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Illustration: Annelise Capossela/Axios

The New York Times on Thursday said it was using more than half of the whopping $1 billion in cash on its balance sheet to buy The Athletic, a sports media startup that currently loses a lot of money.

Why it matters: "It's about accelerating our long-term strategy," Times CEO Meredith Kopit Levien told Axios. "If we didn't think it was a sustainable, engaging product already, we wouldn't be here having this conversation today."

  • The Athletic has 1.2 million subscribers, making it "the fifth-largest English-language digital journalism provider by subscribers," Levien told investors. With nearly 8 million digital subscribers, The Times is the largest on that list.

By the numbers: The Athletic is one of the largest sports journalism companies in the world, with 450 journalists. By comparison, there are roughly 45 sports journalists at The Times. Executives say there's little audience overlap between the two firms.

Yes, but: The Athletic's financial picture is less rosy. In 2021, the company lost $55 million and made just $65 million. While Levien forecasts a "slight improvement" in operating losses in 2022 — and smaller losses in 2023 and 2024 — she doesn't anticipate The Athletic turning profit for another three years.

  • Investors in The Athletic's last fundraising round won't see a major return with this sale. The Athletic's series D investors valued the company at roughly $500 million two years ago. It sold for $550 million Thursday.
  • Asked how The Times concluded what The Athletic was worth, Levien said, "The price is based on the kind of value we believe we can build, what we think they're worth and what we think we can build in our long-term strategy."

Be smart: One of the reasons The Athletic loses so much cash is because it spends enormous amounts of money to recruit top-tier sports journalists at the local level in the U.S., Canada and Europe.

  • Asked if The Times planned to lay off any Athletic employees after the deal, Levien noted, "We bought this business with real ambitions around accelerating our growth strategy and our plan is to keep investing in it."
  • "We see an opportunity to make it even bigger," said David Perpich, head of standalone products at The Times.
  • Perpich will become the publisher of The Athletic, while co-founders Alex Mather and Adam Hansmann will stay on after the deal as co-presidents.

The big picture: The Times has had an extraordinary run over the past few years. It's well on track to meet its 10 million paid digital subscriber goal years ahead of schedule.

  • Levien said the Times has now adjusted that goal to a "meaningfully larger" number.
  • But its subscriber growth has slowed in the post-Trump era. And to ensure it stays competitive, it needs to invest in new products that it can add to its subscription bundle, which currently includes core news, cooking, games, audio, and its consumer reviews site, Wirecutter.

Between the lines: The Times in the past has used acquisitions to fuel its growth strategy, with mixed success.

  • It bought the Boston Globe for $1.1 billion in 1993, only to sell it for around $70 million in 2013. It bought About.com in 2005 for $410 million in cash and sold it to Barry Diller's IAC for about $300 million in cash seven years later.
  • More recent acquisitions, like Audm, Serial Productions, HelloSociety, Fake Love and Wirecutter, have been much smaller in scope.

What to watch: Levien said The Times' first priority for The Athletic is to grow its subscription business, but eventually The Times plans to help introduce more advertising to The Athletic.

  • Perpich said for now, the company doesn't have any plans to change The Athletic's $70 annual subscription fee. "There's a lot of room ahead for them to figure out what makes sense."

Go deeper: The New York Times to acquire The Athletic for $550 million in cash

Go deeper

Dan Primack, author of Pro Rata
Jan 14, 2022 - Economy & Business

How Marc Benioff is transforming Time magazine

Photo illustration: Annelise Capossela. Photo: Jamie McCarthy/WireImage

When Salesforce.com founder Marc Benioff and his wife Lynne bought Time magazine from Meredith Corp. in 2018, it read to many as a vanity purchase. A billionaire buying a legendary media brand, to impress friends and influence people, without doing too much legwork.

Why it matters: But the carve-out is proving transformative for Time, as Benioff seems to have actively brought a lot of his tech ethos to the company Henry Luce founded nearly 100 years ago.

Updated 12 mins ago - Politics & Policy

British national named in Colleyville synagogue standoff

A law enforcement vehicle sits near the Congregation Beth Israel synagogue on Jan. 16. Photo: Brandon Bell/Getty Images

British national Malik Faisal Akram took four people hostage at a Texas synagogue outside Fort Worth on Saturday, the FBI said in a statement.

State of play: Authorities had initially declined to release the name of the 44-year-old suspect or identify the hostages, all adults, though police chief Michael Miller confirmed that one of those held was Rabbi Charlie Cytron-Walker, who leads the congregation.

Updated 24 mins ago - Politics & Policy

Omicron dashboard

Illustration: Brendan Lynch/Axios

  1. Health: Concerns grow over CDC's isolation guidelines — Experts warn of more COVID-19 variants after Omicron — WHO recommends 2 new treatments — What "mild" really means when it comes to Omicron — Deaths are climbing as cases skyrocket.
  2. Vaccines: America's vaccination drive runs out of gas— Puerto Rico expands booster shot requirements— Supreme Court blocks Biden's vaccine mandate for large employers.
  3. Politics: Vivek Murthy calls SCOTUS vaccine mandate block "a setback for public health" — Focus group says Biden weak on COVID response, strong on democracy
  4. Economy: America's labor shortage is bigger than the pandemic— — CDC COVID guidance for cruise ships to be optional starting Saturday — The cost of testing.
  5. States: West Virginia governor feeling "extremely unwell" after positive test — Youngkin ends mandates for masks in schools and COVID vaccinations for state workers — America struggles to keep schools open
  6. World: Beijing reports first local Omicron case weeks before Winter Olympics — Teachers in France stage mass walkout over COVID protocols.
  7. Variant tracker