On June 5, The Athletic co-founders Alex Mather and Adam Hansmann gathered their staff of nearly 600 people for a grim all-hands meeting on Zoom.
The two said that they would lay off 46 journalists, equivalent to 8% of the company, due to the economic crash related to the coronavirus and halting of major live sports like basketball and football that drive the sports news startup's $60-a-year subscriptions. They also cut most staffers' pay by 10% for the rest of the year; those making over $150,000 took steeper pay cuts.
"This is a dark day for the company at one of the darkest moments in recent memory for most of us in the country, in the world," Mather wrote in a memo to staff. "Not a single person leaving is at fault. They did nothing wrong."
The tone had changed from March when Mather described The Athletic during a company meeting as a lion that was going to roar back once the coronavirus ended. After the NFL Draft in late April, his metaphor changed to being an airplane pilot expecting upcoming bumps.
"Over the last month, the demeanor changed in Alex and Adam — it was a little bit more dour, and you could tell that the numbers weren't going to be great," one laid-off editorial staffer said.
Many other media companies, from BuzzFeed to Vice Media, have similarly cut staff in the downturn. Some Athletic staffers were surprised by the depth of the cuts, though, since executives had been taking a salary cut since March and the company had just raised $50 million in Series D funding in January for a total of $139.5 million.
Tensions grew as the company faced a world without live sports
Five former staffers recalled a meeting at the peak of the coronavirus where the founders announced that 30 execs would take a pay cut. Employees were allowed to ask anonymous questions, and one asked when staff would be able to negotiate raises despite the coronavirus. Mather responded with an expletive saying how lucky the staff was to have jobs given the circumstances, according to the staffers.
"It was an awkward, sobering way to end that meeting," said a former employee, adding the message contrasted with earlier messages of "blind confidence" from management during the early days of the coronavirus.
Business Insider spoke to 16 former employees who worked in a variety of departments at The Athletic, 11 of whom left in the past couple of months, and two current staffers, who described the coronavirus' effects on a young and growing media company. The former employees spoke anonymously because of severance packages and disclosures that forbid them from talking to the press. They described pressure on journalists to crank out stories and questions about the business model and long-term potential.
At stake is the company's well-funded and aggressive push to upend traditional sports media like ESPN and Sports Illustrated.
"If this fails, it's going to be the biggest disaster in sports-writing history," said a former journalist at The Athletic.
The Athletic had been on a subscription tear, with self-reported subscriber numbers doubling to 600,000 in 2019 from 300,000 in 2018. New subscriber growth had decreased to 20% to 30% during the coronavirus.
At the same time, podcast advertising — a small but growing source of revenue that supports The Athletic's big push into audio — has taken a "significant" hit, according to the company. Two out of three of The Athletic's largest advertisers plan to spend money with the company in the third-quarter of the year, though, said spokesperson Taylor Patterson.
In addition to the 46 journalists, The Athletic also laid off its freelancers and a programming team on the marketing side and dialed back on video. After hiring TV journalist Armen Keteyian and producers Alan Goldberg and Victor Frank to build a video division, the three left earlier this year after their contracts were not renewed.
The Athletic was built on a data-based approach
Mather and Hansmann are former employees of Strava, a tracking app for athletes, and sports fans who founded The Athletic in 2016 as a subscription-based sports news site that went deep into covering teams, especially local ones, and a mission of saving journalists from the struggling newspaper and TV businesses, using a data-backed approach. The Athletic talked about a goal of 1 million subscribers by the end of 2019.
"We will wait every local paper out and let them continuously bleed until we are the last ones standing," Mather told The New York Times in 2017. "We will suck them dry of their best talent at every moment. We will make business extremely difficult for them."
They poached big-name sportswriters like Stewart Mandel and Ken Rosenthal by dangling big salaries and a promise of freedom to pursue in-depth journalism. One recently laid off staffer said that The Athletic offered a 30% higher salary than their pay at a local newspaper.
To support the expensive model, The Athletic raised $139.5 million from venture capital firms like Comcast Ventures and Bedrock Capital Partners, giving it a theoretical value of $500 million.
The aggressive push for talent sent ripples across the sports media industry, especially since Mather and Hansmann didn't come from media. Most of the recently laid-off staffers said that the sports journalism world has long been skeptical of the model, and several said that during the interviewing process, they grilled the company about the economics behind The Athletic, which include benefits and big travel budgets for reporters in addition to high salaries.
"When traveling around, I would see other writers sometimes be a little bit envious of our situation — mostly how we were allowed creativity in our work and how involved we were with everybody across the company. Double bylines were not just encouraged, but pushed," said one former writer. "Especially early on, there was an emphasis on taking your time and making the extra call."
Staffers said The Athletic lowballed its subscriptions to the press
Spokesperson Patterson told Business Insider that the startup was nearing its 1 million subscription milestone, without giving a timetable.
But the last number it publicly disclosed was more than 600,000 subscribers in August 2019. As live sports ground to a halt, they acknowledged there's been a slowdown in acquiring subscribers and people have cancelled subscriptions. The Athletic upped its discount to a 90-day free trial to attract readers, up from its usual discounts of a week or month free.
Mather and Hansmann routinely share basic data about subscribers with staffers like retention and churn rate, a measure of how many people renew subscriptions. Hansmann told Digiday in October that 80% of subscribers renew their subscriptions every year and 90% engage with content during busy sports times of the year.
Multiple staffers said it was unclear to them how close the company is to hitting its subscription goal, as data like total subscriptions is held closely by top management, as is common for subscription-based publishers. Three former staffers said that the company would often tell media outlets one figure and then tell its own staffers a higher number, lest information leak to the press.
"A lot of it is murky," said a recently laid-off journalist.
The Athletic also needs significantly more than 1 million subscribers to build a long-term, profitable business. Hansmann said in the interview with Digiday that he wanted to rival large subscription publications like The New York Times and The Wall Street Journal, which are long established, have millions of subscribers, are general news-focused and often charged as a business expense.
"Being in that rarified air, we would feel at that point incredibly secure," he told Digiday. "We're not profitable yet but we're obsessed with profitability long-term and getting to a level of subscribers and revenue that will support and sustain the work that we do."
The Athletic expected to be profitable this year before the coronavirus
The Athletic's goal was to be profitable in 2020 when the coronavirus struck.
"Going into March, we were well on our way to achieving this goal," Mather wrote in the June 5 memo. "But as the pandemic has set in and as the sports calendar has remained frozen in place, it has become clear to us that those best-laid plans have irrevocably changed."
"Pre-COVID, it was always about 'What's the latest good news?'" said one former writer. "This is what happens when you're a sports website and you go for three months without any sports — it's just not easy."
One former staffer said the good life for journalists there made it easy to ignore warning signs. Writers and editors didn't have to shoot video to go with their stories like they had to do at newspapers. Expenses were easy to file through a software program. And the founders lavished praise on in-depth reporting.
"Alex and Adam are really good at making you feel good about yourself, and there was a real effort to make the culture and everyone feel good. In hindsight, that may have allowed people to overlook questions," said the former writer.
Journalists spoke of growing subscription pressure
The Athletic reporters have quotas ranging from 10 to 20 stories per month, depending on the sport and if it's in season or offseason, as well as subscription goals. Before the virus hit, former employees said there was growing pressure to crank out subscriptions.
Staffers have loads of data to figure out what stories drive subscriptions. A Slack bot pulls in stories that accumulate five subscriptions within 24 hours. Stories that hit 100 subscriptions are known as home runs and pieces that generate 500 subscriptions are dubbed grand slams.
But several people said that subscription goals are hard to reach and tend to favor big names and mainstream stories of national interest like ones on the Los Angeles Lakers' LeBron James or the New England Patriots — not the local teams and sports that they were hired to cover.
"It takes a lot for them to come together — it has to be the right subject and you can't force them," said one former writer.
Jon Krawczynski, a senior writer at The Athletic, pointed out that big hits like home runs and grand slams need to be balanced with smaller stories to keep sports fans interested.
"Once you get a subscriber to subscribe, you have to give them reasons to stick around. They didn't sign up just for the big, salacious story — they also want to be informed regularly," he said.
The model also makes it harder for younger journalists and people covering small markets to succeed as much as the bigger-name hires, three former staffers said.
Three former staffers said that data analysts started recommending stories for journalists from publications like Bleacher Report over the past year, which one worried would water down The Athletic's promise for exclusive stories.
Staff diversity is a challenge at The Athletic
The founders' tech background is felt at the company headquarters in San Francisco, where its marketing, product, finance, and engineering staff are based. Three staffers on the business side described The Athletic's management as "yes men" who always agreed with Mather and Hansmann.
"The way the company is structured is very much like a boy's club where what Alex says, goes," said a former marketing employee. "If you questioned that, you'd get fired."
Patterson pushed back on the idea that management is not flexible and said that 60% of Mather's direct reports are women.
As for The Athletic's reporters, two sources said the company leans on staff recommendations in hiring, which has worked against hiring a diverse staff. Most of The Athletic's staffers are white men. When The Athletic cut freelancers in March, it impacted the site's WNBA coverage and women journalists in particular.
"It was like a good old boy network," said one former writer.
The sports media industry overall is known for being hard for women and people of color to break into. In January, Sports Illustrated cited diversity in hiring practices in its decision to form a union with the NewsGuild of New York.
Current and former employees said that The Athletic has worked to build a diverse staff and noted staffers like national NBA editor Khalid Salaam, DC editor in chief David Aldridge, and NFL managing editor Lisa Wilson as prominent Black and female hires.
"Diversity in every newsroom in sports writing is a challenge — I think Alex and Adam would be the first to tell you that we've done a good job but let's do better," said Dana O'Neil, a senior writer at The Athletic. "While we try to hire established people, there is also an understanding that if there is a really talented young person, let's give them a chance to settle in."
One former writer also said that the publication explicitly gave writers freedom to cover the reckoning around racism and protests surrounding George Floyd's death. Staff writer Tony Jones published a piece about why he's glad sports have taken a sideline to the protests. Another article chronicled experiences that The Athletic's Black writers and editors have had with racism.
"They let reporters have their voices — there was a lot of freedom but they also wanted to make sure that people were being responsible with what they wrote in difficult and sensitive times," the writer said. "I thought they did their best."
Some question if The Athletic can build a long-term brand
Live sports will eventually come back, and with it, likely, The Athletic's subscribers. But beyond the current coronavirus-related challenges, The Athletic faces questions about its ability to build a lasting brand that can stand up against the likes of ESPN and Sports Illustrated.
Readers have a strong connection with The Athletic's journalists, but that doesn't necessarily extend to the publication's brand. Minutes after The Athletic journalists started tweeting about layoffs on June 5, readers flooded social media to say that they planned to cancel their subscriptions.
"The Athletic just lost a ton of subscribers today," a reader tweeted at longtime LA Lakers writer Pete Zayas after he announced he was laid off.
—art ayala (@archurops) June 5, 2020
The Athletic has hired some of the best-known sports reporters, but some laid-off journalists said the site has struggled to differentiate itself from giants like ESPN. Local sports, meanwhile, has been covered by corporate-backed newspapers for decades. On Twitter, The Athletic's main account has 95,000 followers compared to Bleacher Report's 8.7 million Twitter followers and SBNation's 315,000.
"There were a lot of people that knew my work but weren't sure where I wrote," said a former staffer.
Neither Mather and Hansmann come from marketing backgrounds, and one former marketing employee said the founders believe that The Athletic markets itself.
"I'm a firm believer that their written content is top of the line, but what I struggled with is, if you have the best content but nobody knows that it exists, what's the point?" said the former marketing employee. "They don't have a brand identity, and whenever marketing people would want to bring it up, they would get black-balled."