NYT and Sports, FT’s Group Subscriptions, and BuzzFeed’s Complex Situation
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The wonderful thing about having a week off is that you get to recharge, think, and prepare for the second half of the year. The other wonderful thing is there is a ton to talk about from the past couple of weeks.
But first… A message about our sponsor, Omeda.
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Now… Let’s jump in…
NYT makes right call on sports desk
A year and a half after buying The Athletic for $550 million, The New York Times has made the decision to shut down its own sports desk and have that coverage come from The Athletic. According to a NYT story reporting on this:
The staff of The Athletic will now provide the bulk of the coverage of sporting events, athletes and leagues for Times readers and, for the first time, articles from The Athletic will appear in The Times’s print newspaper. Online access to The Athletic, which is operated separately from the Times newsroom, is included for those who subscribe to The Times’s bundle of products.
In recent years, with the rise of digital media, The Times’s sports department began to downsize, just as many other national and local newspapers did. The section lost its stand-alone daily print section. Not every local team was assigned a beat reporter. Box scores disappeared.
As I said in the headline, I think this is the right call for one very simple reason: it supports the company’s goal to become the first subscription in every local market. And it’s winning. Back in 2020, Chartbeat founder Tony Haile wrote this great piece for Columbia Journalism Review. And in it, these two paragraphs are worth calling out:
Local publishers may not believe that they are competing with the Times, but the Times believes it is competing with them. Its rich-get-richer dynamic increasingly provides all the news that’s fit to subscribe to, while publishers both national and local fall further behind. Competing with the energized leadership of a dominant and implacable Times will require leveraging networks, rethinking how content works in a paywalled universe, and unlearning some of the lessons of the open internet.
Here’s the Times in 2020: it added 587,000 new subscribers in the first quarter. That’s almost three times the number of total subscribers to the Los Angeles Times. It’s more than 70 percent of the total cumulative subscribers to Gannett’s 260 media properties. The New York Times has more digital subscribers in Dallas–Fort Worth than the Dallas Morning News, more digital subscribers in Seattle than the Seattle Times, more digital subscribers in California than the LA Times or the San Francisco Chronicle.
But what has The New York Times missed all along? Enough, high quality, local sports coverage. That’s what The Athletic brings to the table. And with NYT now willing to put Athletic coverage onto the sports sections of the site, NYT can get creative with its personalization. Since it knows everyone’s state, it can show state or even city-specific sports coverage versus just showing what the centralized sports desk creates.
The other reason this is so smart is that it forces people to pay more attention to the bundle. Growing ARPU is one of the key strategies for The Times to achieve its growth goals. And the only way to do that is to get more people to pay for the bundle versus single product subscriptions.
In my section on NYT’s financial results, it’s worth looking at digital-only subscriber ARPU for four quarters:
- Q4 2021: $9.60
- Q1 2022: $9.13
- Q2 2022: $8.83
- Q1 2023: $9.04
In Q1 2022, The Athletic deal closed, which pulled ARPU down quarter-over-quarter. But it wasn’t until Q2 2022 that the full effects of this played out. Even in Q1 2023, we’re still not at pre-Athletic numbers.
But getting back to Q4 2021 numbers, at minimum, is obviously where The Times must get if it’s going to prove this acquisition was correct. As it stands today, it remains a gross overpay in my book. But if the company can get ARPU significantly higher than the pre-deal numbers, it’ll prove that the bundle thesis was the right one.
I think the broader question is what comes next for The Athletic. It is still losing money. According to a WSJ story on NYT executive David Perpich:
Facing challenges felt across the digital publishing landscape—the difficulty of signing up and retaining customers, rocky ad markets—as well as high editorial expenses, the Athletic has had adjusted operating losses totaling around $37 million over the past four quarters. Perpich said the goal is to turn a profit by 2025.
When all is said and done, The Athletic transaction will have wound up costing The New York Times far more than the $550 million that’s reported. It’s eaten up cash on the books that, in a higher interest economy, could be earning a return for NYT. It’ll take years beyond 2025 to determine if this was the right use of resources.
One of the things I respect about Semafor’s Ben Smith is he is unabashedly addicted to finding that next scoop. We all knew something was off about Ozy, but it was his reporting that finally popped that bubble. He often knows something before anyone else in the space.
That’s why I always look forward to receiving his and Max Tani’s newsletter every Sunday night. I get perspective on areas of media that I simply have little experience in and a view on what’s going on globally in the media industry. It’s a must read for the ambitious media professional.
Group subs for the FT
As I think about how to continue growing revenue to A Media Operator, one fact comes back to me time and again: there is legitimate money in group subscriptions. I’ve sold a few of them here, but it appears for the Financial Times, group subscriptions are very much its bread and butter.
According to Press Gazette:
Currently FT Enterprise sees almost 8,000 businesses, government and education institutions in 120 countries pay for their teams to have a group subscription providing full access to FT journalism alongside some exclusive tools.
The B2B division, which formally launched in 2007, makes up three-quarters of the FT’s paying readership and its revenue has grown at an average of more than 10% each year since 2018, according to the company.
Considering the FT has 1.2 million subscribers, this team accounting for such a significant percentage of the total readership is rather impressive. But it also makes sense. When I started at my first company over a decade ago, I would walk into the office and there would be a stack of newspapers, each addressed to an individual executive.
Group subscriptions are a staple for these large institutions. And while individuals might be penny pinching and reconsidering their subscriptions, for these large companies, it’s a rounding error. They’ve paid for these subscriptions for years and it’s an easy renewal.
That explains why this part of the FT has seen revenue growth of more than 10% annually over the past five years. I suspect if we dug into WSJ’s or Bloomberg’s numbers, we’d see something similar.
This is an area where niche, b2b media companies can also have a lot of success. The problem is that it requires resources. In essence, you are doing business development with every company that subscribes to your publication. Big media companies have teams to do this. The smaller ones often don’t.
But if you know that senior executives are reading your publication, that’s your in. The best advocate is someone who is already paying. For example, Adam White from Front Office Sports was an early paid subscriber to AMO. Because he saw value in the paid subscription, it was easier to convince him to get more of his team reading. One business development deal added numerous paying subscribers. (Thanks, Adam!)
Another way to look at it is to do a domain search, comparing your free and paid email lists. If you see that you have one person who pays, but then many others who are on the free list, you can use that as a conversation starter. Ideally, you have 1st-party data about them, so you can identify the highest ranking people on the free subscription. When you email the paying subscriber, you can name drop those people, which might get a conversation started internally.
In other cases, it just helps to promote that group subscriptions exist. If you look at Endpoint News’ paid subscription page, it has two options:
- Endpoints Insider
- Endpoints Enterprise
There are two benefits here. First, it anchors the price of a subscription. For $400 per year, a single person can get access to Endpoints. But if the CEO of a biotech comes along and decides they want to pay, would the enterprise CTA be enough to get them to inquire about getting their leadership team on a plan too?
One thing I’ve learned in my career, people are often not away aware of things you might be offering. You have to remind them constantly to get them to act. In Endpoints’ case, it might be as easy as showing a big CTA that a group subscription is an option.
Anyone responsible for subscriptions—big or small—should be thinking about group subscriptions. It’s a different muscle, but I suspect it’s one that will seriously help.
Before we continue… I opened up ticket sales to the AMO Summit last week and the reception has been unbelievable. Dozens have already bought their tickets and I’ve got three of the sponsorships verbally committed. To the entire audience of AMO, thank you.
There is still time to get your ticket, though. Here’s a snapshot of what’s coming:
- Dotdash Meredith’s Neil Vogel will be doing a keynote with me where we dig into the successful and ambitious Dotdash Meredith
- The Juggernaut’s Snigdha Sur and Punchbowl News’ Anna Palmer will chat with me about the next era of niche media
- Lazard’s Dennis Berman, TCG’s Maureen Sullivan, and Endeavor Business Media’s Chris Ferrell will chat with me about the state of Media M&A.
- And so much more…
For folks that work at media companies, now’s your chance to pick up your ticket. Register here and I’ll see you on October 26th.
Now… Back to your regularly scheduled programming.
BuzzFeed’s Complex situation
It goes without saying, but BuzzFeed’s Jonah Peretti has failed in his dream of being the big acquirer of digital media assets. Going public and using shares as a way of acquiring other assets is a strategy that will not work.
Now the question is: how does the business survive and perhaps get investors excited again? According to The Information, BuzzFeed’s answer might rest with Complex.
Peretti is asking $150 million for a group of Complex assets, including its annual ComplexCon festival and its video series such as “Sneaker Shopping,” according to people familiar with the situation. If he gets that much, BuzzFeed could pay off its expensive debt load, which the company could be forced to repay as early as December of next year. That would allow Peretti to make the pitch to Wall Street that, as a debt-free company with a collection of money-making businesses, BuzzFeed shares should trade much higher.
A major reason that BuzzFeed is so focused on its share price, which closed at $0.58 is that Peretti put up his own shares to convince NBCUniversal to support the SPAC plan. According to a 2021 Business Insider story:
Peretti agreed to give NBCU up to 1.2 million of his 6.4 million shares if the price falls below $12.50 on a certain date, according to a filing.
The transfer date is a ways off — December 2023 — but BuzzFeed’s life as a public company is already off to a tough start. After opening Dec. 6 at $10.95 and initially jumping to $14.28, the stock closed Friday at $6.07.
Frankly, it would take an absolute miracle for BuzzFeed to rise to $12.50 per share in the next six months. And maybe all decision making is with the assumption that those 1.2 million shares are gone. But it’s certainly a tough pill to swallow.
Nevertheless, getting rid of much of the debt on the books would be a healthy move for BuzzFeed. It’s a major reason the business trades for little more than its Q1 revenue. Selling would also be a bit of an arbitrage opportunity. According to The Information:
The Complex assets Peretti wants to sell generated around $70 million in revenue last year, according to a person familiar with the matter. That implies Peretti is hoping to get 2 times revenue for those assets, which is not too far off from where publicly traded entertainment companies are valued.
In 2022, it generated $437 million in revenue. It trades for $81 million. In other words, it’s trading for ~0.185x 2022 revenue. Therefore, Wall Street is valuing that $70 million in Complex revenue at $21 million. If BuzzFeed can turn around and sell it for $150 million, that would be a massive win for the company.
As I’ve written numerous times, BuzzFeed needs to get profitable. It needs to control its destiny. It’s never going to reach the type of scale that the team once thought possible. If that means it needs to pay off a bunch of debt and become a smaller company, so be it. I remain convinced the end game here is that someone takes BuzzFeed private. To some operator, it might be a monetizable asset. It’s just a dumpster fire as a public company.
The question is whether anyone is audacious enough to try and do that. We’ll have to wait and see.
Thanks for reading today’s AMO. If you have thoughts, hit reply. There are a few things I would like to call out before we close:
- Tickets for the AMO Summit are still available. Click here to buy one.
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And with that, I hope you have a wonderful week. I’m pumped for the second half of the year and I look forward to continuing to write for you.