandemicIn return, the newspaper has $1 billion in cash and a stock price that has risen 250% in the past five years-which means it has the ability to pay $550 million in cash As Axios first reported. (The Information first learned the value of this transaction.)

In return, the “New York Times” received a new subscription service that can be promoted together with its core product. It is also a product that does not conflict with anything the New York Times is doing now. In the past few years, this paper has largely ignored sports and spent almost no time reporting on individual sports teams, which is the whole point of track and field.

At the same time, The Athletic already has 1 million paid subscribers, which confuses many skeptics—including the one who types—that they think that not so many people are willing to pay to read their favorite sports team. Being attached to the times means that this startup can enjoy the benefits of a larger marketing engine. And, crucially, this means that the New York Times can provide a subscription package containing two publications, which may make Athletic subscribers less likely to cancel their subscription when their team/sport is not participating in the competition-familiar with Athletic The people told me this is a problem for the company now.

On the other hand: The reason why Athletic sells for $550 million-less than According to reports, the company seeks $750 million, And its investors believe that it was worth in February 2020 (the last time it raised funds) because it had to do so.

As Jessica Toonkel of The Information said Report, This startup burned more than $100 million in 2019 and 2020. In 2020 alone, when sports were in trouble for most of the year, its revenue was US$47 million and it lost US$41 million. Even its most optimistic forecasts indicate that it will not lose money until at least 2023.

So the company needs buyers or investors; a person familiar with the company told me that last fall, Athletic also had a conversation with the Middle East sovereign wealth fund. The Times deal solved a problem, but it is not the solution that athletes have been looking for. This is why we have been reading about Athletic looking for other deals for most of the last year, RiseLike a floating plan Combine with Axios And the merged company will be listed.

Although the New York Times was proud of its subscription boom in the Trump era, that era is over (for now).It will have to work harder to find new subscribers, which is reflected in Slowdown in growth figures At different times last year. If the New York Times were more comfortable with its organic growth, it might not pay approximately $500 for Athletic subscribers.

On the contrary, it is closing the second largest deal in the paper’s history. In 1993, the New York Times bought the Boston Globe for $1.1 billion; in 2005, it bought About.com for $410 million, the largest digital acquisition to date. For the New York Times, neither of these two deals worked. It sold Globe in 2013 for $70 million, and in 2012 it sold About for $300 million (by selling it to Barry Diller’s IAC, which turned it into DotDash, and now has a large Some companies formerly known as Time Inc).

Past performance can never guarantee future results, and today’s Times has a new set of business leaders, so this is entirely possible. But please don’t get me wrong: this is a very big bet, with huge risks and upside-and not long ago, the New York Times could not make such a bet.

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