The Athletic's Financials Since The New York Times Acquisition

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Hey Friends,

The New York Times released its first-quarter 2022 results yesterday, which provided us with more details on how its acquisition of The Athletic is going.

As a reminder, after searching for a potential buyer for almost a year, the sports subscription media site was acquired by the New York Times for $550 million in January. That represented about half the cash that the New York Times currently had on its balance sheet, and they said they could develop synergies to make it profitable.

Here’s what we learned yesterday:

• The Athletic added about 1.1 million subscribers to The New York Times.

• This has pushed total subscribers at The New York Times to 9.1 million.

But the acquisition has also altered the company’s balance sheet:

• The Athletic has lost $6.8 million since the acquisition (February & March).

• This has eaten into the parent company’s profits, with The New York Times reporting an operating profit of $60.9 million for the quarter — that’s down from $68.1 million a year earlier and means that $6.8 million (94%) of that $7.2 million drop in profitability was due to The Athletic’s operating losses.

The truth is that many people didn’t think this was a smart acquisition by The New York Times, and they will probably use these results as an opportunity to say I told you so. But the reality is that it’s entirely too soon to declare victory one way or another, even if I am skeptical of the overall strategy myself.

The New York Times has previously said that just 13% of its current subscribers already have a subscription to The Athletic. That offers them the opportunity to cross-promote the publication and significantly reduce customer acquisition costs through lower marketing spend and fewer signup bonuses. Still, you have to assume the end goal is to eventually limit The Athletic’s operating losses through combined synergies.

The Athletic Operating Losses

• 2019: $54 million

• 2020: $41 million

• 2021: $55 million

Because, based on a $6.8 million loss in February & March, that would put The Athletic on pace to lose more than $40 million again this year — estimated, of course.

The New York Times has said they plan to reduce the operating losses by introducing more advertising to the subscription-based sports site later this year. And given that advertising only counted for 18% of The Athletic’s $12.157 million in revenue in February & March, that could help make a pretty significant difference.

As A.J. Perez points out below, they currently only run advertisements on podcasts.

So we’ll see what happens. The New York Times is playing the long game here. They don’t plan to fire any staff at The Athletic or even limit their travel. Instead, they want to see how it plays out over the next few years, and they have the capital to do that.

The more interesting part to me is seeing if a legacy media company like The New York Times—a business that has significantly shifted its business model over the last several years—can take an unprofitable business and turn it around. But on that front, only time will tell.

I hope everyone has a great day. We’ll talk tomorrow.

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