I find this all the more worrying because The Athletic does not have an interesting model, in journalism terms. It may be a really well run business, putting together a great combination of editorial and corporate talent, but it’s not doing anything new. A friend explained why they thought The Athletic would be a good thing because they were introducing a subscription-based online service. What, like every British publication with the exception of The Guardian? Paywalling isn’t new, subs-only online magazines aren’t new. They’ve had mixed and limited success in the past, and The Athletic may well be in a strong position to do better, but there’s nothing breaking the wheel here. When I see a company like, say, Luminary (or, better still, Medium) come along, I might not think they’re going to be a multi-billion dollar company by teatime, but I can at least see what they are trying to shake up. The Athletic is doing the opposite of shaking things up: it’s doubling down on the prestige commodity of writers, and doubling down on the historic precedent of people directly exchanging money for journalism. Neither of these things are inherently bad ideas, they’re just not ‘million dollar ideas’ (as the old saying goes).
The Athletic: Either sustaining innovation or rearranging deck chairs
Certainly a new kind of news bundle, but three problems therein
This is precisely the point made in “The Athletic and the New News Bundle”: The Athletic is less of a disruptive innovation and more of a sustaining innovation (at best) or rearranging-the-deck-chairs (at worst). That said, you acknowledge the scale of The Athletic’s ambition, but you stop short of acknowledging what’s different about that scale, which is where the aforementioned analysis makes the point that there is something different between The Athletic’s offering and the traditional publications, whom it’s trying to displace: Specifically, The Athletic is angling toward a deep-and-wide bundle, as opposed to a shallow one. (The latter is more like that of The Guardian and the other traditional newspapers that The Athletic is in the midst of devouring.) Nevertheless, there are three specific problems with that strategy…
A whole no greater than its sum-of-the-parts
In disassembling these traditional publications then reassembling them under one banner, The Athletic’s unbundling-then-rebundling is an exercise in selling-pet-rocks. From “Apple News Paying Dollars for Cents”:
[I]t’s not so much that these suppliers/publishers/content aren’t sufficiently commoditized as to be Aggregated, because they very much are and have been; it’s more that strong-form Aggregation means consumers doesn’t have the want or need to pay for access — particularly when it comes to text content like news articles… the intuition can be explained by even more basic supply/demand from econ 101: This commodity content supply is abundantly available for free, so why should the scarce side of the balance, consumer demand, pay for access?! They shouldn’t! As such, [The Athletic’s] new subscription is like lipstick on a pig, selling pet rocks, rearranging deck chairs, paying dollars for cents.
Three strategic flaws
That said, the larger point made by the aforementioned analysis has three central tenets that will present problems for The Athletic’s strategy as it stands today…
First, bundle economics need not apply, per “The New News Bundle”:
While sports is more of a differentiated product than most of the other news verticals — and therefore commands relatively greater demand inelasticity — remember that this isn’t TV rights that we’re talking about; rather, it’s the written-word, print and/or text, which is inherently replicable, substitutable, and rivalrous. Bundle economics simply do not apply when there are such low/no barriers-to-entry and exit…
The Athletic can hire staff writers from The Guardian and BBC (which it already has done) and put them behind a paywall (which it is about to do), but there will remain hundreds of open sources in their place — most of whom you can defer to for free…
Even were this medium less commoditized, like audio/podcasts, it’d still behoove The Athletic to avoid the dreaded middle [but they’re] “stuck in the middle” of a market wherein success is found in the extremes — either broad scale or niche focus — and a paywall is orthogonal to economies of scale [as discussed in “The Four Winds of Modern Media”.]
Second, The Athletic’s economics are not sustainable, due to its journalists’ opportunity costs:
My concern with The Athletic’s bundle isn’t as much about consumer surplus as it is about producer surplus — or lack thereof. I don’t see how The Athletic can sustain its extraneous writers over the long term. To a lesser extent, I also don’t see why its star writers would remain in the bundle, although many may be willing to accept the tradeoff between a lower guaranteed salary as part of the bundle vs a higher non-guaranteed income as a sole practitioner. And, regardless of whether or not the top writers choose to stick-it-out under The Athletic’s banner, the bundle will eventually disintegrate if its average and underperforming writers can’t be sustained by this handful of outperforming dragon kings[.]
Third, its required rate of return on venture equity is not sustainable, due to a lack of both operating leverage and economies of scale:
Here, again, the bundle falls apart from the top (due to a lack of operating leverage) and bottom (due to a lack of marginal utility)… The Athletic insists on maintaining a paywall in between its writers and potential subscribers — something that inhibits growth toward its requisite scale… operating leverage and/or economies of scale that are sorely lacking in its preexisting business.
Much more in the article, as follows, but I’d be interested in your thoughts Nick Hilton, et al:
The most frictionless way to get informed and inform others
You don’t want to waste knowledge worth keeping, so now there’s a network that gives you highlights of everything you need to read and lets you annotate anything you want to save or share for yourself. One person’s annotation is another person’s summarization. Get straight to the point, with Annotote, your antidote to the information overload: