Media company The New York Times has agreed to purchase US-headquartered online sports media platform The Athletic in a $550m deal allowing media group Bertelsmann and mass media company Comcast to exit.
The transaction represents a profitable exit for all the company’s investors and marks a contrast with the fortunes of the previous wave of digital media companies, which focused on a free-to-read business model and which have seen their valuations decline in recent years.
Founded in 2016, The Athletic oversees a subscription-based online platform covering a range of sports using experienced journalists familiar with specific regional sports markets. In theory, this makes it easier for them to form in-depth contacts and focus on news applicable to fans of specific teams.
The company has 1.2 million subscribers internationally and will boost the offering of New York Times, which has 8 million subscribers of its own. It remains one of the most widely read dailies in the world and increased its net profit 63% year on year to $54.7m in Q3 2021.
The move is an interesting one in that there is not thought to be a significant overlap between each set of subscribers, with The Athletic’s more widely distributed than those of its parent company.
The deal will increase New York Times’ wider subscription base by a fair amount while giving opportunity for upselling. The Athletic will continue to be run independently and the newsrooms will not cross over.
The Athletic is not the only subscription-based digital media company to be growing as of late. Substack’s model involves it hiring online writers with existing followings and paying them to release newsletters to subscribers through its online platform.
Substack’s last round, in March 2021, valued it at $585m, and it announced in November it has now passed 1 million paying subscribers.
Interestingly, another newsletter-focused outlet, Axios Media, the online business and politics brand which raised cash from media and communications group Cox Enterprises at a $430m valuation two months ago, is following the lead of The Athletic by signing up local journalists in various markets to oversee local newsletters.
The previous wave of digital media companies, such as Buzzfeed, Vox and Vice, achieved larger valuations but those have decreased due to advertising falling revenues, partly due to Facebook being able to cut into that by hosting their content itself.
Vox and Group Nine agreed in November 2021 to merge, but Vox’s valuation has fallen from $1bn in 2015 to $672m while Group Nine’s has declined from $585m in 2016 to $225m, according to New York Post.
Reports in May 2021 suggested Vice Media’s valuation was set to slump to about $3bn including debt, almost half the $5.7bn at which it was valued in 2017.
Buzzfeed is perhaps in the most trouble, having seen its market capitalisation fall below $700m since it listed in a reverse merger last month, under half the valuation when the deal was agreed, and it is continuing to post losses each quarter.
Medium, operator of a freemium model that lies somewhere in between the old and new digital media operators, may prove to be a bellwether in its next round.
The Athletic had raised about $120m as of a $50m series D round led by Bedrock Capital in early 2020 at a $500m valuation with backing from Evolution Media, Emerson Collective, Powerhouse Capital, Plus Capital, Founders Fund and Y Combinator.
Bertelsmann unit BDMI and Comcast subsidiary Comcast Ventures had both taken part in a $40m series C round for the company in 2018 that valued it at $200m, alongside Evolution Media Capital, The Chernin Group, Founders Fund, Bedrock Capital, Courtside Ventures, Y Combinator, Advancit, Amasia and Luminari.
BDMI had initially invested through The Athletic’s $2.3m seed round the previous year alongside Courtside Ventures, Luminari Capital and Advancit Capital. Its investors also include Precursor Ventures, LionTree Partners, Chris Silbermann and Ali Rowghani.
