Cable and media company Cox Enterprises acquired Axios Media Inc. for $525 million Monday in a surprising move that left the media industry wondering if any independent publications had the ability or desire to remain independent moving forward.
Cox, a 60-year-old private family-run business that’s best known for its cable business, sold the majority of its media assets to Apollo Global Management in 2019, though it still owns The Atlanta Journal Constitution, the Dayton Daily News and a handful of Ohio newspapers that will continue to operate independently. Given the lack of immediately apparent complementary value for a politics-first news organization like Axios, the move has left some scratching their heads as to Axios’ utility under Cox.
Is the former here to bolster the latter’s diminished media footprint or replace it completely? Where is the value coming from? Axios topped 1 million email subscribers in June, but still pales in comparison to rivals such as Morning Brew (4 million). But for a company like Cox that relies primarily on advertising sales across television, radio and newspapers, fortifying itself with a growing and profitable subscription business at a time when ad sales may dry up due to recession concerns is one way forward through uncertain times.
“To me, the synergy is that Cox has a lot of deep pockets,” Christopher Roush, dean of Quinnipiac University’s School of Communications and author of “The Future of Business Journalism: Why It Matters for Wall Street and Main Street,” told TheWrap. “They can spend the money that Axios needs to expand.”
Regardless, the deal is impressive. Axios made $86 million in revenue last year according to President Roy Schwartz and is projected to reach $100 million in revenue this year, which would put the multiple at purchase at 5 times revenue.
Ad-based digital news sites can lose value in recessions as ad dollars evaporate, whereas a digital news site that boasts a growing subscriber base is expected to increase in value in the same span. It’s possible that Cox realized it was better to meet a high asking price now lest the total continue to rise in the coming months.
Axios — which focuses on political, technology and business news — now joins Politico (also started by Axios co-founder Jim VandeHei) and The Athletic as privately held media companies scooped up for big bucks in recent years. Politico was bought by German-based Axel Springer for about $1 billion in October 2021. The Times bought The Athletic for a stunning $550 million last year.
Special-purpose acquisition companies, or SPACs, have sprung up to help aide potential sales talks and IPOs for media companies such as Vice Media Group and BuzzFeed. Though Axios didn’t use a SPAC in its negotiations with Cox, it’s a trend that has raised concerns from certain sectors of the media industry, such as The Information founder and CEO Jessica Lessin, who hasn’t accepted outside funding since launching the media outlet in 2013.
After congratulating the Axios team Monday morning for high-quality news execution since launching in 2017, Lessin wrote, “The deal makes me sad however but it confirms one of my biggest fears: that no investor-backed news brands will survive the coming decade.” (Full disclosure: TheWrap is an independent, private media company owned by founder Sharon Waxman and other private investors.)
The continued emphasis on scale — or the accumulation of assets, customers and leverage — throughout the media industry has created a consistent hunger from larger entities that’s satiated through the acquisition of smaller companies. This can raise questions as to the relationship between revenue and editorial.
As part of the acquisition, Cox — which previously invested in Axios in 2021 — will reroute an additional $25 million into the company and help expand the digital news site’s bullet-style local news coverage to additional cities. The company’s software division, Axios HQ, will be spun off into a standalone company. VandeHei and fellow co-founders Mike Allen and Roy Schwartz will remain on the company’s board and in charge of its day-to-day operations while the editorial team is said to be insulated from ownership control.
“It’s an evolution that traditional media companies have been undergoing in the past decade,” Roush said of the recent uptick in smaller media brands being bought out by larger entities. “They’ve finally seen that companies like Axios and Politico do newsletters very profitably and that this is a business strategy of the future.”
Strategically, Cox may have made the move to acquire the profitable Axios to help with cash flow, though the large private company boasted in its press release that it delivers “$20 billion” in annual revenues. There may be synergies between Axios’ local news coverage and Cox’s local broadcast stations that can now be fully realized, as well as potential collaboration between Cox’s remaining newspapers and areas that Axios isn’t yet covering. One theory is that the acquisition is a way for Cox to build out its relationships with advertisers as a greater percentage of ad budgets are funneled toward digital.
“I can see a scenario where Cox can now go to national advertisers and say, ‘You can have ads in all of our newsletters across the entire country as well as the papers we have left,’” Roush said. “That offers them a deal that’s much more attractive than just selling then advertising in Ohio and Atlanta papers.”
At the end of the day, this may simply be a better financial situation than what German publishing company Axel Springer offered up last year before Axios pulled out of sale discussions. (Axios was reportedly seeking between $400-$450 million then).
“Sometimes investors need an exit strategy and that’s all there is to it,” a media analyst told TheWrap. “What Cox wants to do with [Axios] is anyone’s guess.”
