The Athletic expands to combat sports, will fans subscribe?

June 10, 2019

The Athletic unveiled another vertical in its ever-expanding sports journalism business with coverage in combat sports.  The expansion gives the sport greater coverage but will the company’s foray into combat sports be rewarded with an uptick in subscribers.

Last week MMA coverage was introduced with MMA writing veterans brought on to write about the sport.  Today, Lance Pugmire, Mike Coppinger and Rafe Bartholemew announced that they are moving to The Athletic to write about boxing.  Pugmire wrote for The Los Angeles Times, Coppinger, for The Ring, and Barthomew a former writer for Grantland.  Notably, I interviewed Rafe back in 2010 about his first book at basketball in the Phillipines.

The expansion into covering MMA amd boxing was foreseeable.  Memorial Day weekend saw the unveiling of the company’s expansion into motorsports.  It also started to cover the WNBA when the season began in late May. With the company’s core business based on subscribers, robust content plus good writing, they are banking on an audience of hardcore sports fans that want a little more than the box score.

The Athletic has disrupted traditional sports journalism.  The standard business model for web sites with content is based on the selling of ads.  But The Athletic is solely based on subscribers as their main revenue source.

It hired away some of the biggest writers in the industry from other outlets and started a focus the localizing of journalism which hone in on certain cities and their teams as the writers gave a more detailed look at the teams including more features.

The startup was a creation of the Summer 2016 class coming of the Y Combinator – think summer camp for young entrepreneurs where they learn how to cultivate their ideas and most importantly, meet investors.

The company premised its business plan on the belief that there is still demand for “truly local content, written by sportswriters” with established credentials and contacts in the industry they cover according to a NY Times interview.  It started in Chicago where they hired the top sportswriters full-time and gave them a quota of writing quality, original content each day.

Perhaps the most notable early hires once it expanded past Chicago was the San Jose Mercury’s Tim Kawakami and veteran baseball writer Ken Rosenthal.  It also hired Seth Davis and Stewart Mandel.  Both known for their knowledge of college basketball and football respectively.

At a time when journalism was thought to be dead, The Athletic has shown it is not.  In a 2016 TechCrunch article, Alex Mather, co-founder of the company, said that 80% of readers view every article that is produced and subscribers spend an average of 90 minutes a week reading the content.  You can conclude that there is a base of fans that still want to read about the sports they follow and are willing to pay.

In addition to the written content, one of its main selling points is the quick load times for articles which, in a ‘right now’ society, is helpful.

Another aspect of The Athletic is that writers are incentivized to promote their work and build subscribers via social media as pay is tied toward the number of subscribers that they recruit.

Access is another linchpin for The Athletic.  With hiring established sportswriters, it gained instant credibility with teams and athletes.  NBA and MLB broadcasts refer to The Athletic articles all of the time.  Reporting on sporting events and interviewing players is just one component of The Athletic’s writing.  Long-form articles with intense detail and storytelling are a tell-tale characteristic of the web site.  This part of the web site has allowed them to be more creative and less-driven by press releases and/or PR pitches than with other sites demanding clicks.

Another facet of The Athletic that is pleasing to readers is no ads.  No sponsored content or banner ads that detract from the site.  Readers are asked at the end of the article if they find the content, “Awesome,” “Solid,” or “Meh,” which one might assume will factor into future content.

With the written content, it was only time before podcasts came along.  There are several podcasts on its platform and one might suspect MMA podcasts in the near future.

The Athletic has been a success since its launch.  As of late last year, it had over 100,000 paid subscribers with 60% under the age of 34 and a 90 percent retention rate for those retaining their subscription past the initial introductory offer.

Will this work for the MMA audience that have been accustomed to twitter for its news and looking on social media for the latest dust-ups between fighters?  Moreover, a fan base which is very supportive of fighters getting paid more and a union or association to combat the perceived injustices.  Yet, openly admitting to not wanting to spend money on PPVs and going through illegal streams to watch instead.  Paying $60 per year for stories up against web sites without a paywall seems to be a hard sell to MMA fans.  Alex Mather stated in a TechCrunch article that the $60 price is a “meaningful price, but not prohibitive.”

Of course, there is still backlash, by the MMA fan that doesn’t feel like they should spend money for writing.  It’s not a unique argument, but, as pointed out by Ben Fowlkes below, there is a price for writing:

In the TechCrunch interview, Mather differentiated The Athletic from others online as it being more original content as opposed to aggregated content.  With the advent of online content, there has been a demand for journalists to churn out blog posts in addition to stories for the daily paper.  The Athletic still demands daily original content, but there is also more feature material which could only live online without the parameters of a normal print paper or magazine.

The Athletic is the creation of co-founders Alex Mather and Adam Hansmann.   The two were co-workers at Strava – the subscription-based fitness company.  There has been a total of 6 rounds of venture funding.  Two seed rounds and three additional funding rounds.  According to Crunchbase, the initial seed round in 2017 drew 2.3 million.   A series A round saw it get $5.4 million.  A series B round raised another $20 million.  In October 2018, it drew another $61.8 million and the latest round in May 2019 saw it get another $21.7 million.  In total, it has raised approximately $89.5 million.

The company was valued at around $200 million after its October 2018 round and its likely more now after this latest round.

The Series C round this past fall was based on the possibility of diving into audio and video.  It also looks like there are rumblings that The Athletic will be expanding into the UK soon.

Eric Stromberg of Bedrock Capital, who met Mather and Hansmann at the Y-Combinator, and is an early investor in The Athletic stated that there were two things that they focus on when looking into investing a subscription business:  retention and a positive flywheel.

Retention seems self-explanatory in that there must be retention of customers after an introductory price is made.  The Athletic usually offers introductory offers to entice those interested.  It’s the retention to the usual price point is what matters to investors.

A positive flywheel is based on the premise that the more you build your subscriber base, the more you build your revenue base.  This provides the opportunity to reinvest the capital into hiring writers, expansion and technology.  Stromberg stated, “[w]hen this flywheel is working it’s actually quite hard to put a ceiling on the business.”

It would seem that The Athletic’s business model is working and the expansion into other sports will yield more fans to subscribe.  But the question of how much fans will be willing to spend becomes something dependent on the consumer.  Right now, things are looking great in the industry of combat sports as there are fights on multiple platforms and every weekend there’s an event to cover or write about.  The area of combat sports is not devoid of characters or notable stories.  This will keep the hardcore fans intrigued.  On a personal note, I think that boxing has a rich history that there would be a lot of stories to choose from.  Since MMA is relatively new, there’s only so much to pull from in comparison to boxing.  Yet, with the expansion of the subscription model where fans are paying for ESPN+ and DAZN and PPVs will there be a breaking point for paying out money for content that can be culled from the internet.  We shall see, but as of now the plan is working for The Athletic.

 

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