As ESPN Falters, Sports Startup Chases Fans Tired of ‘Old Fluff’
The Athletic, a Subscription Site for Local Sports News, Raises $5.8 Million
(Bloomberg) -- 2017 is shaping up to be a rough year for sports journalism. ESPN, Fox Sports, Sports Illustrated, Bleacher Report, and Yahoo Sports have all cut staff positions in the last several months, showing the deep cracks in the predominant business model of online sports news. The founders of the Athletic, an 18-month-old online sports publication, see opportunity in the struggles of the biggest companies. As the news of the cuts kept coming, co-founders Alex Mather and Adam Hansmann, who have no previous journalism experience, hastily pulled together $5.8 million in new capital from investors, in a round they closed last week. The plan is to scoop up laid-off writers, and put them to work building a new kind of sports news operation as the traditional industry leaders are in retreat.
Mather and Hansmann are following the well-worn entrepreneurs' credo to zag when everyone else is zigging. For publishers, the promise of the internet has been the potential for immediate global reach. In theory, huge audiences can be translated into massive ad revenue. The Athletic, based in San Francisco, isn't chasing that kind of scale. Instead, it charges subscribers $40 annually for in-depth coverage of local sports in Chicago, Cleveland, Toronto and Detroit -- (it also covers the Golden State Warriors). The company says it can turn a profit in a city once it gets between 8,000 to 12,000 subscribers. It has no plans to sell advertising.
The conventional wisdom in media used to be that no one would pay for content online. But an increasing roster of publications from the big names like New York Times to the niche publications like the information, the tech news website, have succeeded in persuading readers to pay for coverage free publications are less likely to produce.
Mather and Hansmann developed their philosophy about sports journalism while working at Strava, the social network for endurance athletes. Strava consciously ignored the priorities of casual runners and bikers and focused on “the maniacs,” in Mather's words. “We try to connect with the local die-hards who probably aren’t served by the same old fluff that ESPN will produce at the local level, or the cantankerous columnist at the local paper,” he said. “They’re tired of that.”
Peeling away sports from other local news coverage seems like a particularly good target for a subscription business, according to Brian Moritz, an assistant professor at SUNY Oswego who studies the economics of sports journalism. “Nobody has ever offered a subscription to just the sports section of the newspaper for $5 a month instead of the whole thing for $10,” he said. The challenge for the Athletic, he said, is in convincing readers that it's making something good enough to justify the pricetag.
The company first launched in Chicago in 2016 on the hunch that it was finally the year for the Cubs. That was the right call — the team won the World Series for the first time since 1908. The Athletic's founders spent a stretch of the season taking part in Y Combinator, the prestigious incubator for tech startups. Still, it took about eight months to get 1,000 subscribers for its Chicago coverage. When it launched in Cleveland earlier this year, it poached one of the most well-known local writers covering the Cleveland Cavaliers, and got 1,000 subscribers within 48 hours. The Athletic also set up operations in Toronto, where it found its most fertile audience among the city's hockey fans. The company says the city is its most successful market, with over 10,000 subscribers. It's also the only city where it turns a profit.
The Athletic's business strategy is reflected in its product design. The leading online sports journalism operations are built on advertising, meaning they need to attract as many readers as possible, then present them with the maximum amount of clickable content. The prevailing aesthetic is the visual equivalent of a sports talk radio host screaming things at you. The Athletic, by contrast, is a serene affair. Subscribers select teams they are interested in, and see news about only those teams. They get access to all the content, but the Athletic doesn't expect a reader in Cleveland to spend a lot of time diving into analysis of White Sox pitchers. When subscribers arrive on the homepage — which has clearly taken its cues from Strava’s website — they just see one big photo and the headline to a single article about one of their teams. Its editorial focus is on analysis rather than breaking news, and posts only a few articles for each city every day.
Courtside Ventures, which led a $2.6 million investment round in the Athletic in January, also led this round. The Chernin Group, Luminari Capital, Advancit, BDMI, and Y Combinator also participated. The Athletic is using the new capital to tweak its plans. The site plans to triple its editorial staff to 75 and launch in three to four cities by the end of the year, including San Francisco and Philadelphia. But it is also diving deeply into the NHL, by launching hockey coverage in six cities in Canada that have teams in the league, and also beginning to cover NCAA football and basketball. Paul Fichtenbaum, the former editor-in-chief of the Sports Illustrated Group, who has been a consultant, is coming on full-time to serve as chief content officer.
Mike Kerns of the Chernin Group says that it's been looking to invest increasingly in subscription media businesses. He used to work at Yahoo! Inc., and says local sports coverage inspired unusual loyalty among readers. "We knew from our experience it was an insatiable and increasingly underserved market," he said. "Everybody lives somewhere."
To contact the editor responsible for this story: Emily Biuso at ebiuso@bloomberg.net, Andrew Pollack