We know technology can change people’s appetites and habits. But so much ‘new media’ is traditional content fitted into a new digital business model.
Look at The Athletic, the San Francisco-based, ads-free, online sports network which has been shaking the foundations of newspapers in North America and the UK. The $40 million-revenue business, which has poached some of the best sports writers, has been built on three simple realities about sports audiences, which:
- Don’t like ads
- Will pay for good writing and reporting
- Want deep coverage of their favourite topics
That rationale says everything about how traditional ‘everything for everyone’ daily newspapers have been left flat-footed by The Athletic, and may yet be upstaged by other digital specialists giving paying readers only what they actually want. But we know the score. Even if they can contemplate subscriptions-only digital media without ads, few newspapers will enthusiastically compete with themselves and risk accelerating the decline of their legacy business.
The Athletic’s subscriptions dependance drives its obsession with readers. Journalists are motivated by league tables showing stories that have generated the most traffic and those that have attracted new subscribers. Some traditionalists might worry about reporters being troubled by financial realities. But others know it was advertising long ago that dislocated newspaper relationships with readers and (largely) got them into this mess.
For all that, The Athletic defies the wisdom of what makes media successful in the 21st century, simply because it is long-form journalism and mostly text. US subscriptions cost $10 a month or $60 a year, though many customers have signed up at lower promotional rates. The site’s average annual revenue per subscriber is said to be “roughly $64”.
The strategy had seemed to be paying off with an apparently achievable target of 1 million subscribers by the end of 2019. But the last number The Athletic publicly disclosed was “more than 600,000 subscribers” in August 2019. Seven months later, Covid-19 wrecked the economics of professional sport and created unprecedented challenges for media in a stay-at-home world.
It was a perfect storm for The Athletic whose founders Alex Mather and Adam Hansmann had predicted a breakthrough to profitability in 2020.
The two had worked together at Strava, the social network for runners and cyclists. They left to produce “smarter coverage and high-quality journalism for die-hard fans.”
They were motivated by the difficulty of finding high-quality sportswriting not bedevilled by pop-up ads. They raised almost $8 million in VC funding to support their conviction that there were millions of enthusiastic sports fans like them, willing to pay for good reporting and writing – and no ads. They would save journalists from struggling newspapers and TV networks, using a data-backed approach.
In 2015, The Athletic’s first test market was Chicago. Next came the launch in Toronto. Within two months, it had attracted 3,500 subscribers.
Fast forward to 2019 and The Athletic raised $72 million, bringing total investment to $140 million, from funds including Comcast Ventures. The company’s valuation reached a theoretical $500 million. Some $15 million of the cash was allocated to the launch of English Premier League (EPL) football-soccer in the UK, its first operation outside North America.
It was a gutsy challenge to established daily newspaper coverage of the UK’s richest sport. The scale of the EPL is best illustrated by the fact that its 20 clubs each receive more than £100m per season, just from the world’s TV broadcasters. The cash has long helped EPL clubs attract many of the world’s best footballers which, in turn, has built the league’s global popularity – bringing in even more cash from merchandising, sponsorship and advertising.
The EPL is a staple of UK national dailies whose match-report supplements produce additional copy sales every Monday during the football season. The Athletic signed up a team of some 50 journalists including star names and established a network of regional reporters who know everything that happens at their local EPL club.
BuzzFeed reported: “The Athletic…have been super-aggressive … they have gutted The Times. It’s the biggest shake-up in sports journalism since the digital era.” Many of the journalists were recruited at double their existing salaries to provide deep club-by-club content beyond anything done by daily newspapers in print or online.
The New Statesman says: “In a short time, the site has redefined football journalism by working out that those of us with a hopelessly irrational interest in the game want more material, and with a far greater range and sophistication.”
For those of us Brits who are fans of, say, Tottenham Hotspur, The Athletic serves up several long articles a week by a journalist who follows the club full-time. It’s well-written and offers far sharper insights than those of most news brands, including the all-free BBC. The Athletic doesn’t bother with match reports (there are plenty of those online and free) but is all about original content.
Everything about The Athletic’s approach to sports journalism is different, including the management of its reporters. Data tools and analysts show what topics and stories readers are most interested in and what makes casual readers subscribe. Reporters are said to have annual subscription targets and have data to show what stories drive subscriptions. In the US, a Slack bot pulls in stories that accumulate five subscriptions within 24 hours. Stories that hit 100 subscriptions are known as ‘home runs’ and pieces that generate 500 subscriptions are dubbed ‘grand slams’. For journalists, it has been a heady blend of pressure to perform and the ‘feel good’ of being on a winning team.
But, on June 5, three months after the world first learned about “lockdown” and “social distancing”, The Athletic started to feel a lot more like all other media. The founders gathered their 600 people for a grim meeting on Zoom on “a dark day for the company at one of the darkest moments in recent memory for most of us in the country, in the world.”
Mather said that they had been in sight of 1 million subscribers in March. “But as the pandemic has set in and as the sports calendar has remained frozen in place, it has become clear to us that those best-laid plans have irrevocably changed.”
He announced the lay-off of 46 journalists (8% of the total). He also cut pay by 10% for the rest of the year, and larger cuts for the 30 executives earning $150,000+. The Athletic also laid off freelancers, some marketing people and a newly-appointed video team.
It was a dramatic mood change from March when Alex Mather had described The Athletic as “a lion that’s going to roar back” once the coronavirus ended.
The Athletic, which had more than doubled subscribers during 2019, had lost a rumoured 20-30% of them during the early months of the virus outbreak. And podcast sponsorship, reportedly a small but growing revenue source, had also fallen sharply.
In the UK, where no journalists have been laid-off but where salaries were cut, The Athletic is assumed to have fewer than the 100,000 subscribers (paying some £30) it had boasted in March.
It seems almost too ironic that The Athletic should be suffering from the kind of apparent overstaffing that has hobbled daily newspapers throughout the digital era of vanishing advertising revenue.
Barrett Sports Media had offered the founders some early advice: “Assemble a rich lineup of major sportswriting names and avoid hiring not-so-big names in bulk numbers. That way, the site would be dependent on premier columnists and writers to power through the early years.”
The Athletic did almost the opposite and hired hundreds of writers to cover and analyze almost every imaginable league, team and programme in US sports. For a year or two, it looked like nothing less than a winning formula, spelled out by what were claimed to be 90% subscription renewal rates. But it became clear that the low churn rate was flattered by the large number of monthly subscriptions (more chances to cancel) and discounted prices.
If we assume that, despite Covid, The Athletic has been able to maintain its average subscription rate of about $60 and that its revised annual operating costs are some $60 million, the breakeven may now be about 1 million subs.
Given that subscriptions may currently be some 800,000, the company may be burning through more than $12 million a year. But those cost/revenue assumptions could be generous. The Athletic is clearly a long way from the profits it promised in this fourth year – at a time when many of the North American and UK daily newspapers in its sights have been able to grow subscriptions at a faster rate than ever. Covid has been good for some.
That is why the founders and investors of The Athletic may now be looking for the exit. They might be hopeful of some money-spinning sports betting deal. But a collaboration with Bloomberg could be more productive. Purchasers of the $290 annual Bloomberg. com subscription receive a free six-month trial to The Athletic. The partnership also includes a video relationship where journalists from The Athletic are featured on Bloomberg Media’s digital news network QuickTake reporting on the business, culture and technology of sports.
For all the headwinds, The Athletic still helps to makes the case for an increasing number of ads-free, subscription verticals drawn from the wide range of content that is still stubbornly bundled together by most daily newspapers. Many of those readers outside the current reach of traditional news brands may only be attracted by a “pick and mix” approach to paid-for content.
The Athletic is also part of the “subscriptions” economy featuring an increasingly wide range of product and service providers (beyond mere media) which have expanded during the Covid lockdowns. Everything from flowers to food and cosmetics to candy is being sold on subscription.
But The Athletic has got to work hard to survive. The (who knows how urgent?) task is to reduce costs yet further. It may need to halve breakeven to 500,000 subscriptions. It needs to learn from the digital profits of The Information, Morning Brew, and Axios.
As The Athletic wobbles into its fifth year with 50 fewer staff than 12 months ago, newspaper obituary writers can’t wait to play back to Alex Mather his hubristic quote from 2017: “We will wait every local paper out and let them continuously bleed until we are the last ones standing,”
Right now, it is The Athletic that is bleeding in a world where the pandemic has comprehensively disrupted spectator sports. And next comes recession.
There is a lingering view that many sports fans can get broadly comparable coverage of their teams elsewhere for free. But The Athletic is distinctive and the smart money is on its survival, perhaps under the ownership of a news company that should always have launched it. That seems much more likely than a US sports media “merger” with Disney’s ESPN, CNN’s Bleacher Report or Sports Illustrated.
The Murdoch family’s News Corp, Jeff Bezos’s Washington Post, and the New York Times (architect of real success in paid-for digital verticals) might all make The Athletic work with shared costs and promotional power. So could its partner Bloomberg. Just watch.