Original Article: The NY Times, by Kevin Draper, August 24, 2018

The Athletic, the hyperlocal sports website and app, is growing quicker than any sports media company in recent memory. This month, hardly a day passes without the announcement of a new hire. Or four.

A football writer in New Orleans. A baseball writer in Cincinnati. An N.B.A. columnist and a college basketball editor.

Just 10 months ago, when The Athletic celebrated its second birthday, the subscription-only website had 65 editorial employees in 10 markets. By the time the N.F.L. and college football seasons open next month, it will have more than 300 editorial employees, and sites focused on 38 markets.

Backed by $28 million in venture capital, The Athletic long ago moved past simple questions like what to cover and where, to more existential ones: Can its rapid growth be sustained? Will it eventually make a profit? And why do its investors believe it will sail counter to the prevailing winds in media?

Those answers are not easy to find, but the business plan at The Athletic is largely a bet that it will emerge as a Netflix-like solution to the decline of local sports coverage by newspapers decimated by budget cuts, and that it could eventually win over millions of subscribers. Its current hiring surge, then, is more a doubling down on that bet than a tangible payoff on it.

Daniel Leff, the founder of Luminari Capital, which has invested in The Athletic, argued that the website is already worth hundreds of millions of dollars, and the only remaining question presently is how large it will grow. “This is a company that has already achieved escape velocity,” he said.

Without subscription figures or internal financial reports, Leff’s optimism is impossible to validate. Media companies like Netflix, Spotify and Sirius XM have tens of millions of subscribers paying monthly for their services, but few journalism companies approach those numbers. The New York Times leads newspapers with 2.9 million digital-only subscribers, and several magazines have circulations in the millions.

Taylor Patterson, a spokeswoman for The Athletic, said the company has “well over” 100,000 subscribers, each paying about $5 each month. Leff, the investor, said it had “many multiples” of 100,000.

Its recent expansion has generated considerable skepticism, however, especially as the behemoths of media are merging and acquiring to achieve greater scale; other venture capital-backed midsize media companies like Buzzfeed and Vice are struggling to meet revenue targets; and local news organizations are withering.

Brian Grey, who was the chief executive of Bleacher Report when the sports media company raised $33 million in investment capital and later was acquired by Turner Broadcasting for around $200 million, wonders if the Netflix or Spotify comparisons are accurate. “Video and text are two different animals,” he said. “The subscription and consumer willingness to pay for content may not map completely.”

But to Leff, small-bore questions about expansion or profitability are missing the forest for the trees. “Just to get to 100,000 subscribers is a huge endeavor,” he said. “They may or may not need additional capital to do it, but if so, so what? There are a multitude of capital sources that want to put money into this company.”

When asked if The Athletic was already worth the $200 million Bleacher Report was acquired for six years ago, Leff responded: “Absolutely. We wouldn’t take that.”

Still, The Athletic has received heavy criticism from the industry it hopes to dominate. In several markets, The Athletic has hired multiple writers away from the same newspaper, decimating the sports staffs at papers like The San Jose Mercury News and The Atlanta Journal-Constitution, among others.

The Athletic’s initial practice of hiring mostly veteran writers without posting jobs publicly also has perpetuated homogeneity in an industry that is overwhelmingly white and male, leading to criticism. Since then, The Athletic has begun hiring more women and people of color, and the company participated in the recent National Association of Black Journalists convention in Detroit.

At the same time, with the news industry under stress and as some have come to view supporting local journalism as a moral imperative, one of the founders of The Athletic, Alex Mather, told The Timeslast fall that his company would “wait every local paper out and let them continuously bleed until we are the last ones standing.” (Mather later apologizedfor his tone.)

John Kosner is a former longtime ESPN digital media executive who oversaw ESPN’s failed attempt at creating local sites almost a decade ago. He cautioned that while The Athletic is off to a promising start, it would need to “sell an awful lot of subscriptions to become a big profitable enterprise.”

But he also argued that The Athletic may be different from Netflix and Spotify in a crucial way: The Athletic’s first subscribers were avid fans who already spend thousands of dollars each year on sports. To get to its goal of millions of subscribers, Kosner warned, it eventually will have to attract casual fans, a far more difficult proposition. Netflix and Spotify had the opposite challenge; both found it hard to attract subscribers initially because they had small content libraries, but they grew quickly as they added more titles, a concept of steady, relentless growth known as the flywheel effect.

“Yes, you can go into new markets and get sports fans,” Kosner said of The Athletic’s recent growth. “But it may not be as easy to continue to grow in these markets than it is to get started.” He predicted the end goal for The Athletic would be acquisition by a major media company, not a long-term future as an independent company.

Patterson, the spokeswoman at The Athletic, said even converting just a percentage of die-hard sports fans into subscribers “would result in a very healthy business for us.” She said the company has not seriously entertained any acquisition offers.

Leff also believes there is a crucial difference from other subscription companies: Though Netflix increasingly produces original shows, it and Spotify are still mostly licensing companies. Combined, they have to pay billions to stock their services, while The Athletic creates 100 percent of its content.

That content may be the crux of the challenge.

Most of The Athletic’s writers, including many of its most recent hires, earned their following over years, or decades, at newspapers, a following they — and their new bosses — turn into Athletic subscribers. But stocking the site with newspaper veterans (there is also a very strong contingent of former “Sports Illustrated” journalists) means The Athletic often doesn’t read that different from a newspaper sports section.

At Netflix and Spotify, the compelling product is the video and the music. But in sports, the most compelling product isn’t the writing. It is the games themselves, and Grey, the Bleacher Report veteran, wondered if that might be what The Athletic needs in order to truly scale its audience.

“Facebook is buying rights to live games. Twitter is buying rights to live games,” Grey said. “The Athletic may need to find itself moving in that direction.”