How the NYT’s $550m acquisition of The Athletic sets the tone for the future of media

The deal adds to a growing list of recent high-profile mergers and acquisitions within the news media space. In June of last year, Buzzfeed acquired Complex Media in a deal worth $300m, followed by Politico’s $1bn acquisition by Axel Springer. Then in late 2021, Dotdash purchased Meredith for $2.7bn and Vox merged with Group Nine Media in a holiday stock deal.

The pattern may be a response to declining global readership rates. Following the departure of former president Donald Trump and growing Covid-related news fatigue, news media across the globe have struggled to maintain engagement levels. Axios this week reported that broadcast viewership, visits to top news sites and downloads of major publisher apps all plummeted in 2021. The sharpest decline in engagement was witnessed on social media, where interaction with news stories declined 65% from the previous year. Major outlets like the Washington Post have struggled to gain digital subscribers.

What’s more, the economic downturn brought on by the pandemic also decimated many media companies’ ad revenues. In turn, companies like WaPo have launched their own ad-buying networks and invested in global market expansion.

Looking to dial up engagement, subscriptions and ad revenue, media companies are increasingly eyeing partnership deals and mergers and acquisitions. The Athletic-New York Times stands out as a deal that marries two subscription heavyweights and positions the Times as a major player in the sports media category — a move sure to catalyze growth and help the company reach its stated goal of reaching 10m digital subscribers by 2025. And it makes sense, because subscriptions drive bottom-line growth; recent research from management consultancy Activate found that nearly 80% of paid content revenue last year came from subscriptions.

Grzegorz Piechota, a researcher-in-residence at the International News Media Association (INMA) and an ex-fellow at Harvard and Oxford Universities, has researched trends in publishing and subscriptions. He says, “Overnight, the Times added more than one million subscribers, most of whom are active on a weekly basis and who retain at industry-beating rates. Compare this quick win with the time and effort behind the success of other flagship verticals of the Times: games and cooking. Both reached one million subscribers, too, but it took them more than 10 and seven years, respectively. He also points out that the Times will gain 600 new employees in the deal, including about 400 journalists who are already familiar with subscription-based news media. “This acquisition of talent has further strengthened the Times’ position in the winner-takes-most market of national news.”

It’s worth noting that The Times doesn’t have a perfectly rosy track record when it comes to accommodating acquired businesses. In November of 2021, Wirecutter employees went on strike over the Times’ refusal to raise wages and offer improved benefits. In December, union members reached a deal with the paper, which included a guaranteed minimum 2 to 2.5% in salary increases each year — up from the Times’ guaranteed annual raises of 0.5%. The debacle attracted significant press.

Going deeper than the headlines, however, the new deal with The Athletic is indicative of a larger-scale shift in the media business.

The evolution of subscription bundling

The Athletic-New York Times deal represents a broader shift in the media business: the proliferation of bundled media subscriptions.

“Similar to the way Hulu, ESPN+ and Disney+ are bundling their subscriptions, this deal brings together diverse audiences across verticals to cross-promote and grow loyalty,” says Anthony Gonsalves, senior vice-president of publisher development at video tech company Connatix. “As the industry continues to shift toward subscription-based strategies, we can expect to see more bundled offerings and acquisitions like this.”

In fact, a growing number of news outlets appear to be taking a page from the video streaming industry’s book. In July of last year, CNN announced plans to debut CNN+, its streaming service, in 2022. Sean Cullen, executive vice-president of product at marketing services firm Fluent, says that news media that has traditionally relied on cable and digital channels may increasingly pivot to subscription-based video streaming services “as a means to meet the changing demands of cord-cutters and appeal to new audiences with exclusive content offerings.”

Part of the reason for increased bundling across both news and entertainment media, per Piechota, is likely the fact that many subscription-based services have already converted most of their most enthusiastic fans and news consumers. “News brands with mature subscription programs… need to go beyond these segments to grow,” he says. “Based on the INMA subscription benchmarks, a median news brand doubled its online subscriber base in the past three years. Some brands, though, grew faster — tripling and quadrupling the base. They priced for penetration, sacrificing their average revenue per subscriber for the higher share of the total market. The gamble paid off in the pandemic.”

As the natural next step, Piechota says, major publishers often “see opportunities in bundling and unbundling to boost value for money of their offers and appeal to segments beyond fans and heavy news consumers.” Recent INMA data indicates that 70% of news organizations see the upcoming year’s growth attributable to new segments of consumers, and 37% see growth coming from changes in packaging and marketing — in other words, bundling or unbundling their content offerings. And bundling is hot: “In media and entertainment industries, both companies and consumers clearly prefer all-you-can-eat pricing,” Piechota says.

Playing in an underdeveloped market

Though it’s clear that various kinds of subscription bundling could kickstart business growth, there are downsides, too. Fluent’s Cullen, for one, thinks that demand for individual offerings will remain strong. “I think we'll see experimentation when it comes to bundling, but I would expect individual subscriptions to remain available. The Disney+, Hulu, and ESPN+ bundle and the New York Times All Access Digital subscription are great for consumers that want all content, but many more may want to pay only for one of the services bundled,” he points out.

And, as it stands, subscription-based news bundling has only proven somewhat successful. This is because the global market for paid digital news is still immature — on the whole, most consumers don’t pay for their news. And even among subscription-inclined consumers, most don’t want to pay for more than a few subscriptions (not counting news outlets, the average US household already has nine paid subscriptions across gaming, videos and music, per a recent report by Deloitte). Thus far, news publishers have driven subscription growth primarily by selling to their most avid fans.

The future, according to Piechota, is uncertain: “As the market matures, more publishers might consider offering lower prices and unbundled content in external channels, such as aggregators or other publishers.” The Wall Street Journal, for instance, offers a handful of select stories on Apple News+ that don’t hamper online subscriptions to the Journal because it gatekeeps its premium business news on its site. “In the future, we may see more national and local news brands unbundling and re-bundling their offerings,” says Piechota. “Perhaps we will even see them offering selected stories on the New York Times platform.”

In an increasingly crowded market, of course, offering more content under one subscription cannot be a publisher's sole differentiator. “In conversations I'm having with publishers, their leadership teams are focused on bringing more value to their subscribers and readers — whether that is with the content they produce or the community they are creating,” says Roee Goldberg, co-founder and chief operating officer of social engagement platform OpenWeb. “Publishers that can provide the best user experience in these two facets of the industry will have the best shot at being successful in the media and subscription economy.”

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