Good afternoon, I'm Dylan Byers.

 

Welcome back to In the Room, my private email on the inner workings of the American media. Thanks as always for subscribing to Puck, and please feel free to reach out anytime. If this email was forwarded to you, you can sign up here.

 

Thanks,

Dylan

Iger’s Next Act and the Times-Athletic Tango

Deal murmurs, M&A rumblings, the Zaz rumor mill, Iger’s next moves, and other insights into the media in-crowd’s inside conversation.

It’s been a rollicking week here at the intersection of the media, tech, and financial industries following a number of major news breaks and year-end developments that could push the M&A frenzy into another, higher gear in 2022. Herewith, my conversation with Puck co-founder and editor-in-chief Jon Kelly about what’s on the horizon over the holidays.

Jon Kelly: Dylan, you recently wrote at length about The Athletic entering into exclusive deal talks with The New York Times Company. Any update on the progress here? And any further clarity on whether the Times itself would absorb The Athletic, or whether it would operate it as a standalone business unit?

 

Dylan Byers: Most of the sources I’ve spoken with believe this will go through, but it’s not a done deal yet. I was told by one source with direct knowledge of the negotiations that nothing is going to happen before the new year. (This news came as something of a relief to this reporter in light of Christmas.) The big question, as always, is the price tag. And one presumes that’s why the deal talks fell apart in the first place, earlier this year.

 

Athletic co-founders Alex Mather and Adam Hansmann were hoping for $750 million, which is a significant bump from the $530 million valuation tied to their last financing round. As readers of this email know, the value of a private company is more complicated than meets the eye. It’s usually achieved via a multiple on revenue, EBITDA, or quite possibly an adjusted-EBITDA, or even future revenue or EBITDA projections. And it’s also often set to support and protect the value of the early capital. Their investors, who have preferred equity, need to be paid back before anyone gets their money. 

 

Will The New York Times Company value The Athletic at $750 million? The company is losing a ton of money—$95 million over the course of the last two years. And the fact that these talks died and then were resuscitated leads me to believe the Athletic guys realized they needed to play ball on the Times’ terms. I’m speculating here, but I wouldn’t be surprised to see the price much closer to the valuation from that last financing round. One other lever that The New York Times Company can offer, which a merger with Axios did not, for instance, is Times stock, which is approaching heights seen two decades ago.

 

As for what the Times does with it, I think they’ll preserve it as a stand-alone app that’s integrated with the core product, much as they do with NYT Cooking. If you’re a basic Times subscriber, you can access the paper’s food coverage through the NYT app. But if you click a link for a recipe it redirects you to Cooking, which requires an additional subscription or an upgrade to the “all access” bundle. Articles by Athletic writers could be featured in the Times Sports section, but readers who want to go deeper will be redirected toward The Athletic—or NYT Athletic—which will require an additional subscription or upgrade.

 

There are obvious advantages to doing it this way. First, existing Athletic subscribers could have the opportunity to maintain their subscriptions at the current $5/month price, so the Times doesn’t risk sacrificing their overall digital subscriber count. (Remember, boosting digital subs with an influx of 1.2 million Athletic readers is one of the core reasons for doing this deal.) Second, adding the Athletic to the “all access” package gives the Times a reason to jack up its bundle price and boost the ARPU in that segment. In the past, The Athletic has been criticized in media circles for spending too aggressively on its growth, and hawking low-priced subs that are likely to churn. There may be some truth to this, but it may also have a sympathetic potential acquirer in the Times. In a recent earnings call, C.E.O. Meredith Kopit Levien suggested the Q4 sub numbers could be soft—a consequence of readers who joined on lower-priced initial offerings in the election cycle, who churned out thereafter. So I think the two companies are stronger together.

 

I really love this deal for the Times. As I wrote last week, sports fans are a sticky and insatiable audience—and it’s an audience the Times doesn’t currently have. It also helps them reimagine an offering that’s still marooned in the Harvey Araton/George Vescey era. Consider the potential for boosting subscriptions (and the ARPU on existing subscriptions) if your coverage of the teams in Los Angeles, San Francisco, Houston, Atlanta, etc., is as strong as your coverage of the Yankees. Mather and Hansmann won’t make the same money that they may have dreamed about a couple years ago, but they are still going to be very rich.

 

Media is awash in M&A chatter, and all for good reason. In general, global M&A activity crossed $5.5 trillion in 2021, and media saw plenty of the action, most notably the still-pending Warner Bros Discovery deal and Amazon’s acquisition of MGM. Our friend Sara Fisher also recently reported that Michael Moe and GSV are plotting a bid to acquire Forbes Media, which was planning to SPAC, but may not make it public given BuzzFeed’s lukewarm initiation to the public markets. 

 

Predicting M&A activity is entering the armchair culture. But you’re talking to the people in the C-suite. What are they watching out for next year, besides whether or not Shari Redstone pulls the trigger?

 

There is one question that comes up more than any other in my conversations with media executives, and it’s this: What is Brian Roberts going to buy? The conventional wisdom among the Sun Valley set is that Roberts was going to make a move to unite NBCUniversal with WarnerMedia, got blindsided by David Zaslav, and is now in need of a Plan B. Roberts and his spokespeople will deny all of this, but it’s hard for anyone to see how they keep pace with Netflix, Disney and Zaslav’s Warner Bros. Discovery without adding more assets—or, most enticingly, eventually merging with Zaslav’s new shop several years down the line. It’s also hard to imagine the immensely adept, competitive, and acquisitive Roberts sitting on the sidelines during this era of media consolidation. We’ll see.

In the meantime, the most interesting acquisition target for Roberts, or one of his peers, may be Bobby Kotick’s Activision Blizzard, the video game empire that’s trading at a discount in light of game delays and sexual harassment scandals. As I wrote a few weeks back, Activision would give Comcast’s NBCUniversal immediate entry into gaming, which is the fastest-growing content category in media, and a vast new trove of intellectual property, including the Call of Duty and Overwatch franchises. We don’t always think about gaming when we talk about media M&A, but we should. Reed Hastings and Ted Sarandos have already embarked on gaming at Netflix, and I wouldn’t be surprised to see Bob Chapek make Disney more aggressive in that space as well. Disney’s I.P. library offers a huge head start in the space. 

 

Speaking of Disney, you reported on Bob Iger’s final dinner in exquisite detail, down to the swordfish and chicken parmesan on the menu. Iger is a singular figure in our culture. And as nice as his yacht may be, I can’t imagine he disappears off into the sunset. Our colleague Matt Belloni has reported on his abiding interest in owning an NBA team. What else do people close to him suggest that he might pursue for his third act?

 

Executives of Iger’s caliber and temperament almost never sail into the sunset. They love the game and the influence, and so they find ways to stay relevant, with varying degrees of success. See: Barry Diller with IAC, Peter Chernin with Chernin Group, Jeffrey Katzenberg with WndrCo (and, of course, the fittingly short-lived Quibi). No one I’ve spoken with knows exactly what Iger will do, though quite a few believe he’ll open up his own investment firm. I could definitely see him coupling that with a sports team, as Matt reported. At least we’ve finally put to bed the idea of him ever running for office. You don’t spend a lifetime cultivating your image as the effortlessly refined model C.E.O. only to make yourself vulnerable to the unforgiving mudslinging of a political campaign. And I do know he really likes that yacht, by the way. There’s a reason his goodbye speech that night had a nautical theme.

 

While Iger exits Hollywood, David Zaslav seems to be entering like a feudal lord. It seems like everyone is trying to read the tea leaves about every lunch or dinner the guy has, and the fact that he plans to move to L.A. full time in order to be closer to his company’s studios. What are industry agents and executives predicting and discussing?

 

Sometimes I try to think about how good it must feel to be David Zaslav right now. For most of his career, he’s overseen some lucrative but definitively unsexy assets and now he’s pulled off the deal of the decade and put himself at the table with the major players in Hollywood. It’s hardly a surprise for anyone who has known him. Zaz was C.E.O. of the century and deal god Jack Welch’s prized protégé, and he learned a thing or two about how to amass corporate value and synergy through industrial combinations. He built Discovery Communications, and now Warner Bros. Discovery, through shrewd M&A, just as Welch turned GE into a behemoth. 

 

Now Zaslav is moving part time to Los Angeles, remodeling the $16 million Bob Evans house and meeting with absolutely everyone in town from the comfort of his Beverly Hills Hotel bungalow. Not bad for a kid who’s idea of a vacation was a stay at a Motel 6!

 

This is the honeymoon phase, of course. He’s just bought the team, the schedule looks promising, but the season hasn’t started. In the meantime, players and rivals are wondering who he’ll draft as quarterback. Current WarnerMedia chief Jason Kilar will almost certainly be out the day the deal closes—he memorably wasn’t brought in on the deal during negotiations. Who might replace him as Zaslav’s #2 at WBD? Kevin Mayer, who is currently advising Zaslav on the deal? Peter Rice, who is said to be restless at Disney? Jeff Zucker, who oversees CNN and Turner sports, but may have broader ambitions? I have absolutely no idea. I’m not sure Zaslav knows yet—but he’s got time. The deal isn’t expected to close til Q2 or Q3 of next year.

 

What’s the latest round of chatter within MSNBC about the sweepstakes to replace Maddow? Is Nicolle Wallace still the leading contender?

 

Yes, Wallace is still the frontrunner, for all the reasons I laid out back in September: she has the support of Maddow (and her fans), executives love her, her Never Trump Republicanism could centrify the network in a post-Trump universe, and she’s “producible.” Beyond that, we’re still at the point where the only people who know what MSNBC’s future looks like are Jeff Shell and Cesar Conde, which means the speculation among everyone else is mostly worthless.

 

But I would caution cable doomsdayers a bit. Even though the business is bleeding ratings, and it’s audience is older, the carriage fees are significant and stable enough to ensure that the business transformation will be slower and steadier than many imagine.

 

You’ve written before about the view expressed by John Malone, the cable titan and Discovery (and future Warner Bros. Discovery) board member, that CNN should return to its non-partisan roots. But between the midterms and a forthcoming general election that could include Trump, Cruz and/or DeSantis, will the network be able to resist the temptation?

 

Probably not. Outrage is easy; insightful analysis and real reporting is hard. I’ve also never expected Jeff Zucker to come into the 9 a.m. meeting one morning and announce that everyone needed to start playing it down the middle—far from it. This is the guy that encouraged Jim Acosta to grandstand even harder in Trump’s briefing room, that encouraged Breanna Keilar to rail harder against Republicans. This is a business, after all, and Zucker turned CNN from a post-prime relic to a business that made a billion in profit in 2017. Malone cares about that part, too.

 

That said, I do anticipate a more measured line over the long term. As noted above, change never happens fast in cable news, but as the oil tanker that is CNN sets its course for a future in Zaslav’s port, I do believe it will tack back toward a smarter kind of journalism. Think of it this way: CNN prime time, where a lot of the partisan opining happens, averages about 300,000 viewers in the 25-54 demo. If you’re Zaslav, that’s not exactly a killer streaming asset. But the CNN brand—the one that is synonymous with breaking news and in-depth reporting and great storytelling—that’s potentially a huge value add. Netflix doesn’t have that. Disney doesn’t have that (with apologies to ABC News). Amazon and Apple don’t even want that. So if part of your appeal to consumers is, “We’ve got news,” you better make damn sure consumers still associate your brand with news—and not the #resistance.

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