Adam Hansmann (left) and Alex Mather (right), co-founders of The Athletic. Photo: Steph Gray, courtesy of The Athletic

The Athletic, a subscription-based digital sports media company, has raised $50 million in a Series D funding round, executives tell Axios.

  • With this investment, the company has raised a total of $139.5 million since its launch in 2016 and is valued at roughly $500 million after the new raise, according to sources familiar with the deal.

Why it matters: The Athletic is considered an anomaly in digital media upstarts because it's focused on subscription revenue rather than advertising revenue. Investors say they remain bullish on the company's ability to keep growing, because it's been able to grow its subscriber base quickly, especially overseas, while retaining existing customers.

"The success of The Athletic has so far played a very strong role in bending the narrative of ad-supported media business models to subscription-based models, which are much more aligned with what benefits the end customer."
— Eric Stromberg, Founder and Managing Partner at Bedrock in an interview with Axios

Details: The round is being led by Bedrock Capital with participation from Emerson Collective and Powerhouse Capital along with existing investors.

  • Bedrock Capital led The Athletic's Series C round in 2018 alongside Founders Fund.
  • Matthew McConaughey also participated in the round via Plus Capital, a venture fund backed by top influencers from entertainment, TV, film, music, and sports.
  • Founders Fund, Evolution Media and Y Combinator also participated.
  • The money will be mainly used to grow The Athletic's editorial operations overseas. Prior raises were used to poach veteran sports journalists with big salaries and to invest in audience, data and editorial teams to drive subscriptions.

By the numbers: The company expects to become profitable in 2020 and says it will soon hit a million subscribers worldwide, according to The Athletic co-founder Adam Hansmann.

  • The company now has over 500 full-time employees across the world, with the vast majority based in editorial.
  • It's nearly tripled the number of people at its headquarters in San Francisco since 2018 to 85 people. Its engineering team has grown by nearly 300% since that time.

Be smart: According to The Athletic co-founder Alex Mather, the company's next goal is to find subscribers in other countries, after a successful launch in the UK last year.

  • "We're starting to see that our bundle is very unique. Subscribers can access journalism about different leagues and sports all in one place at a depth that they can't get anywhere else."
  • The new funds will also be used to invest in expanding the company's headquarters and "making sure that we're building the foundation of a business that seems to continue to grow well beyond 2020," says Mather.

Between the lines: Mather says that the team doesn't have any specific sports in mind that it intends to go after this year, but that it will continue to invest heavily in soccer.

  • "Soccer has far and away been the new thing for us and it is the thing that probably has the highest ceiling of growth, so we will continue to invest there."
  • Investments in soccer in the UK have begun to attract subscribers all over the globe that care about the English Premier League. "It basically opened up our product to dozens of more countries."

The big picture: The Athletic's strategy for the past three years has been to hire top-talent sports journalists in local markets and to get people to pay for high-quality journalism content.

  • The company isn't looking to increase prices on consumers to hit profitability, but rather is focusing on growing and retaining its user base, Mather says.
  • Stromberg says he "likely" expects profitability next year because the company doesn't spend a lot of money acquiring customers,
  • He says that 80% of Athletic subscribers stay past one year. "Retention is really what sets The Athletic apart."
  • The Athletic was the first to report that The Houston Astros used technology to steal signs, leading to some of the harshest penalties ever given out in MLB history.

What's next: Mather acknowledges that The Athletic's eventual goal is to return a profit to its investors, but that its investors are being patient with their growth.

  • "Our investors are incredibly patient. They look at things much longer time horizon. We are focused on building a business that returns a large profit to them. That's our priority at this time."
  • "We're taking a very long term view," says Stromberg. "We believe there's far more value to be created in the future with The Athletic."

The bottom line: Stromberg says that sports, unlike other investment categories, tend to offer great lifetime value, because most avid sports fans don't stop loving their teams as they get older.

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