Financial writer for PitchBook, Adam Lewis, gives us the breakdown on The Athletic’s impressive evaluation.
The Athletic, a subscription-based sports website that doesn’t feature advertising, has raised $50 million in a Series D led by Bedrock Capital that values the company at roughly $500 million. Existing investors including Emerson Collective, Powerhouse Capital and Y Combinator also participated in the funding along with Matthew McConaughey, who invested via Plus Capital.
The news was first reported by Axios.
The latest investment brings The Athletic’s total capital raised to almost $140 million, with the new funding expected to go toward expanding overseas operations and its San Francisco headquarters. The investment tops a $40 million Series C led by Bedrock and Peter Thiel’s Founders Fund in 2018 that reportedly valued the business at around $200 million, according to PitchBook estimates.
Founded in 2016 by Adam Hansmann and Alex Mather, the company has grown rapidly in an online media industry that’s otherwise struggled as Google and Facebook have pulled in the bulk of available digital advertising revenue. Instead of trying to grow through digital ads, The Athletic focuses on subscriptions, offering $60 per year for an annual membership or $9.95 to renew on a monthly basis.
By offering significant pay raises to some of the biggest names in sports journalism, the website brought in a well-respected group of national writers who helped rapidly increase its following. Four years in, the company has more than 500 full-time employees, after pushing into the UK last year to cover the English Premier League. It has also launched a network of podcasts, with some supported by advertising revenue.
Bedrock partner Eric Stromberg couldn’t be reached for comment by PitchBook, but he told Axios he expects the company to surpass more than 1 million subscriptions in 2020 and achieve profitability. The Athletic has a roughly 80% retention rate among its subscribers, with Bloomberg reporting last year that it pulls in roughly $64 annually for each user. It reportedly has no plans to increase its price; instead, it will try to continue to grow the subscriber base and retain existing readers.
“When the content flywheel is turning and retention is this strong, subscription businesses tend to surprise everyone with how large they can become,” Stromberg wrote in a Medium post announcing the new funding. “Steady subscription revenue provides the economic engine to expand and deepen the bundle over time. Where the company goes looks quite different from where it starts, as it consistently expands the market.”
Does The Athletic’s success mean there will be a resurgence in venture capital activity in digital media companies? That’s less clear. The number of venture capital investments in US digital media companies ticked up slightly in 2019, according to PitchBook data. But many companies that don’t rely on subscription revenue have continued to struggle, with Buzzfeed, Vice, The Players’ Tribune and Sports Illustrated all announcing layoffs over the past year or so.
Nearly the entire editorial staff at Deadspin quit a few months ago after private equity firm Great Hill Partners acquired the company and appointed CEO Jim Spanfeller, who told the staff to “stick to sports.”
The Athletic has suffered no such fate, in part because its investors view it as a tech company with reliable subscription revenue rather than a media company fighting tech giants fighting for ad dollars. And that’s led to a lucrative valuation that makes it the talk of the sports journalism world.