A Good Private Equity/Media Deal?

How The Athletic should diversify & Group Nine Media gets more investment

Apologies for disappearing for a couple of issues. It was my first time in China and The Great Firewall seriously screwed up my research. Not to mention this jet lag has seriously screwed up my life, but I am getting back on schedule. So, with that, we’re back with a new issue of A Media Operator.

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When we talk about media being purchased by private equity, it tends to be a sad story. But perhaps—and this is still a maybe—there’s a deal that can actually be a good one.

Falfurrias Capital Partners, a Charlotte-based private equity firm, acquired a majority stake in Industry Dive, a B2B media company with 19 industry verticals (and corresponding newsletters). Although terms were not discussed, Flashes and Flames reports the valuation was around $70 million.

This isn’t an outright takeover since co-founders Sean Griffey, Ryan Willumson and Eli Dickinson are sticking around and still own some of the business.

So, why do I think that this deal could wind up being good?

There are two ways that PE generates a return after it buys something. It either cuts costs aggressively while adding a bunch of debt to the business or it invests in the business. The former is how a lot of media deals go down. The latter seems to be how this deal is going down.

In an interview with Folio, CEO Griffey said:

We were attracted to Falfurrias because they shared our vision for the future. From the very first meeting, they highlighted their belief in the importance of high-quality, independent journalism to grow media companies. That resonated with the team here. We’ve had opportunities in the past but never felt that we had a partner who so closely aligned with our vision and values before.

This is key because it’s truly the only way to make a media business more successful. It’s easy to believe that cutting journalists will save money and then with fancy tactics, you can grow revenue. But that’s just not reality.

The only way to truly grow a media business is to continue doing great journalism. If you have great journalism, being a media operator is easy because the audience naturally comes to the site.

So, what comes next?

Industry Dive generates all its money from its direct response advertising products. B2B companies don’t have huge brand budgets, so anything they do has to directly tie to revenue. The business is clearly working.

In 2018, it had EBITDA of $5.8 million on revenue of $22.4 million. If 2018 revenue was up 40% over 2017, let’s pretend that growth is slowing a little and 2019 revenue is only 30%s greater than 2018. That would mean the company generates $29 million in revenue this year. If margins stay current, EBITDA would be approximately $7.5 million. I would wager margins have improved since the brands are getting older and they’re streamlining operations across more brands.

As a quick aside, one of Industry Dive’s benefits as it adds brands is that it’s able to streamline operations, which reduce costs. Here’s a tweet from the CEO of Aging Media that sums it all up:

Suffice to say, the ad business is in a great place and as Industry Dive continues to add additional brands, that centralized ops/sales/design team won’t need to scale linearly to support those brands. That should help it continue growing its margins.

But this points to why I think this deal happened now. The business is strong, but it’s still entirely advertising based. The press release hints at what’s to come (I’m speculating here):

Industry Dive’s partnership with Falfurrias comes at just the right moment, when we are ready to scale our B2B journalism, business intelligence, and sales and marketing products to new audiences and new industries. We wanted growth partners who were true managers, builders, and advisors, not only financial supporters, and we’ve absolutely found that in Falfurrias.

Emphasis is mine, but I think that business intelligence section is worth calling out. In my opinion, business intelligence is another way of saying research. And for B2B brands, that’s another way of saying “subscription content.”

This will take considerable investment because teams of analysts cost money and then there is the operations side of running a subscription business. While the latter can have the same centralized approach (to some extent), the former can’t be spread out across multiple teams since each niche requires specialty.

Research can be a very hot business and when you have an audience that trusts you, it’s not hard to imagine customers forking over four figures for business intelligence. It doesn’t require a large number of clients for this to be a significant addition to revenue.

I also fully expect Industry Dive to enter the trade show business. A big reason we were to able to grow Consensus to thousands of attendees is because the event series was built on the back of a strong editorial brand. It’s far easier than trying to do it without the editorial brand. With how many contacts they have in their database, marketing targeted events won’t be hard.

Ultimately, we won’t know if this is a good private equity deal until Falfurrias screws it up. But assuming it goes well, which if we trust everyone involved at their word, it will, then there are a few things to take from this:

  1. Niche wins in media

  2. Email is so important for niche media

  3. If you’re thinking about launching a media brand, pick a strong niche and report the hell out of it.

I’m excited to see what Industry Dive does next.


This news is a bit older now, but still worth covering because it’s a duh moment.

According to Axios, The Athletic is experimenting with free content that might include advertising.

The company will start by offering one episode a week to non-subscribers in front of the paywall and one behind. The goal is to offer people who might be less likely subscribe to The Athletic the ability to sample some of company's content.

A small portion of the free audio will include advertising. While this is just an experiment for now, the source notes that the company is likely to ramp up advertising efforts in the future.

Normally, this wouldn’t be worth calling out, but it’s so obvious that this was going to happen.

The Athletic billed itself as the alternative to ad-based media. Pay for content and you won’t ever need ads. The problem is that depending on a single source for revenue is dangerous. Diversification is important.

The introduction of free content supported by ads could also be a way to get more people to sign up. The Athletic is a hard paywall, which means there’s no tasting before you buy. The introduction of this free content could entice users to sign up if they want even more.

My guess is they’ll stick to podcast advertising because it is the least offensive. I don’t expect them to throw banner ads up on the site, primarily because most content will still be locked, so they won’t get the necessary pageviews for that to move the needle. I am curious to see what their plans are with video because CPMs on ads can be pretty high, but for a media company that said they’d never do ads, it can be a hard pill to swallow.

Since we’re talking about revenue diversification for The Athletic, let’s speculate on what else they should. I actually think they should take a look at what Bleacher Report is doing and really invest aggressively in multi-revenue streams.

Back in June, Digiday wrote a story on how Bleacher Report was on track to hit $200m in revenue. Where some of that growth is coming is two newer two divisions. The first is experimental marketing, which is just a fancy way of saying events, and then commerce.

For instance, earlier this year, Bleacher Report hosted a House of Highlights-branded activation during the NBA All-Star Game, which included a studio, a gaming room and a basketball gym — sponsored by Adidas, McDonald’s and Twitter. Revenue from the experimental marketing team is up 67% year over year, according to a Bleacher Report spokesperson.

Bleacher Report is weaving in commerce with custom apparel and other merchandise that the company sells to fans both online and through its events. For the upcoming FIFA Women’s World Cup, Bleacher Report is working with female artists to design nine unisex soccer jerseys, which people will be able to purchase on Bleacher Report’s site. Bleacher Report’s commerce business is still in its early stages, with revenue up 500% year over year, said the spokesperson.

Both of these would be smart plays for The Athletic. The former is a great way to get marketing spend from companies without having to do ugly advertising on the site. And the latter is a great way to get paying customers to spend even more with you. I actually think that a paid subscriber is more likely to buy something than a free subscriber. If you love a team enough to pay to read about it, you’ll want swag.

There are two ways I’d look at doing this.

  1. Affiliate marketing: Start driving revenue to Fanatics, which says they pay up to 10% on revenue. Then, when you’re generating enough, you can work out a custom deal with them to get a greater cut. You already know what teams they like, so you can target specific swag to those people.

  2. Custom swag: Bleacher Report obviously created custom unisex soccer jerseys. There’s a Knicks blog I follow and they created a slew of t-shirts when RJ Barrett was drafted by the Knicks. I can imagine die-hard fans wanting to own these. With the draft every year, new players can become icons for local fans and I’d be curious to see how much revenue there is.

Commerce is hard and it does require creativity, but fans love their teams. I don’t know the legality around creating t-shirts and things like that Knicks blog does, but it’s definitely an interesting approach.

I am also curious to see if The Athletic expands into the sports betting world. Everyone else appears to be.

In the past week, Fox Corp announced the launch of FOX Bet in partnership with Canadian gaming provider The Stars Group. TheScore secured $40 million to “fund the growth and development of the Company’s media and sports betting businesses.” Barstool Sports announced Barstool Bets, which is more of a contest than true betting, but it’s still gambling. And then SB Nation, owned by Vox, launched Draft Kings Nation in partnership with the fantasy sports betting site, with content focused on those that are gambling.

With sports betting becoming a bigger business, I see no reason why sports publishers won’t try to take a cut of the revenue. Again, will The Athletic try to create content to get its users to bet? I’m certainly intrigued…

The reality is, I don’t see how The Athletic justifies its lofty valuation without having multiple revenue streams. If they are tasteful with advertising and do smart integrated programs—events, commerce, maybe even gambling—they can have a well-rounded business that could earn the bulk from subscriptions, but be supported with other sources.


The Wall Street Journal reports that Group Nine Media has raised an additional $50 million from Discovery and Axel Springer, valuing the business over $600 million when you account for the additional cash.

A quick backstory on Group Nine Media courtesy of The Wall Street Journal:

Group Nine Media was created in 2016 with a $100 million investment by Discovery that valued the company at about $585 million. The company has raised $190 million to date.

Group Nine Media was formed by the merger of several online publishing brands: NowThis News, food-focused Thrillist, technology brand Seeker and the Dodo, which caters to animal lovers.

A few things jump out to me about this deal…

First, for all intents and purposes, this is a flat round. The only change in valuation seems to be the addition of $50 million, which is why the valuation went from $585 million to over $600 million. Although a source tells WSJ that revenue has doubled since the brands merged, it remains unprofitable. This likely means that revenue is up, but costs are up similarly, which has the investors a little concerned.

Second, I expect that we’ll see Group Nine Media announce an acquisition soon. There are many smaller media brands that can’t reach the necessary scale required for a consumer ad business, so they’re floundering. Group Nine will use some of this cash to buy one.

Although media roll ups have been the talk of the town, they’re not easy deals. The Information has a great piece on why paring up is hard to do. It’s worth a read. The gist?

Behind the scenes, investors in companies like BuzzFeed, Group9, Vox, Vice and Refinery29 have been pushing their companies to make some sort of deal happen. Over the past 12 months, talks have taken place for various rollups and combinations—the most recent of which has been Vice’s interest in buying Refinery29, as The Wall Street Journal first reported. But to date, none of these companies have announced any deals. One possible complication could be the terms attached to shares held by some investors guarantee them outsized returns, say people familiar with the situation.

That last part (emphasis mine) is the tricky part. As The Information breaks it down, it’s a question of who gets paid first, what the valuations are, and how the acquirer pays.

Going back to Group Nine, I expect a third and final thing to happen in the next year or two. Discovery will buy the rest of the business. The Information reports that Discovery has that right based on a previous investment and with how much they’ve invested, it seems like a no-brainer. To be honest, I’m not sure why they haven’t yet.

It’s never boring when talking about these large media brands that raised too much money and are now trying to figure out how to survive.


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