What’s happening:
The Athletic, a digital sports media company, has raised an additional $40 million in a new round of funding. This capital adds to the previous investment money raised since its launch in 2016, bringing its total funding raised to $70 million.
The Athletic is now valued at an estimated $200 million, and thinks it can meet the growth expectations of venture capitalists in the digital media field.
Why it matters:
Venture capital investments have not fared well, overall, in digital media companies with advertising-based revenue models. The Athletic, however, is a subscription-based company that currently has more than 100,000 subscribers with an impressive 90% renewal rate — roughly the same size of a digital subscription base as The Los Angeles Times.
This strong subscription model has helped The Athletic obtain investment capital in what has become a bleak funding environment for digital companies that rely on advertising sales for revenue.
Digging deeper:
The two current, major investors in The Athletic are Founders Fund, a San Francisco-based venture capital firm that specializes in technology, and Bedrock Capital, a venture capital firm that specializes in early stage investments. Other participants in this funding round include Comcast Ventures, Evolution Media Capital, Courtside Ventures, The Chernin Group, Y Combinator, Advancit and Luminari, Amasia and BDMI.
“Our revenue comes in recurring payments,” says Alex Mather, co-founder of The Athletic. “It’s a lot less explosive than ad companies — it’s harder to build — but the payoff is huge in revenue foundation.”
Previous investment capital was used to hire veteran sports journalists. The Athletic’s journalists cover sports in 47 markets, most of which are profitable according to the company. This new round of funding will be used to invest in:
- Audience
- Data
- Editorial teams
- Driving subscriptions
Other players:
The digital upstart is aimed at competing with dominant sports media outlets such as ESPN and local market newspapers and radio stations. Several other digital sports media companies have also taken on the legacy outlets, including:
- Bleacher Report — raised $40.5 million before being purchased by Turner in 2013.
- Barstool Sports — raised $15 million; valued at over $100 million.
- Players Tribune — raised $58 million, started by Derek Jeter.
- SB Nation — raised $307.6 million, owned by Vox Media.
The bottom line:
While subscription-based digital media companies like The Athletic are currently finding more success at attracting investors than ad-based companies, they still have a ways to go in catching up to huge, legacy media outlets.