When The New York Times acquired digital sports journalism company The Athletic last month, some people saw the deal as an amazing achievement from co-founders Alex Mather and Adam Hansmann. They built a subscription journalism product from scratch and sold it for $550 million — one of the largest digital media exits of all time.
Others, including some of their own investors, felt the co-founders left money on the table. In their first interview since selling the company, Mather and Hansmann have a message for those investors and, for the first time, fully explain their decision to sell. This interview has been lightly edited for clarity and length.
Alex Sherman, CNBC: I want to start with a quote from you, Alex. This was late August 2020. At the time you told me, and here’s the quote, “We just don’t think about exit and we don’t know the upside here. There are very few companies doing what we’re doing. The New York Times is the tip of the spear, and they’re growing faster than ever. We don’t know what our ceiling is. When we feel like we know what our ceiling is, then it’s time for Adam and I to have a chat. But we have not come close to having a chat.”
Six months later, you guys were in talks to merge with Axios and soon after that, The New York Times. So I guess my question to you is, what changed or were you being coy with me at the time?
Alex Mather, The Athletic co-founder: That was not the quote I was expecting, but it does sound like me. I think it’s a situation where we frankly got to know the folks at The New York Times. And like I said back in 2020, The New York Times is the tip of the spear in journalism and subscriptions and really rethinking that bundle. And we got to know them. It really got us excited about the opportunity of the Times being a permanent home for The Athletic. A standalone brand within an incredible essential bundle. And we saw that as an opportunity to really push our agenda further and faster. This allows us to do what we can do best, which is sports writing, sports journalism, at an institution that is fully dedicated to that mission. We couldn’t be more proud of the landing spot for our employees. For the future of the company, we’re just incredibly excited. As things go, you adjust plans, and you think about where and how you can achieve the mission of the company when you started. The New York Times felt like that opportunity.
Walk me through the timeline, though. We have that talk where you say you’re not thinking about an exit. Then you have discussions with Axios to potentially merge and go public via SPAC, right? So walk me through the timeline between August 2020 and then early 2021 when you’re suddenly thinking about something different.
Mather: Not going to comment on specific conversations or specific timelines, but we did our work and understanding of our strategic options, really thinking about how the product could be the best version of itself. And that timeline obviously unfolded in 2021. We all know where it ended.
Adam Hansmann, The Athletic co-founder: I’ll chime in. I think our name was in the news for a while. I would categorize some of that information as very preliminary exploratory conversations as opposed to anything that was advanced. We had other options, lots of different options, that we could have pursued. But the truth is, this just felt right. We’re just excited about what the Times can help us do. Alex said it first. We’ve been really blown away by the Times’ management team. They went all out during the diligence process to really get to know us, flying out to S.F., putting in the work. It really hit both of us, as founders. The Times has many, many large teams of smart people to work on the kinds of problems that, by comparison, we might have one person working on that thing or that problem. This just felt right.
The other thing I would call out is when you can find a partner that actually respects the work that you do and the company that you’ve built intrinsically — I think you can appreciate this, Alex — most companies don’t have the clarity of purpose The Times does. Bad media owners buy and sell media companies all the time, and that’s fine. But in this case, it’s just kind of like a perfect fit in our minds in terms of the mission —which is we create journalism that’s worth paying for.
But why sell? There was a lot of reporting around this in terms of how much cash you guys were burning. I think the numbers reported were you burned through $100 million, roughly, from 2019 to 2020. There are some people that see those numbers and say, ‘OK, this sale wasn’t about finding a great fit in The New York Times.’ This was a distressed asset that needed capital. Is that partially fair?
Mather: Definitely not. We’re absolutely at an inflection point as a company in many ways. As we assessed our options, of which we had many, it really came down to do our missions and visions align? Can we strike a deal, and what is the ceiling for The Athletic? We feel like there’s no way on Earth that we wanted to limit the ceiling for the business long term. We felt that the Times offered up the best opportunity to reach that ceiling faster, whatever that might be. Obviously, as you go through any strategic process you’re evaluating bringing in additional capital. You’re looking at lots of different options across the board. For us, the simple version of ‘why sell?’ is: The New York Times won us over. They won us over in their mission, in how we fit into that mission, and how important we are to their mission, and how they can really supercharge what we’re doing. And we fell in love with the idea, and our board was supportive.
But there were investors in your own company — I know because I’ve spoken to some of them — who thought The Athletic will be a multibillion-dollar company with time. Why not just take more fundraising and continue on solo?
Mather: Yeah, we believe The Athletic will be worth multiple billions of dollars. We decided that the best way for us to achieve that was a part of The New York Times.
But that takes the value away from you and puts it on New York Times’ shareholders. Is that disappointing?
Mather: Uhhhh….You know, I understand where you’re going with the question, but I think it’s always just a balance of 3,000 things that add up in your mind. At the end of the day, The New York Times won us over and made the decision pretty straightforward for Adam and I.
Hansmann: I would add, we had very constructive, healthy dialog with our board and, boards vote, and there may have certainly been investors that thought there was still lots of unrealized potential. We agree with that. We’re excited to get to work and capture that with [New York Times CEO] Meredith [Levien] and her team. I think there was a quote about if we had told the three people we hired in Chicago back in early 2016, if there was this type of a scenario to create a company that’s worth what it’s worth in six years, and in one-third of that time you’re stuck in a pandemic, we’d be over the moon. And we are, and we were.
OK, but, if you can, just help me understand how we got from ‘we are nowhere near thinking about an exit’ in August 2020 to, ‘You know what? It makes the most sense for us to sell’ a year and a half later. In other words, why did you come to the conclusion that you couldn’t get where you wanted to go solo?
Mather: I wouldn’t classify that conclusion as accurate. I think our conclusion was our fastest, most efficient way to achieve what we want to achieve, which is a long-lasting journalistic brand in sports — we felt that The Times won us over on how they can help us achieve the mission. And you know, I know we can get it to the VC world and the investors, and not everyone’s going to agree. Any time you sell a company, there’s a billion folks who have opinions. Was it too soon, too late? But a year and a half, I think, is an incredibly thoughtful period of time. Things change quite quickly. You know, we took a year and a half from that moment and really, you know, evaluated all of our options and in the end felt like The New York Times was the best home for the company.
Can you add some more specific clarity on what exactly it is that The New York Times can do for you that made it the best option? In other words, is it they can grow the most subscribers? Or is it something more specific to the content itself?
Mather: That’s definitely a super exciting area for us to dig in on. First and foremost, we both mentioned it: the core of what we do remains the same. We are still an assortment of the best sportswriters in the world. We enable them to do the best work of their career. We promised them that from the day we hired them in 2016, and now we continue to promise that. That commitment from the Times to continue to invest in that is really important. That’s a prerequisite for us.
As we got to know the executive team, and the folks who run different parts of their business, we were blown away in a few areas. First is audience. Their ability to, at the top of the funnel, to reach more people every single month than almost anyone in media, helping us reach as many sports fans each month as possible. And then you can kind of click your way down the funnel — just excellence in every area. Adam mentioned it, they might have five people working on something that we have someone working on part-time. We started to match our teams and got so excited about the ability to level up. How do we think about intro offers? How do we really convert folks? How do we think about the funnel from top to bottom and really winning over our users and our subscribers?
This is something we’re working on over the next couple of years, but the bundle — I don’t think it’s been talked about enough, just how exciting the bundle we’re building is. If you think about the essential news bundle in the world, you add in what The New York Times does in world news, politics, science, I can go on forever. And then you think about what we do for the sports fans who live anywhere in the world. That is absolutely an essential bundle.
Is it your understanding that The Athletic will just be slotted into that bundle for no extra charge?
Mather: We don’t know the details right now. We’re still working at it, but the idea is to become a part of the bundle over the next couple of years. Absolutely. How it fits in, we’re less concerned about that. What we really are concerned about is just making sports fans happy. Those sports fans might already subscribe to The New York Times. They might help someone subscribe to The New York Times. They might like Wordle or crosswords, whatever it might be. But we think the bundle of the things we’re putting together is unmatched.
When we spoke in 2020, it was because you guys had reached 1 million subscribers. This past month, I believe you guys said you now have 1.2 million subscribers. That suggests your growth rate had slowed down from what it was earlier. Was part of the reason to sell to The New York Times because you guys reached the conclusion that on your own, maybe the total addressable market for what you guys wanted to achieve is simply not possible as a standalone product?
Mather: I wouldn’t classify it as not possible. We saw a faster, more efficient way with The New York Times, as a part of their bundle long term.
You ended up selling to The New York Times, even though you had discussions with them in the spring, and then those talks broke down. So I’m curious to hear from both of you how you strategically thought about that — coming back to the table and then ultimately striking a deal.
Hansmann: You referenced it, there was the reporting that we were having some conversations with Axios in the spring and then it was immediately followed by, hey, we’re talking to The Times. Things were moving pretty quickly. I can only speak for The Athletic. We felt like one thing was just leading to another and we really wanted to have the chat. As Alex said, both in terms of us, as founders, and with our board, we wanted to go through a process where we explored every option as opposed to sort of picking up the phone and having lots of subsequent conversations in no particular order. Just really being as thoughtful as possible, given the stakes of that kind of a decision.
And I think for The Times team, just wanting to get to their level of conviction that they needed. But really more for us, it was like, you know, taking the rest of 2021 to really sit down and not making a rushed decision given everything that was going on.
Mather: Timing is definitely everything. And we spent a great deal of time with the folks in Q3, Q4 and just fell in love with the idea.
Was part of the thinking also to get The New York Times to raise its price? I mean, ultimately, they did in fact raise it through the process, correct?
Mather: I can’t comment on any of that stuff to confirm any conversations previously.
How will The Athletic coverage change through this transaction?
Hansmann: The standard will remain as high as ever. I think you’re a subscriber, Alex?
I am. I love the product. I’ll throw that out there.
Hansmann: It’s the combination of great national coverage, long-form storytelling, the local beats where we’re prolific, and we have no intention of taking a step back. In fact, it’s the opposite. We want to invest and bring more coverage and really grow the footprint. We see that as definitely an asset. I am not a 49ers fan, like you. I’m a Bengals fan.
Hansmann: Thank you. We do have that large local editorial footprint covering individual clubs and leagues. We have two dedicated Bengals reporters. I read every single word they publish, especially this week. And that was true even when the team was 2-14. So, I think, continuing to lean in on the areas where we are already strong. And then, The Times can help us elevate even further. They are a leader in the audio space with “The Daily.” They have a growing newsletter business. They are active off-platform — their data products, in terms of the election needle or the COVID tracker or even some of their sports products — they have world-class capabilities top to bottom. We want to learn from them and potentially apply some of those ideas in our own way. I’m a big Spelling Bee player. Maybe there’s a sports crossword or sports Spelling Bee, things like that. But I think we can really learn from them. And just continue to serve our subscribers as well as we always have.
Are you guys planning on sticking around?
Mather: Love this company. Adam and I personally have hired hundreds of the people who work at this company. We have a ton of pride in what we built, how we’ve treated folks, and where we’ve landed. And we intend to see a lot of that through.
It’s going to be different though, right? I mean, you’re going to have a boss now.
Mather: You always have a boss, whether it be a single person like David Perpich, at The Times, or a board. We couldn’t be more excited about the opportunity to have a boss with a very clear vision on what they want from us and their resources to help us get there.
What have you told the current and former employees of The Athletic who had equity about their payouts from this deal?
Mather: I believe we’re done. They’ve been paid.
One of the things I was always curious about from The Athletic is your pricing and promotion swung wildly, depending on when you would sign up. So, I’ve been a subscriber for a while, and I pay a dollar a month. I remember in business school you learn about the Groupon theory, which is, if you pay at a lower price, it’s hard to then transfer that payment into a much higher price. Were there things with pricing and promotion that you guys experimented with that maybe you learn lessons from, or even beyond that, other lessons that you guys kind of learn through the process?
Mather: Yeah. We were very experimental as a company. You see it in the streaming world, too. We’re figuring out this new world of subscriptions together. There’s an incredible amount of experimentation that happens in any company that is doing this. You think about the beginnings of Amazon Prime, and how it used to be one way, and now it’s a different way. And the beginnings of Netflix and the slow price increases. We’ve always been experimental as a company. As we got to know, the folks at The Times, we were incredibly excited about sharing notes.
Once the deal closed, it’s only been eight days or so, we’ve been able to dig in and actually share notes. We’re learning so much in terms of how to figure out how to best bring people into the product and find the best price point for as many people as possible. And like the thing that I’m most excited about, and I’ll use the streaming analogy: My wife and I love to use a palate cleanser at the end of a night of watching a drama, like “Seinfeld” or something. And you watch “Seinfeld” or “Parks and Rec” or something, and there’s no commercials, right? Because you’re using Netflix and Hulu or whatever it might be. And you go back to watching linear television, and the first commercial hits, and you’re like, ‘What have I done?’
So, there are not many outlets in the world that give you depth of coverage for a bundle of sports like we do. That bundle is incredible. And then you think about The Times’ bundle. You start to consume news this way. Listen to our podcasts, use our cooking products. We think that bundle, once you get used to it, will be as hard to leave as it is to leave commercial-less “Friends.” Sharing those notes on how we reach more people together is one of the most compelling reasons that we wound up going with The Times.
Are there any mistakes that you feel like you learned from?
Mather: Every mistake is an opportunity to learn. I will say this to the first employee we hired or the last employee we hired: We are incredibly proud of the company we built, how we built it, who we hired, how we’ve handled our business and inevitably where we landed. Couldn’t be more proud.
For any employees that fear for their job after this merger, do you have anything to say to those employees who are concerned about that, especially for a company that hasn’t turned a profit yet?
Mather: We’re just incredibly excited to continue to grow the business. Our goal is to invest in the team and invest in the brand. We’ve been very honest with our employees from day one.
I don’t mean to harp on the mistake portion because obviously you guys built the company from scratch and sold it for a lot of money. But there were markets that you guys experimented with and then decided, you know what, there’s not the interest isn’t here. Maybe we grew too fast. We’re going to have to pull back on some coverage. We may need to let people go. There was that time during the pandemic where you guys had some layoffs. Do you feel like there is a specific lesson that you learned in terms of how to grow the company?
Mather: Everything is a learning process. Being the tip of the spear comes with the responsibilities of learning, and you make tons of mistakes, and you do everything you can to handle everything with integrity, grace and be as patient as possible with as much as you can. But I mean, there’s no company that grows to what we’ve been able to accomplish or hits a million subscribers faster than we did without making some mistakes. But I mean, absolutely no regrets.
Hansmann: Yeah. I mean, the idea is growing the number of people that work at The Athletic and leveraging The Times as we go. I mean, obviously, we’re not perfect. But, I really hope the legacy is we worked our a***s off, we’ve created a product that people love, and always tried to do the right thing by the staff.
Do you guys have a piece of advice you might give to someone who’s sort of thinking about building a subscription media business? I mean, you’re one of the more successful exits of all time in this industry.
Mather: I mean, I could go on for hours on this one. Lots of advice. Most importantly is don’t be afraid to charge your subscribers for the content you create. You’re never going to know how to do it right and what folks want until you start charging. I think there’s a lot of apprehension generally from media, which is like, ‘Hey, if I put up a paywall, I lose all my audience.’ And I think like, if anything, The New York Times and The Athletic have proven that wrong.
Hansmann: We still want to prove The Times is right on this acquisition. There’s still skepticism out there about the addressable market for paid journalism, even as The Times and The Athletic have refuted that. And I would tell other people, we’re happy to keep proving this thesis out because we believe in it.
So what is the total addressable market for subscription sports journalism?
Mather: It’s absolutely in the tens of millions. Long term, we strongly believe that media is going in this direction. The Times has been very public about saying there’s a total audience of 125 million to 135 million people addressable in the English language. We absolutely believe Meredith when she says that.
And The Athletic will continue to be its own standalone product while you guys are there, correct?
Mather: Their goal is for us to remain a standalone product and fold in to the bundle. That was a big part of us selling the company to the New York Times.
What are you guys going to buy with the money you made?
Mather: Something for our moms.
Hansmann: I need a Joe Burrow jersey.
Last thing before we conclude, do you guys have a takeaway message for your investors in this? Because look, there’s been one, at least, that’s been public saying we feel like this company sold too soon. Is there sort of a takeaway message that you guys have for them to sort of placate that?
Mather: I would just thank them. I’m not going to get into all of that. I would just thank them for their support. This has been an incredible journey. Every single one of them, regardless of what has been said in the media, has been incredibly important in our journey and helpful in helping us achieve what we have achieved. And I hope all of them are proud of the outcome, because we are.