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July 14, 2023

Editor Note: JohnWallStreet and Guggenheim Securities' Michael Morris hosted our second sports investment 'mini-camp' earlier this week.

Investors representing just shy of $860 million worth of institutional capital turned out alongside a handful of select industry leaders for an interactive discussion on sports betting and gaming led by Eilers & Krejcik partner emeritus Chris Grove. 

How did it go?

Here's the feedback from one JWS A-Lister in attendance: "Tight. Informative. Prepared. Included both 'news you can use' and things you didn't know. That hour plus stands in stark contrast to most similar programs I Zoom in for or attend."

A second wrote: "It was terrific. The only issue is that I wanted more! Such a rich array of topics, all of which are very timely. Well-done folks."

As mentioned on Wednesday, there are plans to continue and expand on the series in the months ahead. We'll pause in August before returning with another NYC-based event in September. Much more news to come in the weeks ahead.

And as a reminder, Adam Grossman takes the controls on Friday mornings. You will find his latest

Revenue Above Replacement

column below. I'll be back on Monday. Have a great weekend.

NYT’s Decision to Disband Sports Department Indicative of Growing Media Bifurcation

The New York Times’s decision to disband its sports department and instead rely “

on coverage of teams and games

from its website The Athletic” is a historic moment in sports media history.

“For decades, the excellent sports reporters at The New York Times were must-read on topics ranging from sports media to concussions to international developments such as FIFA, the IOC, and LIV and the PGA Tour,” John Kosner (president, Kosner Media) said.

By contrast, The Athletic launched in 2016.

However, the recent announcement is also indicative of a broader change occurring within the industry. There is an increasingly clear bifurcation between media outlets providing analysis and those offering straight news or event coverage.

The NYT’s decision to purchase The Athletic in January of 2022 was seemingly a bet against this reality.

The Times acquired the sports news site to fuel digital subscriber growth. The company currently has over nine million subs. One million came with its acquisition of The Athletic.

However, The Athletic rarely produces the unique or difficult to replicate content that has historically driven the Times’s digital subscription business (think: long-form journalism, opinion, crosswords, games, cooking recipes, and product reviews). While it will publish the occasional a long-form or opinion piece, it is primarily known –and consumed– for its team coverage.

The problem is, it's hard to compete and win on news and information in today's media marketplace.

“Sports news and information is largely a commodity in today's media marketplace,"  Ben Shields (senior lecturer, MIT Sloan School of Management) said. "The score is the score, no matter where you see it.”

And the second one outlet has it, it gets picked up and published by dozens more.

As a result, media companies focused on ‘standard’ news and event coverage are struggling to compete with the likes of Google and Meta for advertising dollars.

Sports outlets are not unique in that way. There are plenty of businesses that operate in competitive environments with commoditized products. Those that are successful have differentiated brands.

PepsiCo and Coca-Cola help to illustrate this dynamic.

Soda is primarily just flavored carbonated water, and consumers can buy a SodaStream system and make their own versions of it at home. Yet, both companies are multibillion-dollar businesses.

That is because consumers do not want any soda. They want a Coke or Pepsi, the brands they associate the product with.

The Times’s choice to disband its sports desk makes more sense when one views brand as the framework for the strategic decision.

While fans can find comparable coverage on other sites, they have come to recognize The Athletic (and ESPN) as two of the ‘go to’ places for digital sports coverage. ESPN

set

a record with 120 million monthly unique visitors in October of 2021 (the last publicly reported data on the company’s unique visitor counts).

The Athletic was the fastest

growing

sports digital site in terms of unique visitors that same year. It was acquired the following January.

The Athletic’s success growing its digital subscriber base in the face of rising competition from artificial intelligence providers is evidence brand matters in the media business.

Outlets, including the Associated Press, have been using ‘automation technology’ to write game recaps since 2015. Large language models (LLMs), built by companies like OpenAI, have made it even easier and faster to produce high-quality automated text recaps since.

And yet, The Athletic managed to build an audience of more than a million digital subs (albeit unprofitably).

Ironically, the strength of The Athletic brand helped solidify the bifurcation reality that culminated in the shuttering of The Times's sports desk. The company felt its own sports section could never be as successful driving digital subscriptions as the VC-backed local sports play because its brand is not one fans associate with sports coverage.

The Los Angeles Times recently came to a similar conclusion announcing it will no longer have box scores, standings, game stories, TV listings or a daily sports calendar.

It is important to note that The New York Times is not firing its sports reporters. It is re-assigning those individuals to other roles in the newsroom so that they can focus

on

“how sports intersect with money, power, culture, politics and society.”

Retaining those reporters shows that The Times is still interested in covering sports in a way that is consistent with its flagship brand. Doing so may also help the company to avoid a lawsuit.

However, closing the near 100-year-old sports desk is a clear indication that The Times does not believe valuable analysis and commoditized news focused content should live under the same roof (or brand).

It will be interesting to see if other legacy media companies come to the same conclusion. Kosner expects they will. 

“[It's a] sign of what’s coming,” he said. “Full-fledged sports news departments are going away. What’s next are non-traditional influencers who can build sports communities based upon a team, league, event or topic.”

About the Author: Adam Grossman is the Vice President of Business Insights & Analytics at Excel Sports Management. He works with companies, sports properties, media rights holders, athletes, agencies, and events to determine the value of their most important assets. Grossman is also a professor at Northwestern University Master’s In Sports Administration program and the co-author of The Sports Strategist: Developing Leaders for a High-Performance Industry. You can find him at [email protected].