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 your interest in Puck. You can read a free preview of my work below. Or, better yet, subscribe now to read all of my reporting in full, online or delivered directly to your inbox. 

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...

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