Axios and The Athletic talk merger: The long-term plan is to include other digital publishers

From a Wall Street Journal story by Benjamin Mullin headlined “Startups Axios and the Athletic Discuss Merger”:

Sports-media outlet the Athletic is in merger talks with news startup Axios…part of a plan to build a larger online-publishing company that could include going public through a blank-check firm….

Alex Mather, chief executive of the Athletic, approached Axios CEO Jim VandeHei about a week ago with a merger proposal….The two CEOs have held general conversations about business opportunities during the Covid-19 pandemic, but the talks escalated significantly in recent days.

It isn’t clear who would lead the combined company.

If Axios and the Athletic merge, the combined company may seek to raise money for expansion and acquisitions….The long-term plan is to bring additional digital publishers into the fold, especially those with content that consumers are willing to pay for and that can earn a premium from advertisers.

The plan under consideration calls for both the Athletic and Axios to continue operating as distinct digital properties, each with their own journalists and editorial products….

Across the digital publishing world, companies are exploring ways to consolidate what is now a fragmented market, betting that scale will improve their odds of success.

Mergers won’t erase all of the challenges the sector faces. The online-ad market has proved volatile and unreliable for growth. Selling subscriptions means competing for a share of households’ budgets not just with other publishers, but also streaming-entertainment companies and other content providers.

Axios and the Athletic believe one potential growth area is selling subscriptions to businesses at a premium rate….Mr. VandeHei and one of his co-founders, Axios President Roy Schwartz, helped create Politico Pro, a business-to-business publication, when they both worked at Politico….

One logical step to raise capital could be going public by merging with a blank-check company, also known as a special-purpose acquisition company….

Blank-check companies have become increasingly popular, including among media firms. BuzzFeed Inc. and Group Nine Media Inc., for example, are exploring using SPACs as vehicles to go public or merge with competitors….

Axios was launched by Messrs. VandeHei and Schwartz and journalist Mike Allen in 2017 after the trio left Politico. The company, which specializes in short, newsy stories and concise newsletters, generated more than $60 million of revenue last year and was profitable….

Axios has about 250 employees and has launched newsletters focused on media, technology and deal making. The company also has a documentary-style show on HBO and has developed a communications platform that it is selling to companies that want to update their employees in its succinct style.

Last year, Axios said it was acquiring Charlotte Agenda, a digital-media publisher based in North Carolina, part of a plan to launch a local news business. The company also has launched newsletters in Denver, Des Moines, Iowa, and Florida’s Tampa Bay region.

The Athletic and Axios already have complementary footprints in some local markets, which is one potential selling point of the merger. If the merger is completed, the companies could use their combined reach in those markets to attract additional advertisers and subscribers.

The Athletic—founded in 2015 by Mr. Mather and Adam Hansmann, veterans of the exercise app Strava—charges $7.99 a month for access to sports articles, including local coverage of teams in all the major sports. The company has said it has more than one million paying subscribers.

The sports news outlet came to prominence as newspapers across the U.S. were losing large swaths of their staff through layoffs. Its co-founders recruited aggressively from the ranks of beat reporters and columnists in local markets, often offering big pay increases. It competes against a host of sites that mostly offer free sports content, including the Ringer, Bleacher Report, Yahoo Sports and

The company has persuaded investors that readers in the U.S. and abroad are willing to pay up for in-depth reporting and analysis. It has raised about $139.5 million from venture investors including Courtside Ventures, Bedrock Capital and Founders Fund….Its last funding round, a $55 million infusion announced in January 2020, valued the company at $475 million.

The Athletic doesn’t disclose detailed financials, including whether it is profitable. The company generated about $80 million in revenue in 2020….The Athletic has built out newsrooms in North America, the U.K. and Australia and currently has more than 600 full-time employees. The company also has expanded into audio journalism, producing podcasts on major U.S. and U.K. sports.

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