January 4, 2022

Two Things I’m Watching in 2022

I hope everyone had a great end of the year. It was good to take some time to recharge, clear the head, and think about what’s coming. 2021 was a monumental year for media at large, but also, for me personally. The past year for AMO has been unbelievable. Nearly 4,000 of you receive AMO every Tuesday and hundreds of you receive the premium version on Fridays. I never could have imagined we’d be here when I launched back in August 2019.

Coming in 2022 will be more of the same. You can expect to receive AMO every Tuesday and for premium members, I’ll continue to offer deeper thoughts on building digital media business every Friday. If you want to receive that, become a premium member here.

Also coming this year is the return of the AMO podcast. Back in 2020, I would interview media operators about how they’ve built their media companies. Thanks to the good people at Omeda, they are sponsoring a season where I’ll do it again! If there are people you’d like to hear from—or you think you should be on the show—hit reply to this email. But please, no PR folks pitching vendors. I’m interested in media operators exclusively.

Finally, you may have noticed that I started running ads in the newsletter last year. I will continue to do that this year, so if you are looking to reach thousands of people who work in media, let me know.

Okay, announcements are done. Why don’t we jump in on two things I am watching this year.

Events

As we continue to move more into winter, the sudden and very quick-spreading Omicron certainly has people talking. Here in New York City, it feels like everyone had it over the holiday. But it does provide some complications because it seems that even vaccinated people are getting it (albeit, with a much lower severity).

But the question is, how will event operators react to this? And more importantly, how will attendees and sponsors react?

My guess is that very little is going to change this year. CES is on, starting tomorrow. Although they cut it by a day, it’s still going to convene tens of thousands of people in Las Vegas. According to a press release, 143 additional companies have signed up to exhibit in-person in the past two weeks. For all intents and purposes, I think CES is taking the right approach from a health perspective.

  1. You need to be vaccinated. That’s not shocking and, honestly, I think every event organizer needs to be doing this from the get-go.
  2. Test before entering a CES venue. CES is providing the Abbot BinaxNOW Covid-19 Antingen Self Test kit, which comes with two tests to every attendee.

I haven’t heard of events giving out tests, but I think it makes a lot of sense. There is an argument to be made that this should be a mandatory step since so many vaccinated people are experiencing breakthrough cases. On the other hand, we start crossing into events operators having to manage user healthcare data and that sort of user privacy becomes quite complicated and potentially has liabilities.

Nevertheless, CES is happening. There’s no canceling at this point. And so, I’ll be watching to see if CES will become a super spreader event and if it encourages other locales to start putting limits on events.

On the financial side, even if an event does happen, it’s hard to know just how well the product is performing. Are we returning to any semblance of 2019 numbers or is it going to be a long slog to get back there? To answer that, I’ll be paying close attention to how Informa performs throughout 2022.

If we look at Informa’s 2021-2024 Growth Acceleration Plan presentation, it said that Q1 2022 events will be back to 70% of where they were in 2019 when looking at current bookings. It could certainly be worse, but it’s got a long way to go. In that same presentation, Informa talked about its 2021 events that hit >85% of 2019’s revenue broken down by geography:

  • Mainland China: 17/44 or ~39%
  • North America: 16/118 or ~14%
  • Rest of World: 35/171 or ~20%

Obviously, 2021 was the year that we were scaling up vaccinations, but we need to see much stronger numbers in 2022 for me to believe events are in a better place. And even if Q1 bookings are at 70% of 2019, could people maybe hesitate?

We’re fast approaching our third year with the pandemic and we know that winter months tend to be worse than warmer months. We might start to see a reshuffle in event planning where the absolute coldest months have fewer gatherings (sorry CES). But those sorts of macro trends will likely take years to truly cement.

Nevertheless, I remain relatively bullish on events this year and I am continuing forward with events I am planning in the day job (though some remain up for debate in early 2022; we’ll see).

Mergers, Acquisitions & IPOs

2021 had a ton of activity on the acquisition front. We even got a public BuzzFeed, even if it limped across the finish line and has not enjoyed its first month of being public.

But 2022 will be different than last year.

The first is that most other media companies are going to run far from SPACs. Vox/Group Nine are going to make an attempt at it later this year because the Group Nine SPAC only has this year to get a deal done before it loses all that money. Not to mention, it is reportedly profitable (though what adjusted EBITDA actually means is anyone’s guess), so maybe going public could work for them. However, for the rest, it’s just not worth repeating what happened to BuzzFeed.

You can see the writing on the wall with the reports that Forbes may be acquired by private investors rather than go public through a SPAC. According to Axios:

Investment firm GSV is working on a bid to buy Forbes Media at a $620 million valuation as an alternative to Forbes’ announced SPAC merger, Axios has learned.

This is about $10 million less than the SPAC deal, but that assumes every investor doesn’t redeem their shares. As we saw with BuzzFeed, there are tens of millions of dollars up in the air when it comes to redemptions, so Forbes would much rather be acquired than deal with that drama.

Changing our attention to the possible deal between The Athletic and The New York Times… Back in mid-December, Front Office Sports reported:

The New York Times has reemerged as a potential buyer of The Athletic, sources told Front Office Sports. 

The two companies were unable to come to an agreement in June, and The Athletic has since hired investment banking firm LionTree to facilitate a sale. Talks over the summer stalled as reps for The Athletic had issues with the stock/cash split and how long the buyout would take to complete, one source said. 

The Athletic has a valuation of about $500 million, although the site is seeking as much as $800 million in a sale. The website — which will hit its six-year anniversary next month — has yet to turn a profit. 

Dylan Byers at Puck also reported on it, which could either mean that a single source at The Athletic is very chatty or maybe this deal could actually happen this year.

I think this deal gets done this year primarily because The New York Times wants to grow faster. However, it will not get done at $800 million or $500 million. If I were a betting man, my guess is that The Athletic gets acquired for under $300 million.

Here’s why… It’s running out of money. According to an October story by The Information:

Last year, when Covid suspended most sports, the firm generated revenue of $47 million, while its cash burn was $41 million. The Athletic is projecting that revenue will rise 64% to $77 million this year, while its cash burn drops to $35 million. Next year The Athletic expects its cash burn to drop sharply, to about $7 million. And the company has told investors it expects to be marginally profitable in 2023 on revenue it projects will be $156 million.

The Athletic has enough cash to cover its needs for about the next eight months, said a person familiar with the situation.

That was three months ago, so now it has enough cash to cover its needs for roughly the next five months. And with marginal profitability in 2023, it’s hard to see investors coming in to save the day. That means, we’re dealing with a business in a pretty desperate place, so The Times isn’t incentivized to overpay (and $500 or $800 million is overpaying).

However, the terms of the deal could help boost that number. If The New York Times and The Athletic both believe that there are significant synergies and that The Athletic could start really growing faster with the right support, perhaps there will be some sort of earnouts over the next few years.

But in 2022, if that deal happens, I can’t see any reason why The New York Times agrees to pay anywhere near asking. Yes, The Athletic has 1.2 million subscribers, but growth has slowed and it remains unprofitable. Couldn’t NYT simply wait for the cash to run out and just hire the entire team? It would be interesting for a newspaper to wait The Athletic out and let it continuously bleed.

Finally, here are some rapid-fire things that I will be watching for in 2022:

  1. What comes next for Dotdash/Meredith? Will it spend the year playing nice with each other? Could it be spun out this year? Probably not, but it’s one of the most successful digital media companies out there.
  2. Will we see dying events brands—especially those that get hit by Omicron—get acquired? Or, if they are diversified, will they look to sell their subscription products like Informa is doing with its pharmaceuticals, finance, and maritime products?
  3. Can BuzzFeed actually start buying now that it’s public or are shares so beaten down that it just doesn’t have the warchest to play?

These are just a few of the things that have me intrigued this year. It remains an unbelievable time to be in media. The last decade was rough, but as we move farther into this one, I feel very bullish. I hope you do as well.

Thanks for reading today’s newsletter. If you have thoughts, please hit reply. And if you’d like to receive even more AMO, please become a premium member today. Thanks and have a great week!

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