The Athletic Has Over 100K Subscribers, Needs Several Times More to Endure

The Wall Street Journal has a new story about The Athletic today, analyzing their rapid expansion under the lens that some experts in the sports media industry believe that their path is risky. In the story The Athletic says that they have over 100,000 subscribers, and currently have 150 employees. Without growing their employee base more, The Athletic would probably need at least three times as many subscribers to be profitable.

My math on that is as follows: If 100,000 subscribers are paying $60 a year — many subscribers have joined at a rate of about $35 for the first year, and it goes up to $60 after that; there is also an option to be a monthly subscriber paying $8 per month — then the annual revenue would be about $6 million per year. They say they have “more than” 100k, so let’s make that $7 million. We could even call it $8 million if enough of a proportion of them are on the monthly option.

Let’s take the average cost per employee to be $100,000 per year between compensation, taxes, benefits, and travel expenses, that would be $15 million a year in costs. That number could be conservative based on some of the big names they have hired. The WSJ piece said that a rival editor estimated that “the Athletic offered his employees between 15% and 36% markups on their six-figure salaries to join the company.” And travel expenses for beat writers are considerable.

If you take the average cost and make it $150,000, that adds up to $22.5 million in costs. That may be high, but they’re also still adding writers at a rapid clip, expanding into new markets. They also spend a a lot of money advertising on Facebook (I have personally seen this ad over a dozen times):

It’s undeniable that The Athletic deserves a lot of credit for the swing it’s taking trying something new. Co-founders Alex Mather and Adam Hansmann have succeeded in raising $30 million in VC funding, and getting big names in sportswriting like Richard Deitsch, Tim Kawakami, and Seth Davis to go work there.

Richard Deitsch broached the subject of The Athletic’s survivabilitylast month on Robert Seidman’s podcast: “I’m rooting, obviously, for it to succeed long-term given that I now have a vested interest in it. The whole ballgame is ‘can we convince enough people, particularly those under the age of 40, to look at The Athletic in the same way you look at Netflix?’ In that, $35 per year, it’s important for me to spend my money to get this quality information/entertainment in the way that I think most Americans have now made the decision that Netflix is worth me paying these guys however much I pay them each month for it. So that’s the big ballgame: Can you change enough people’s behavior so that they’ll pay for it?”

“I say this obviously with a bias, but I think it’s honest,” Deitsch continued. “I don’t think the issue’s The Athletic’s content. It’s money. It’s just a question of can you convince enough people to go into their pocket to purchase this product the way people have done for the New York Times and the Washington Post. Obviously I’m rooting for it. I’m gonna do everything I can to help. But I think that question still at this point remains unanswered.”

To achieve sustainability on the scale at which they’ve hired and are hiring, The Athletic might need half a million subscribers. Will they get there fast enough to endure?