August 26, 2019

Business Model Canvas – The Athletic

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#Journalism The Athletic

Quick Pitch – The Athletic is an upstart ad-free, online-only sports journal & news site. The founders wanted to build a next-gen brand by bringing in the best sportswriters and creating a subscription-only site where virtually all the content is behind a paywall.

How does The Athletic make money?

The Athletic publishes high-quality, written content across all major sports leagues every week and puts that content behind a paywall.

Subscriptions cost $10 per month or $60 per year, though many start at lower promotional rates. Average annual revenue per subscriber is $64, according to the company. Almost every one of the 1,200 stories the site publishes in an average week is behind the paywall.

Bloomberg Businessweek

Launched in 2015, their 1st test market was Chicago, where they hired 3 recently laid-off journalists using the founders’ own money, before launching the site live in January 2016. Their 2nd test market was Toronto, and within months of launching, they had reached 3,500 subscribers. Today they have more than 600,000 subscribers worldwide in almost 50 local markets.

Long-term the question is whether or not the company will profitable, but on a market-by-market basis the company reaches the breakeven point despite the fact they pay journalists higher than industry-average and offer additional incentives (ie. equity, sub bonuses), indicating that the business model has legs. With an ARPU of $64 annually, there are ways the company can build additional ad-free revenue streams in the future if they are able to continue to (sustainably) grow their subscriber base.

The company is profitable in all but a few markets, according to Mather, who says it usually takes 6 to 12 months to break even

Bloomberg Businessweek

Community-Centric or Commercial-Partner Strategy?

One of the elements that makes The Athletic’s business model so interesting is their community-based strategy. Compared to other competitors’ websites that publish ads and lean towards more clickbait, social-media friendly soundbites, The Athletic has focused on offering deep, meaningful content to the core fanbases of a given region – a very community-based strategy.

The Athletic’s goal isn’t for every story to reach the largest audience; it’s for each one to fill a niche. The target demographic, Mather says, is the fan who follows a team, win or lose

Bloomberg Businessweek

Furthermore, they want their writers to get right into the bleachers and locker rooms of the fans’ favorite respective franchises and create emotionally-engaging content. Coupled with economically-aligned incentives for their writers – good pay, strong sports culture, possible equity – it seems to be a winning formula for sustainable growth.

Starting salaries, according to conversations with more than a dozen Athletic employees, ranged from $55,000 to more than $120,000, depending on experience and location. For a top beat writer in a new market, the company might pay a 20% premium or more.

Bloomberg Businessweek

There are too many variables to analyze in order to determine whether or not The Athletic will sustain this strategy for long-term, as it relies on continuous fundraising from Venture Capitalists (VCs) and continuous innovation at the content level in order to keep subscribers hooked. Additionally, competitors feeling the heat will be forced to pivot their model, consolidate with other online publications, or make alliances with mainstream brands, which could lead to The Athletic seeking out more commercially-focused partnerships in the future. Recently, for example, they announced a partnership with in order to expand their ‘college football beat’ coverage. This type of strategy will likely continue as they enter more markets outside of North America for cultural, language and strategic reasons.

Mather says more than 80% of users re-up after their first year, and the rate is the same whether or not they first signed up at a discount.

Bloomberg Businessweek

For the moment, this model seems to be working.

Fundraising and Valuation

After bootstrapping the brand using their own funds, founders Alex Mather and Adam Mansmann raised VC funds starting in 2016. The YC-backed company (Y Combinator) raised a $2.3mn Seed Round in late 2016 from a series of investors, and have subsequently gone on to raise ~$90mn, with their most recent round coming in Q2 2019 from Founders Fund:

Venture capital investors have poured more than $90 million into the site to date; in the most recent fundraising round, a $22 million investment the Founders Fund led in May, the company was valued at about $500 million

Bloomberg Businessweek

At a half-billion-dollar valuation, the upside is that they have the cash in the bank to continue with their strategy of paying the top writers for the best content in an ad-free model. But the next 12-18 months will test the strength of their business model as they grapple with new competition and potentially diminishing margins in their core subscriber base, meaning that ongoing product innovation will be critical.

The Athletic Business Model Canvas

A business model is defined as:

“the rationale of how an organization creates, delivers and captures value.”

Alex Osterwalder et al invented the Business Model Canvas to help individuals and organizations conceptualize how to analyze, create, and develop business models.

Explained - components of the canvas
Business Model Canvas - Index

Value Proposition

Ad-free, online-only digital sports journal and news site:

  • High-quality sports content from top writers, globally
  • Emotionally-driven, non-clickbait articles that bring fans closer to players and teams 
  • Full-time, well-paid journalists – ~1,200 articles per week
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