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Originally Posted by dustygoon
Sorry guys. I was writing fast. But ya....software businesses with subscription models have sticky revenues => once someone subscribes, they rarely cancel even in economic downturns. That is extremely valuable (more so than the old license model). So their stocks trade at very high multiples of that revenue stream rather than profit....many SaaS companies don't make profit except for the bigger older ones like adobe....and they don't care because the market has agreed that revenue is the key metric. Anyway....$550m for the athletic which generates $75m of revenues is ~7x value/revs. That's getting close to the kind of value that software companies with sticky revenues trade at. I just don't believe the athletic's subscribers are that resilient.
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Thanks, some of this further information was helpful to me. However, don’t you think looking at The Athletic as a stand-alone is too narrow of a view? I can see why the NYT sees the value.
The NYT owns publications specializing in a fairly broad range of subjects. They didn’t have any sports coverage like this so maybe it was important to them to fill that hole? If the NYT offers The Athletic as part of a bundle of subscriptions, then that would certainly help the stickiness of subscriptions as well as add some people who subscribe to it as part of a bundle but not on its own.
I am still a bit surprised at how high of a price the Athletic fetched, but the Athletic went and took a lot of the top writers. If the NYT wanted to start a similar sports-only publication instead of buying the Athletic, they’d be competing with The Athletic (or it’s new owners) instead of having a stranglehold on this kind of coverage for a while. Instead, now they can become the de-facto publication like this and use their clout to keep it that way.
Besides that, I still think online news subscriptions are still growing and evolving and by all accounts The Athletic was burning their cash by rapidly expanding. I would think they still have a lot of room for growing their subscriber base and also making more subscriptions stick as they add more sports coverage worldwide and develop markets they’ve newly expanded into.