Good afternoon, I'm Dylan Byers.

Welcome back to In the Room, my private email on the inner workings of the American media. Thanks as always for your interest in Puck. You can read a free preview of my work below. Or, better yet, subscribe now to read all of my reporting in full, online or delivered directly to your inbox. 

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Dylan

The Times & The Athletic Are Getting Hot and Heavy

The Athletic has now entered into exclusive talks with The New York Times about a sale. Here’s the logic.

I first heard about The Athletic some four years ago from Apple executive and Golden State Warriors and Duke megafan Eddy Cue, and I was immediately enchanted by the founders’ vision. Alex Mather and Adam Hansmann, who had met while working on the performance sports app Strava, seemed to intuitively understand what local newspaper executives had long realized: that sports fans were a sticky and insatiable audience, eager to read anything written about their favorite teams, even if that meant three articles about a game they’d already watched or a free-agency pursuit that was never going to materialize. 

They also knew that the local sports reporters who fed those appetites were victims of a rapidly declining local news business, criminally underpaid, and already establishing direct relationships with their own unique fandoms over social media. So Mather and Hansmann seized the moment, snapping up some of the nation’s best team beat reporters, market by market, with a few million dollars in seed funding. Their ambition, Mather said, was “to be the local sports page for every city in the country.” It was an ambitious and smart idea. 

In those early days, the duo had the moxie that usually comes from founders who know they are the beneficiaries of a new paradigm shift. “We will wait every local paper out and let them continuously bleed until we are the last ones standing,” Mather told The New York Times in 2017, betraying an unapologetically killer instinct that many journalists found uncomfortable but many investors nevertheless appreciated. “We will suck them dry of their best talent at every moment. We will make business extremely difficult for them.” 

Setting aside the indifference for the death of local newspapers, I admired the acumen and hustle, too. And when I met Mather a few months later at The Athletic’s San Francisco headquarters, I entered the office as both a reporter and would-be student, eager to understand more about the business model that would bring their dream to fruition, and make it sustainable. I also found in Mather a thoughtful leader, wisened by his first brush with fame and slightly uncomfortable press. 

Success in business often follows a relatively simple formula. To quote Succession‘s fictional entrepreneur Lukas Mattson, it’s essentially “analysis plus capital plus execution.” Mather and Hansmann made the right calculation about the sports news business: fandom was often local, and required an investment in local reporters. Furthermore, subscription-based direct-to-consumer companies would be valued more handsomely due to their business model (annual recurring revenue, or A.R.R.) and the trove of data helmed within the tech stack, which many publishers had largely abnegated by forking over their content to the Facebook news feed, among other intermediaries. 

And their timing was perfect, seamlessly coordinated with the widespread legalization of sports betting and the rise of trends such as micro-wagering. The Athletic recognized that game stories were a relic of the past and that the interest had moved to the sort of scoopy analysis that helped recreational gamblers and fantasy sports enthusiasts gain an edge. They also raised significant capital to put their thesis to work: about $140 million to date, according to Crunchbase. (TPG, an investor in The Athletic, is also an investor in Puck.)

The matter of execution is usually where the rubber meets the road...

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