The Athletic: Good for the Times, a potential disaster for local news

It turns out, The New York Times does really care about local news — just not in the way we thought.

By purchasing The Athletic, which covers 270-plus sports teams in more than 47 local markets, The Times has placed itself in direct competition with every local news site for the same pool of subscribers. And since the average number of news sites people will pay for is one, that is very bad news indeed for local legacy news organizations.

Newspaper execs will say The Times has been competing with them for decades, which is true. But The Times has never competed as directly in a domain (local sports) that, until now, was largely owned by local news.

Sports is among the last vestiges of the regional monopolies local newspapers enjoyed before the internet era. Granted, sports isn’t the only reason people subscribe to a local newspaper, but it is one of them. It is also one of the topics local newspapers traditionally do well. Passionate fans can name their favorite columnists, their favorite writers. Those are the folks The Athletic was courting when it launched in 2016.

You can bet those newspaper execs slept not a wink last night imagining their hard-won subscribers receiving solicitations for a future bundle that includes the nation’s best news site, Cooking, Games, Wirecutter AND all the local sports coverage anyone could ever want.

The attraction for the Times is obvious: With subscription growth slowing, and a goal to hit 10 million subs by 2025, The Times immediately gains The Athletic’s 1.2 million subscribers to add to add to its own 8 million. Because The Athletic’s churn rate is reportedly quite high, The Times also gets access to who knows how many thousands of former subscribers they may try to win back.

Times executives say the overlap between theirs and The Athletic’s subscribers is relatively small and are bullish on future growth. That growth will come from the same local markets and the same pool of potential subscribers local news sites are trying to win over.

Certain markets will be better positioned to compete with the Times/Athletic bundle than others, as David Boardman (the dean here at Klein College and the former editor in chief of the Seattle Times) points out. But it is yet another reason not to subscribe to your local newspaper, and that’s a problem even in stronger markets. In weaker markets, this deal could be a disaster.

The Times has a major challenge on its hands to make The Athletic work financially. In short, they need more subscribers. A lot more.

Back in 2019, when The Athletic’s founders were doing the rounds looking for investment, they claimed about 600,000 subscribers and said they would be close to 1 million around the end of the year. They got their investment, but didn’t cross the threshold of 1 million subs until more than a year later— and then only after offering crazily discounted pricing plans.

The advertised price of The Athletic today is $71 per year paid annually, or $96 per year paid monthly. But based on the founders’ previous statements, almost no one is paying full price. In November 2020, I paid $12 for an annual subscription. I recently renewed my annual subscription for $35.99.

Those wildly discounted subscriptions did work to grow subscribers. Today, The Athletic has about 1.2 million active subs, which means it has grown by about 20,000 per month since 2019. That’s not nothing, to be sure. But is it the kind of growth The Times likely has in mind after dishing out a half-billion dollars for the property? I kind of doubt it.

I doubt it mainly because The Athletic is losing money, and a lot of it.

Average revenue per subscriber back in 2019, again according to the founders, was $64 at a time when a subscription cost as much as $120 per year. Today, revenue per subscriber is likely well below that. It’s hard to say without access to the financials, but based on figures reported today, it has likely sunk below $55 per subscriber.

Not great.

The Information reported last year that The Athletic lost $54 million 2019 and $41 million 2020. The Times reported today that The Athletic lost another $55 million in 2021 on $65 million in revenue. That’s $160 million in losses over three years, which won’t be erased quickly. CEO Meredith Kopit Levien said the site could affect The Times’s profitability for the next three years.

Also not great.

The challenge and opportunity for The Times here is obvious: Lower churn. Lower costs. Increase subscribers. Increase average revenue per subscriber.

I’ll let others more knowledgeable about business weigh in on the questions of cost, churn and ARPU. But it’s pretty obvious based on what Times executives have said that they see growth potential for The Athletic, and a lot of it.

There’s ads for one. The Athletic is currently ad-free. The explosive growth of online sports betting has led to an explosion in sports betting ad dollars that The Times now has the home for.

The Times also has an industry-leading native advertising operation. The Athletic likely opens opportunities for ads here that also wouldn’t be allowed to run on the mothership.

Costs certainly can be cut — somewhat. But only somewhat.

The Athletic is a premium product whose growth depends entirely on hiring people. There isn’t a shortcut to growth, or some algorithmic solution to dramatically cut costs. You either hire reporters to cover teams or you don’t, and that means keeping a lot of journalists (currently around 450) employed.

Ads, cost-cutting will help The Athletic get closer to break-even. But in the end, there’s only one real path to make this acquisition successful: growing subscribers. And that means fighting toe-to-toe, tooth-and-nail with local news. There’s just no way around it.

Normally, right around here I would express my doubts that a traditional news organization (like The Times) can pull all this off. But I think it can. The Times has grown quite capable of doing things it used to struggle with — things the rest of the industry mostly still does: launching new products, integrating acquisitions, expanding markets, etc.

The Wirecutter acquisition a few years back has been a massive success. Cooking and Games as well. The Athletic is by far the biggest challenge yet, for all the reasons here and many, many more. But I think The Times has shown it is up to the challenge.

What I am less sure about is whether local news organizations are.