Does the Rumored Axios/Athletic Merger Make Sense?

Last week, The Wall Street Journal reported that there were talks between Axios and The Athletic about a possible merger.

If Axios and the Athletic merge, the combined company may seek to raise money for expansion and acquisitions, according to people familiar with a presentation aimed at potential investors. The long-term plan is to bring additional digital publishers into the fold, especially those with content that consumers are willing to pay for and that can earn a premium from advertisers, the people said.

…

Axios and the Athletic believe one potential growth area is selling subscriptions to businesses at a premium rate, according to the people familiar with the investor presentation. Mr. VandeHei and one of his co-founders, Axios President Roy Schwartz, helped create Politico Pro, a business-to-business publication, when they both worked at Politico.

There’s a lot to digest in this rumor and, to be honest, there are reasons both in favor and against this ever happening. Let me try and explain why.

Local content

Axios has been moving into the local market, launching newsletters across a variety of cities in the United States. It even paid approximately $5m to acquire The Charlotte Agenda (paywall) and renamed it Axios Charlotte. I think it’s an interesting strategy that could work, but has some possible problems that the team still needs to solve. Read my analysis in the linked article.

The Athletic is all local, all the time. It covers local sports teams for an audience that might have national and international interests. I’ve been honest about my concerns about The Athletic, but from a content perspective, it fits perfectly in the local bucket.

Merging the two brands, therefore, would make sense. Axios Local and The Athletic becoming one would create an incredibly strong product to compete with the local papers in those various geographies.

The problem is that, at least according to the rumors, the intention would be to keep the two brands separate. The two editorial teams would each operate independently. If a big hope here is that this creates a more robust local strategy, I’m unsure how keeping the brands separate helps.

Complementary businesses

While keeping them separate and operating as a house of brands is an approach that is mildly confusing to me, what isn’t confusing is how complementary the two brands are to each other.

Axios serves a specific type of audience, selling very expensive advocacy ads. This audience is likely incredibly high net worth and comprised of decision makers in government, finance, etc. The Athletic is an ad-free business that sells subscriptions to die hard sports fans with less specificity about who they are.

Bringing these two together allows them both to expand their capabilities. Axios can learn how to sell a high volume subscription product in the event it wants to move more aggressively toward competing with The Times. The Athletic can learn more about selling ads (though it’s really not that hard).

One way to create an incredibly diversified business is to simply have two separate brands that generate revenue in different ways. If one goes south for a little while, you’ve still got the other.

Building B2B

There’s just one problem with what I wrote in the previous section…

In WSJ’s reporting, this sentence jumps out to me: “Axios and the Athletic believe one potential growth area is selling subscriptions to businesses at a premium rate.”

No they don’t. Axios and The Athletic would not be having a conversation if the idea was to build a high-priced subscription product targeted to businesses. It doesn’t make any sense whatsoever. The Athletic is a consumer product through and through.

Why does that matter?

When you’re selling a consumer product, your subscription process is different. It’s very heavy on paid ads to drive users to pages so they can see the paywall, convert, and hopefully not churn. There is no “seller” at The Athletic trying to hawk a sub.

A premium rate subscription—aka, a B2B subscription product—requires a higher touch. Consider Politico Pro. The Axios founders helped to build Politico Pro, that brand’s B2B product. One thing that immediately jumps out is that there isn’t even a subscription page. I mean it. Go try and subscribe to Politico Pro right now. What you’re going to hit is a page that says “request a demo” or “schedule a consultation.”

This type of premium subscription requires a sales team that can work through the client’s specific use cases for information and then present a five figure cost to them. It’s a great model if that’s what they’re trying to do, but it’s nothing like what The Athletic has built so far.

Now… if the idea is to compete with Bloomberg or The Wall Street Journal, which both charge a few hundred dollars for a premium subscription, there is an argument to be made that The Athletic’s systems could be valuable. But if they’re looking to build Axios Pro, the merger of the two isn’t complementary.

Axios could have the right strategy

I haven’t hidden that I find Axios’ strategy to be a bit confusing. On one hand, it is continuing to expand into new areas where it can further serve its audience. On the other hand, I can’t help but feel like it’s trying to do everything all at the same time.

That said, I am intrigued by the notion that Axios could be looking to acquire publications that have very specific types of audience—those that either command high ad rates or can sell subscriptions.

This creates a very interesting funnel. At the top is Axios with its large email list of business professionals. If it acquires a publication, it can drive audience down to that property with the hope of converting those people to paid subscribers. Or, it just becomes a play where Axios can earn even more from advertising. A more specialized site should be able to get away with a higher CPM.

Frankly, I think Axios trying to move into the B2B space more aggressively is the right approach for the brand. It can use any acquired brands as the foundation for a premium subscription. And it fits within its business professional audience. These are people that work in fields that require accurate information and they’ll pay for it.

The Athletic, on the other hand, could be an interesting opportunity, but I think it pulls Axios in a direction that would make it less valuable. Trying to compete with a generalist publication like The Times—except with a robust sports section—doesn’t feel right to me.

Ultimately, I would be surprised if these rumors came to fruition. There’s little reason to doubt the two brands want to take advantage of all these SPACs to go public, but I believe a merger creates complications rather than synergies.