A playbook for The Athletic

The next chapter for the sports media platform

It’s been five years since?The Athletic?first launched. It’s now live in 47 markets, and has over 1.2 million subscribers, with $80 million in annual revenue.

To date, its product has offered high-quality articles (news & editorials), podcasts, fantasy draft kits, and scores + standings.

All of this is sustained by a $72/year (or $8/month) subscription fee (as well as ads on podcasts).

However, it’s clear this single revenue stream is no longer sufficient.?Reports?indicate The Athletic incurred a $41M loss in 2020, on revenues of $54 million. This year, they’re projected to incur a $35M loss on $77M revenue.

So, what’s the problem with its business model?

Well, it’s not usage retention:?90%?of The Athletic’s subscribers are weekly active users (WAUs); those are excellent numbers for a media company.

Nor is it subscriber retention: 80% of its subscribers renew after Year 1 (and 95% renew after Year 2). For comparison, about 90% of Netflix’s subscribers renew after their first year. Needless to say, that’s an excellent benchmark.

But there are two issues with their business model, in my opinion.

First, The Athletic makes as much revenue from a casual user as they do from a power user.?Contrast this with?consumer products like Instagram or Twitter, which monetize based on users’ engagement levels.

Second, unlike most media companies, they rely solely on subscriptions as their primary revenue stream.?Even Netflix has branched into other revenue streams such as merchandise and gaming.

And so, despite most of their users retaining and being highly engaged in their content, The Athletic has yet to turn a profit and is?seeking?a buyer to bail them out.

What’s the root of the problem?

They’re under-monetizing their users.

Simply put, the amount of value The Athletic generates for its users is worth far more than the $6/month they receive from them.

The easy answer to this is to raise prices — which they already did earlier this year, going from $60/year to $72. But there’s a ceiling with price hikes, as consumers are price sensitive. At some point, the increased churn will outweigh the surplus in revenue.

What they need to do is generate additional streams of revenue, without charging users more.

So, how can The Athletic differentiate itself to survive?

It’s time for them to become a true media company.

Here’s how I think they should do it:

1. Invest in video & streaming
2. Enter the fantasy sports market
3. Build a community for fans

Investing in video & streaming

While The Athletic has dozens of podcasts, they have yet to enter the video market — neither live nor asynchronous.

But we know that sports users crave video, whether it’s highlights, recaps, or commentary. Sport is an inherently visual spectacle. The sports highlights market in the U.S. alone has a TAM of?$4.5 billion, with YouTube and Facebook currently capturing the largest share of wallet.

With the?decline?of traditional sports viewing, especially among Gen Z, many sports media brands have pivoted into short-form, bite-sized content. The theory is, Gen Z doesn’t want to sit in front of a TV for 3 hours and watch commercials; they’d rather catch up on the noteworthy moments afterwards.

Bleacher Report, which leads the pack here, has over 30M followers on its Instagram accounts, which it?claims?generates over two-thirds of its >$200M in annual revenue (via ads and sponsored content).

There is a gap in the market, though.

While vertical-specific (e.g. leagues / sports) video is already a crowded space, no one has created a high-quality, regular sports recap show, ala SportsCenter. The league-specific channels work for fans of specific sports, but what if you want to catch up on all the major sports?

I liken this to what Cheddar did for news. It built a mobile-first, live-streamed business news channel via Twitter, and scaled that to $50M in revenue (via ads) with hundreds of thousands of users. It was dubbed?the ‘CNBC for millennials.’

The content focused on millennial-centric news, and was packaged in a digestible way that was easy to consume on a mobile device.

Similarly, you could imagine The Athletic launching a nightly highlights show that focuses on the top plays of the night, best fantasy performances, and features casual commentary like the NBA on TNT panel.

The Athletic could leverage its Twitter and Facebook profiles to live stream a nightly show to its combined ~1M followers, and generate significant ad revenue via sponsored content.

TSN has already begun experimenting with a mobile-first SportsCentre show, leveraging Instagram stories:

The Athletic would be able to sell ads on their live video content, as well as create sponsored content (e.g. “daily value picks” from McDonald’s). Or on their highlights show, show the “Taco Bell” plays of the night, or the “Monster” fantasy performer of the night. You get the picture.

Entering the fantasy sports market

Fantasy sports & sports betting are poised to take over a significant share of consumers’ wallets. Fantasy sports is already a?$22 billion?market in the U.S., while the recent legalization of sports betting in several U.S. states (and Canada) has fueled a surge of consumer interest. Estimations peg the betting market anywhere from a $15–30 billion TAM.

The Athletic, naturally, already has a robust Fantasy content department, with tons of experts on board. However, again, they aren’t monetizing any of this! It’s all included in the subscription. That’s a good start, but passionate fantasy users have a strong willingness to pay for anything that’ll help them win.

Where I think The Athletic could make big moves is by leveraging its fantasy content as a ‘hook’ for consumers, then monetizing further with additional fantasy products. Some ideas could be:

• An Instagram account that posts daily value picks, based on The Athletic’s single-game probabilities.

• A daily fantasy sports (DFS) app that offers head-to-head and group competitions, with free and paid entries.

• A fully-fledged fantasy pool app to take on Yahoo and ESPN, with a freemium model (advanced stats, trade evaluator, etc.).

An Instagram account for betting could easily rack up millions of followers, and generate ad revenue via sponsored posts. Just like Bleacher Report has done.

They’d be able to charge transaction fees on paid DFS entries, and have sponsored pools. For a fantasy app, they could have a freemium model — with a monthly subscription (or one-time fee) for an advanced fantasy sports package that unlocks additional advanced stats, input from experts, and a trade evaluator.

Building a community for fans

Sports has an element of community like no other — whether it’s fans cheering from the stands, watching the group at home with friends, or your group chats lighting up after every big play.

The Athletic’s relationships with its users are largely transactional right now; they push out content to their subscribers, those users then read it, and that’s it. This lowers switching costs (churn / lower engagement), as there’s no hook to keep users engaged.

What they need is a two-way form of subscriber engagement, where fans can interact with each other, to drive retention. Some ideas for this are:

• Live ‘group feeds’ for fans of teams to discuss the game with one another in real time. Push notifications could be leveraged on mobile to encourage fans to tune in to a close game or overtime, and join the conversation.

• Audio rooms on Twitter Spaces for fans to voice pre- and post-game reactions — just like the phone boards on sports radio stations. These could be moderated by the local beat reporters, and be sponsored or have ads. People are already doing this for reality TV shows like The Bachelor!

• Paid ticketed events to have intimate discussions with famous reporters and insiders. These could be held in small group settings on something like Clubhouse, where you could hear never-been-told stories, hold AMAs, or ask for career advice.

In summary, I believe The Athletic needs to move beyond subscriptions as its primary revenue stream.

Subscriber growth has a ceiling, and sports fans are already deeply engaged in alternative forms of sports media (group chats, live feeds, highlight videos, audio rooms). It’s time for The Athletic to move into these realms, and capture a share of the wallet.

How I think they should do it is:

• Invest in short-form and live video content, to generate ad revenue
• Launch new fantasy sports offerings with freemium models
• Foster a community among sports fans, increasing engagement

This is a series of blog posts on my observations from the tech industry and product management. I’m on Twitter at?@samir_javer! ??