The Athletic: $140M In Funding, Still Not Profitable

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Friends,

After merger talks between The Athletic and Axios ended earlier this month without a deal, Sara Fischer at Axios reported this week that the New York Times was “looking into a potential acquisition of The Athletic.”

In addition to formally starting the conversation with The Athletic, Fischer says that executives at the Times have already begun “reaching out to former employees to vet The Athletic’s business and culture.”

Important Note: The New York Times deal would be a full acquisition rather than a strategic partnership or the merger agreement via SPAC that Axios was reportedly considering.

Founded by Alex Mather and Adam Hansmann— former coworkers at subscription-based fitness company Strava — The Athletic had one simple mission: “to provide smarter coverage for die-hard fans.”

The website had no advertisements. Instead, despite almost all sports-related coverage being free at the time, The Athletic decided to build its business model on subscription revenue. The website would be cleaner, the app would be easy-to-use, and they believed real sports fans would pay for good, high-quality reporting and writing.

The interesting part? Investors agreed. Mather and Hansmann wowed Y Combinator — the seed money startup accelerator that has launched over 2,000 companies, including Stripe, Airbnb, and DoorDash — and The Athletic officially launched in 2016.

The Athletic launched its coverage in Chicago, grew to more than 20 markets across the US and Canada by year two, and now, just 5 years later, covers 47 markets in North American cities and the United Kingdom.

They cover almost every sport, from the NFL and NBA to MMA and boxing, and have hired nationally recognized writers like Ken Rosenthal, Shams Charania, and Lindsay Jones. And yes, they have raised more money along the way.

In total, The Athletic has raised $139.5 million via five funding rounds.

Funding History

• Seed Funding: $2.3 million led by Courtside Ventures

• Series A: $5.4 million led by Courtside Ventures

• Series B: $20 million led by Evolution Media

• Series C: $40 million co-led by Founders Fund & Bedrock Capital

• C1 round investment: $22 million led by Founders Fund

• Series D: $50 million led by Bedrock Capital

Over the last 5 years, The Athletic has proven to be an incredible case study on the business of sports media. They have raised $140 million. They aggressively expanded their coverage domestically and abroad, from 0 markets in 2016 to ~50 markets just 5 years later. They now have more than 600 full-time employees, and at over 80%, they boast about their incredible customer retention rates.

But there is just one problem: Despite 1.2 million subscribers, $80 million in revenue last year, and a valuation north of $500 million, The Athletic still isn’t profitable. The company has reached desired size and scale, but the business model isn't working. That’s not me being harsh. It’s the truth.

This is where the New York Times comes in.

For a company that has always raised & spent money more similarly to a tech company than a media company, a sale to a business like The New York Times has always seemed like the eventual outcome.

The New York Times has almost 8 million paying subscribers currently — just under 7 million that pay exclusively for digital products — and is currently on pace to meet its goal of 10 million subscribers by 2025.

The Times currently focuses on news, games, cooking, and audio, making The Athletic’s sports subscription business an easy addition to a larger, more diversified subscription bundle package.

Unfortunately, there still appear to be more questions than answers: How much are they willing to pay? Will it be an all-cash deal? Will they leverage NYT stock, which is trading at its highest price in two decades?

Does the Times cut The Athletic’s local coverage and focus on cheaper national coverage? If they do, how many subscribers leave as a result? Heck, how many subscribers will leave just because they don’t like the NYT?

I could go on, but you get the point. This isn’t an obvious acquisition by any means. If the New York Times believes its current editorial & digital infrastructure can positively impact The Athletic’s business model, maybe they do it. If they don’t, maybe they stay away. But given their current financial position, the Times has the ability to think about this long term. They don’t need The Athletic to be profitable in 12-24 months.

In the end, none of this is surprising. The Athletic has incredible writers that produce amazing work, but when you raise $140 million from the best investors in the world, hire 600 employees, and spend 5+ years acquiring 1.2 million subscribers, it’s not an option to be unprofitable.

I hope each of you has a great weekend. Monday is Memorial Day, so I’ll talk to you on Tuesday.

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