This week, the New York Times paid more than half a billion dollars for a sports news startup founded just five years ago. The paper has also lost one of its star columnists, Ben Smith, who is trying his luck with his own news.
Both moves are a symbol of the times in digital media. In a sector full of failed dreams and pessimism, a new wave of hope is fueling what some executives say is the most significant period of change over the years.
“We have entered a frantic phase of media innovation, both from established companies and start-ups,” Douglas McCabe, an analyst for Enders, said.
This generation of start-ups differs from their predecessors in the mid-2010s, who were obsessed with browsing the pages, giving readers stories for free to reach a wide audience. Instead, these companies believe that journalism should be paid for and that, thanks to social media, individual writers can build relationships with their readers, in the same way that influencers on social media work with followers.
These groups were confirmed this week as The Athletic, a sports news site founded five years ago by two former associates in the fitness group Strava, sold for $ 550 million. It was the second largest acquisition in the history of the Times.
“I joined [the Times] I bet if you do something really great that people can’t get anywhere else, they’ll pay for it. I think a lot of places are proving it, ”Meredith Kopit Levien, executive director of the New York Times, told the Financial Times. “There is a real market of people who will pay the subscription. Even in digital, when many alternatives are free. It’s a whole different thing than just. . . chasing a rock. ”
Jon Kelly, a former Vanity Fair editor who co-founded Puck last year, a subscriber publication covering business and politics, believes this is “the biggest market turnaround in 20 years.” Puck raised $ 7 million from investors, including TPG, to hire a handful of influential journalists, each of whom owns a stake in the company.
Executives, writers and observers have been debating the future of journalism for two decades, while the Internet has eroded existing business models. Venture capital investors led to a boom in innovation from 2014 to the end of 2016, during which Silicon Valley investors invested hundreds of millions of dollars in online start-up media with foamy estimates.
BuzzFeed, which achieved viral success with stunt videos such as the explosion of watermelon with rubber bands, was estimated at as much as $ 1.7 billion in 2016. But the bubble burst when Facebook and Google took over the online advertising market, leading to write-offs and layoffs in media groups that depended on digital ads, such as BuzzFeed and Vice.
Last year, BuzzFeed aimed to go public through a $ 1.5 billion special purpose purchase agreement. However, after listing on the Nasdaq in December, the stock price sank, estimating the group at $ 670 million on Friday, a multiple of just 1.2 times its annual revenue.
By comparison, Axios, a startup founded by former Politico reporters, was recently valued at $ 430 million in fundraising, about five times annual revenue. German publisher Axel Springer last year bought Politico for a billion dollars, also about five times the annual revenue. The New York Times trades with multiple annual revenue of 3.6 times.
Vice Media, like BuzzFeed, has fallen to the ground. At its peak in 2017, Vice TPG investor estimated at a staggering $ 5.7 billion. Just two years later, another investor – Disney – wrote off its entire stake in the company. That same year, Vice bought the women’s website Refinery29 in a deal on all the shares; the companies assigned a value of about four times their annual revenue to their combined group.
Jessica Lessin, who founded The Information in 2013, a technology news publication aimed at Silicon Valley executives, said the industry has reached a “healthier place”.
“It was a time when investors were fleeing the news as quickly as possible [companies]. Then we had the phase that Andreessen Horowitz invested in BuzzFeed . . . Technology has been trying to invest in content in that wave, ”she added. “It’s targeted now, and it’s far from where [investors] either they ran behind the fence or just wrote huge checks. ”
In addition to Puck, other journalists have recently sought to create their own publications.
Richard Rushfield, who previously worked for the Los Angeles Times and Gawker, made his own last month newsletter about hollywoodinto a new job; Lessin invested.
Some Politico reporters – who were founded by former Washington Post reporters – left their jobs last year to found Punchbowl News, charging readers $ 300 a year for information about “Washington’s decision-makers.”
Influential journalists, including Bari Weiss and Andrew Sullivan, have left their jobs in the mainstream media due to Podstack , a platform where they can publish independently and charge readers for access to their newsletters. The 10 best writers on Substack together earn more than 20 million dollars a year, which is far more than the traditional salaries in the editorial office.
But overall, much less money is flowing into digital media compared to 2010. Venture capital invested $ 115 million in digital media last year, a tenth of the $ 1.1 billion it funded in 2015, according to PitchBook.
BuzzFeed’s slight stock market debut underlined pessimism about certain types of business model; almost all investors from his Spac fund fled before listing last year.
Still, Justin Smith, former Bloomberg Media CEO, who founding a companywith Ben Smith, told the FT that this week he was “overwhelmed by the interest” of investors. He refused to name any of them and financed the operation himself, but he became lyrical because of the opportunity.
“Netflix was a real pioneer who identified this audience in the content space. . . this global strategy. The same type of people, this audience, all share a common interest in great entertainment. That’s the best way to explain the audience we see. It’s almost like launching planetary news. Which is really not done, “he said.
It is too early to say how much space there is in consumer budgets for all these subscriptions. An online subscription to The Information costs $ 39 a month, more than a subscription to streaming services Netflix, Disney Plus and HBO Max combined, although it is intended for those with a larger wallet. News publishing remains a shrinking industry, and even a success story like The Athletic is losing money.
“It’s still incredibly difficult to build a news organization,” Lessin warned. “It’s not a job for the faint of heart.”