Happy Friday, I'm Dylan Byers.

Welcome back to In the Room, my biweekly private email on the intrigue and inside story behind what’s going on in the media industry. As you know, In the Room is part of Puck, our four month-old media company focused on the nexus of Wall Street, Washington, Silicon Valley, and Hollywood. If you want to buy a group subscription for your team or colleagues, please reach out to Fritz@puck.news. We’re now offering group subscriptions.

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Without further ado, it was a busy week in the industry. Here’s what’s been occupying my notebook and text threads.

Have a great weekend.

Cheers,

Dylan

The Times & Athletic Make It Official

My chat with Times C.E.O. Meredith Kopt-Levien, plus reporting on the latest news at CNN and BenSmithCo.

Alex Mather was—reasonably, deservedly—celebrating when I texted him last night, hours after The New York Times announced its stunning $550-million all-cash acquisition of The Athletic. The deal was a coup for both Mather and his fellow co-founder Adam Hansmann (and a masterstroke for ubiquitous banker-to-the-stars Aryeh Bourkoff, and his deputy Alex Michael). Six years ago, Mather and Hansmann had capitalized on the disruption of the newspaper industry by snapping up many of the nation’s best local sports reporters and fashioning themselves as, in Mather’s words, “the local sports page for every city in the country.” Nevertheless, they were still burning about $50 million a year on average and appeared to be hitting a growth ceiling. And yet, they’d managed to convince the subscriber-hungry Times that their 1.2 million paying readers were worth more than half a billion dollars. It was probably the most lucrative and well-timed exit they could have hoped for.

In industry circles, The Athletic’s reputation has been sullied of late based on their reported aggressive burn rates and a belief that a significant portion of the subscriber base included at-risk, highly discounted subscribers. But the sale price, which represents a 10x multiple on revenue, is a power manifestation of the industry’s interest and emphasis on the long-term value, or LTV in industry parlance, of a subscriber. It’s a staggering multiple that must have many traditional publishers in heat today.

Mather wasn’t ready to talk about the deal last night, but Times Company C.E.O. Meredith Kopit Levien was game. It was, after all, her most notable move as chief executive of the Times to date. “We’re building volume,” she told me in a video interview. “We want to build a big audience around quality journalism… journalism for passionate fans.”

There is an obvious logic to the deal for the Times. As I explained last month, an Athletic acquisition stands to elevate the paper’s lackluster daily sports coverage and make it a dominant source for local sports teams in most major and mid-level U.S. markets—with all the long-term benefits that entails for boosting subscriptions and growing ad revenue. It also provides the Times with a potential opening to capitalize on the expansion of sports betting—a revenue stream that Kopit Levien indicated she was open to, further down the line. More immediately, the Athletic acquisition brings an influx of 1.2 million digital subscribers to the Times, a move the street rewarded Thursday with a nearly 5 percent jump in $NYT stock. 

Nevertheless, it is important to note that an Athletic subscriber is today not worth as much to the Times’ bottom line as a full-fledged Times subscriber—and that there may come a point in which the street starts focusing less on subscription numbers and more on ARPU, or average revenue per user. A full-cost Times subscription comes out to $221 a year; at most, an Athletic subscriber is paying $72 a year, though an untold amount of the Athletic’s 1.2 million customers are first-year subscribers who are paying as little as $12 a year thanks to trial subscriptions. So part of the Times’ gamble rests on its ability to either a) convince Athletic subscribers to become full-fledged Times subscribers; b) convince Times subscribers to pay more than $221/year for the privilege of local sports reporting; or c) both. 

Kopit Levien argues—reasonably, deservedly—that the Times has “honed the data science” for adding subscribers and then pricing them up. “We have a really good track record of building volume first,” then growing revenue per subscriber, she said—and she’s not wrong. Meanwhile, volume is of course crucial to scaling up the advertising business, as well. 

In the meantime, there is reasonable anxiety among Times and Athletic rank-and-file over the impending layoffs that will come about as a result of this deal. The Times currently employs less than 2,000 journalists, about 40 of whom are on the sports desk. With the acquisition, it will add 450 sports reporters and editors. When asked about staff cuts, David Perpich, the head of standalone products at the Times and the newly named publisher of The Athletic, told me that he and his colleagues “believe we can build a great business on top of a 450-person workforce.” But if you believe The New York Times Company intends to employ 500 sports journalists, I have an NFL franchise to sell you. As is almost always the case in mergers and acquisitions, there will be blood.

Mr. & Mr. Smith

Elsewhere at the Times, sources are wondering who might replace Ben Smith as media columnist now that he is leaving the paper to join forces with Bloomberg Media C.E.O. Justin Smith (no relation) and launch a global media brand that aspires to rival the Gray Lady herself. I have no inside knowledge on that, but my gut tells me the answer is: No one, at least not for a while. The position had been vacant for nine months before Smith took over anyway, and after all of Smith’s attention-grabbing success in that role—including his takedowns of Carlos Watson, Julian Reichelt, and, in a way, Ronan Farrow—I can’t imagine why any media columnist would want to be judged against his successes. It’s practically a death sentence.

Meanwhile, the most pressing question among media executives I talk to centers on the funding for Justin and Ben’s new venture. Justin told me earlier this week that he was funding the project himself while securing outside investment, but it stands to reason that he wouldn’t have set this in motion without some financial guarantees in place. And yet no one I’ve spoken with seems to know exactly who intends to back him. This has already led to all sorts of speculation about foreign money, which might make sense given Justin’s vast international Rolodex and his global ambitions.

Over on the television side, I took great interest in the news that CNN had signed star recipe author Alison Roman to host a “highly opinionated and never finicky” cooking show for CNN+. Beyond my own fascination with Roman’s career trajectory—and the fact that we cook her recipes religiously in my home—the news convinced me once and for all that Jeff Zucker and Andrew Morse have a very different vision for their streaming outfit than that of their rivals at NBC News. Between Roman’s cooking show, Eva Longoria’s Stanley Tucci-esque explorations in Mexico, and even Chris Wallace’s newsmagazine, it’s clear that CNN+ will not offer a watered-down, B-team version of the cable network’s linear offering. Instead, CNN+ will feature a broader array of nonfiction programming that goes beyond traditional cable news—something Zucker laid the groundwork for with CNN weekend programming like Anthony Bourdain: Parts Unknown, almost a decade ago. 

I have to imagine that will fare much better than NBC News Now, which despite a few notable names still adheres to the linear cable news format and mostly feels like training camp for NBC News and MSNBC. (NBC News has also launched the “Today All Day” and “The Choice” streaming services, which expand the aperture of news programming). The strategy actually reminds me a lot of how newspapers and magazines treated the rise of the Internet twenty years ago—essentially jettisoning the B-team to a webby rubber room. The New York Times once famously believed that its digital project was essentially a separate entity, with a separate team.

Obviously, if you’ve made it this far in the piece, you know that the Times Company caught up, and then some. But many other staples of the culture didn’t. I’m certainly not saying that the vast resources of NBC News (my former employer, by the way) are imperiled. I’m noting, instead, that they should embrace the difficult, complex, often contractual conversations that come with convincing talent to embrace the next thing, rather than the current domain. It may be too late before they know it. And as David Zaslav and Jeff Zucker know, Netflix, Disney, and Amazon aren’t touching news. It should be a profitable business in the future. And the future always comes faster than you realize.

Zucker and Trump: The Latest Chapter

And finally, speaking of cable news, I noticed via Maggie Haberman that former President Donald Trump cancelled his January 6 rally in part because he realized he wasn’t going to get the attention he so desperately craved from television news outlets. A couple sources familiar with the matter tell me the outlets had agreed to pool coverage, rather than sending their own reporters. And in a Monday morning conference call at CNN, Zucker informed the network’s producers that there would be no coverage of Trump’s remarks unless he announced he was running for re-election. Quite a turnaround from the days of wall-to-wall Trump coverage in 2015.

FOUR STORIES WE'RE TALKING ABOUT