Will The Athletic Find a Buyer?

Will The Athletic Find Buyer?
Yinchen Niu/Variety Intelligence Platform

The Athletic may have reached 1 million subscribers last September after launching roughly four and a half years prior, but the digital sports-news hub’s future is still far from certain.    

That’s according to The Information, which reported last week that The Athletic has enough cash to cover its needs for eight months and is still looking for a buyer or new funding round. 

Luckily for The Athletic, VCs have been eager to pump money into news companies in 2021. As of August 17, there were 22 M&A deals involving venture capital-backed media companies that are U.S. based in 2021, a figure that’s up from 16 in 2020, according to Crunchbase. 

However, The Athletic reportedly prefers the M&A route despite several merger discussions with notable publishers like The New York Times and Axios failing to materialize. The sports site has hired investment bank LionTree to field bids and is now seeking a valuation of over $750 million.  

The question then becomes, Who may still want to snap up The Athletic in the first place?  

While recent potential deals involved news publishers (NYT and Axios), it seems just as likely that a sports-betting entity may end up snatching The Athletic, given the growth of sports betting in the U.S. 

The federal ban on sports gambling was struck down in May 2018, and 27 states offered single-game sports betting as of Sept. 30 of this year, according to the American Gaming Association (AGA). Moreover, of the 11 states that offered legal sports betting in 2019 and 2020, seven saw year-over-year (YoY) increases in the amount wagered last year, per the AGA. 

This is why we’ve recently witnessed deals between sports betting companies and publishers. For example, Barstool Sports was acquired for $450 million by casino operator Penn National Gaming in January 2020, while sports betting group Better Collective acquired the Action Network for $240 million in May 2021.  

Perhaps one of the major sports-betting operators will kick the tires on The Athletic next. FanDuel and DraftKings were the two most downloaded sports betting apps in the U.S. during the first eight months of 2021 and 2020, according to Sensor Tower. 

FanDuel majority owner Flutter reported over £600 million (or over $817 million) in cash and cash equivalents as of Q2 2021 end, while DraftKings reported over $2.6 billion in cash and cash equivalents for the comparable period.  

DraftKings has also been on an acquisition tear as of late and scooped up sports betting media company VSiN, sports betting operator Golden Nugget Online and online gaming tech company BlueRibbon Software since March of this year.  

The M&A-hungry DraftKings has also previously expressed interest in buying WarnerMedia’s Bleacher Report, according to The Information.  

The Athletic would give any sports gambling operator access to over 1 million subscribers that could be pushed toward digital gambling products. Sure, sports betting is not permitted nationwide, but data on readers of The Athletic who are in states without legal gambling could still help inform the advertising and content strategy of a DraftKings or FanDuel.   

It’s also possible a deal occurs between The Athletic and another non-sports-gambling-focused company. Group Nine, which was also reportedly interested in Bleacher Report, formed a SPAC earlier this year to acquire companies in several industries, including digital media.  

But the $750 million is likely too steep a price for the Group Nine SPAC that raised nearly $200 million from its IPO. Some other pubs are likely balking at the $750 million valuation The Athletic is seeking as well. 

The Athletic may become a more attractive acquisition target if other publishers that recently launched paywalls (like USA Today and Reuters) don’t onboard paying subscribers as quickly as they’d hoped.  

News companies looking to jumpstart subscriber growth could easily begin to offer a bundle that includes access to The Athletic and their own news subscription product with the digital sports site under their ownership.