The site’s meteoric rise provides an example of how to build big with a subscription niche in multiple industries
10 Minute Read
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In 4 years, the sports news website The Athletic has become a guide for modern and legacy media entities, as well as niche-driven subscription businesses in many other markets, both in terms of revenue model and content.
At a time when newspapers and online news sites were chasing page views, The Athletic introduced a subscription service, believing it provides more sustainable revenues and would allow journalists to focus on quality over quantity.
As of late 2019, The Athletic had nearly 1m subscribers paying ~$60 annually (many receive discounted rates), with ~$90m in funding. The company has grown from less than $100k in the first year to what Trends estimates to be ~$60m in revenue in year 4. As for journalistic accomplishments, The Athletic recently broke open the story of the World Series champion Houston Astros’ cheating scandal.
Outside of sports media, there’s a larger premise behind The Athletic that can be applied to other industries: Co-founder and CEO Alex Mather, along with co-founder Adam Hansmann, is proving that starting a company based around a devoted niche group works. Rather than go after the largest total addressable market, The Athletic identified its audience as hardcore sports fans who didn’t get enough about their favorite local teams from cash-strapped newspapers or from national websites like ESPN that mainly covered the big stories.
Mather talked to us about The Athletic’s strategies, growth, and expansion plans. Despite starting with a niche, one day it may still be possible for The Athletic to grow to ESPN-level heights.
A subscription niche that pays
Mather learned some of his first niche lessons at Strava, the social network exercise app that began by catering to cyclists. He was a devoted cyclist who had started using the app and wrote a blog post hypothesizing what Strava could become one day. “He wasn’t angling for a job at all,” says Michael Horvath, co-founder and former CEO of Strava. “He was just writing something that he was passionate about.”
At Strava, Mather was a lead designer who came up with the big picture vision of Strava’s user experience. He also brought an acerbic but welcome sense of humor and a passionate, intuition-based work style that complemented Horvath’s analytical personality. Horvath always assumed Mather would leave to start his own venture. That happened in 2015, after four years at Strava: Mather left with Hansmann, another Strava employee, to start The Athletic.
Mather, who is from the Philadelphia area, could never find enough to read about his favorite hometown teams, especially while living in the Bay Area. The media industry primarily consists of beleaguered newspapers dealing with private equity owners who wanted to slash costs and staff to turn a short-term profit, as well as VC-backed, but mostly unprofitable, online startups hooked to pageviews and the ever-diminishing advertising pie.
Neither model was particularly adept at producing quality stories or making sustainable revenues. These problems became apparent through Mather’s following of Philadelphia sports writer Sheil Kapadia. Kapadia was laid off from the Philadelphia Inquirer, and Mather was astonished that the newspaper couldn’t find a way to be successful with a writer as talented as Kapadia, who now covers the NFL for The Athletic.
Mather believed there was an audience that would pay for good journalism on a well-designed site that didn’t have any annoying ads.
“We said people aren’t getting dumber. People like to read,” Mather says. “When you read a great story, when you read a great book, it’s an incredible experience. You internalize it so much differently than any other medium. That to us isn’t going away, so we just said, ‘Let’s go to the opposite end and just do quality.’”
The strategy did not entail matching established sports websites like ESPN or Bleacher Report in terms of volume or audience. It was exactly what Mather and Hansmann had picked up from Strava.
“We’ve all become jaded by Facebook; it is for everybody. Strava is not,” Horvath says. “ESPN is for everybody. The Athletic is not. If you capitalize…by choosing who you are for, you’re more likely to build something that meets their needs and something they’re willing to pay for.”
Inside The Athletic’s numbers
Mather and Hansmann started with personal savings and began reaching out to sports journalists over LinkedIn. It wasn’t an ideal medium: Out of dozens of journalists, the lone person to respond was former ESPN Chicago reporter Jon Greenberg. After ESPN had eliminated or scaled back its local sites, including Chicago, Greenberg was out of a job. He was impressed by Mather’s UX background and the mockup he and Hansmann had created for the early version of The Athletic.
Chicago launched in 2016 as the first site. Growth was slow at first: Greenberg remembers working tirelessly on articles that would get something like 80 page views. But by the end of the year the site had a subscriber count in the low thousands (many paying less than the current $60 rate).
The early success happened on a shoestring budget. The Athletic had enough money — somewhere in the very low six figures — to hire Greenberg and two other journalists. Almost all of the rest of the work was done by Mather, who coded the actual website, and Hansmann, who contributed writing in addition to all his other duties, such as raising money. “Those guys really put the work in,” Greenberg says. “They didn’t just come up with the idea and hire people. We’d be Slack messaging each other at 3 a.m.”
Just a few months into The Athletic’s existence, Y Combinator’s Jared Friedman said he believed Mather’s and Hansmann’s idea could “save local sports media.”
The VC world started thinking so, too. In January 2017, The Athletic received ~$2m in seed funding (Horvath was one of the funders but is not involved with the company). Using some back of the envelope math, combined with information shared by Mather in interviews and on stage at Hustle Con, we can estimate The Athletic’s growth.
It went from about 3.5k subscribers its first year in 2016, to 100k in 2017, to 500k in 2018, to nearly 1m in 2019. First year subscribers are often enticed to sign up with $30 annual memberships for the first year. But Mather has said The Athletic makes approximately $60 per subscriber. Using this $60 estimate per subscriber and Mather saying The Athletic made around $20k its first year, we are estimating its annual revenues to be $20k in 2016, $6m in 2017, $30m in 2018, and approaching $60m in 2019.
The Athletic used that money and the bigger rounds of funding to come almost entirely on its talent. Mather says 90% of the website’s expenses have gone to journalists, which include expensive, well-known writers and TV personalities like Ken Rosenthal, Seth Davis, and Armen Keteyian. Less-experienced journalists still receive salaries higher than many would make at newspapers or other digital news sites (in the $70k-range, as opposed to $50k). Basing expenses on the number of journalists hired and a $100k salary, estimated costs for 2016, with 7 journalists on staff, were $700k; for 2017, with ~75 journalists on staff, it was $7.5m; for 2018, with ~200 journalists on staff, it was $20m; for 2019, with 550 journalists on staff, it was $55m. These numbers are potentially higher, as they do not include travel expenses, support staff, and numerous other expenses. The company is not profitable yet but is profitable in many of its local markets.
The Athletic has been able to support the growth with venture capital. According to Crunchbase, The Athletic has received ~$90m in investment. It started with two rounds of funding that totaled about $7m in 2017. In 2018, The Athletic received $60m in two rounds, and in 2019 it received $21.8m.
Although The Athletic advertises, Mather says only about 20% of its subscribers come through paid acquisition. Most subscribers come to the site through word of mouth.
But to grow in the early days of the website The Athletic relied on incentivizing its writers to drive subscriptions. They were given a commission for subscribers who signed up through one of their articles, often found on Twitter. Mather says that in the beginning journalists with huge social media was one of the main drivers of subscription growth.
This structure was also necessary for The Athletic: It allowed the website to better afford writers when it didn’t have as much VC funding. Today, Mather says, almost 95 percent of the writers just receive base salaries and company equity.
The writers get a fair amount of latitude to choose their topics and don’t have to meet quotas, but Mather says The Athletic has “an obsession” with evergreen stories. These stories tend to be in-depth and are not about specific games or controversies. They stay relevant for weeks or months or longer and drive subscribers. Mather says the best example is a spring 2019 story about Los Angeles Clippers star Kawhi Leonard and his many odd maxims, including “board man gets paid.” The Athletic used it as part of a paid marketing campaign on Facebook, Snap, and Twitter. That story, Mather says, drives dozens of subscribers every day and has driven thousands total since it was published. The same has been true for the investigative coverage of the Astros’ cheating scandal.
To keep existing subscribers, Mather says The Athletic focuses on engagement. This type of content, like a video breakdown of a Sixers game, might not attract new subscribers but gets read by existing subscribers. To ensure they stay engaged, The Athletic also uses push notifications and email newsletters. The hope is that existing subscribers will at least view content weekly.
An obsession with metrics and details is key to The Athletic keeping the subscribers. Mather says about 80% of Athletic subscribers have re-upped after their initial subscription ends — and that number is about the same whether they subscribed through advertisement, word of mouth, or elsewhere. People who want to unsubscribe from The Athletic can do so online. This is more convenient than the process for many other media organizations. I subscribed to one major metro newspaper at an introductory rate and had to call someone when I wanted to cancel. I was then pleaded to stay for several minutes until they talked me into subscribing for $1 for a whole year.
“We’ve been obsessive about every little story, every little group coverage that we do,” Mather says. Everything that we do we try to do the best. While it might seem the same on Day 1, by Day 365, by Day 730 it is significantly better. So we’re hoping to make our product better.
“I think about Netflix a lot,” he adds. “I think when they launched ‘House Of Cards’ it’s like, ‘That’s cute.’ A little foray into original content. Then the shows just keep getting better and bigger and cooler. They’re obsessed over quality and they’re obsessed over scale.”
The Athletic’s next phase is international, where the company may be able to gain an advantage over ESPN. Mather points at the sports streaming company DAZN as an example of how open the international market is. In less than 5 years, the London-based DAZN streaming service has added 8m subscribers, with 90% based outside of the US. By contrast, ESPN’s streaming service ESPN+, which started in 2018, has 3.5m subscribers.
So far, The Athletic has hired some 100 staffers to cover international sports in the Europe, Australia and Canada (their stories, particularly about European soccer, routinely rank among the most read on the site). Future plans could include partnering with international entities and offering coverage in foreign languages. “The Premier league fans are in every country on earth,” Mather says. “There are NBA fans in every country on the earth. So how do we find them and how do we bring them something premium?”
He discusses these expansion plans with passion in his voice. Horvath knows that tone from Mather’s days at Strava and knows that when Mather gets an idea he always goes after it.
“He’s one of those people who looks at the world and sees something missing,” Horvath says, “and thinks, ‘I can fill that void with something.’”