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Competitors, Neighbors, Partners



By Matt Kinsman
04/10/2007

For Jerry Powers, president of SoBe News Inc., the publisher of Ocean Drive and other party-pic heavy regional luxe titles, the idea of expanding into glitzy Las Vegas was too tempting to ignore. The problem was a local publisher, Greenspun Media Group, already had a commanding hold on the market, including several different city magazines (Las Vegas Life, VegasGolfer and ShowBiz Weekly) and, even more significantly for SoBe, in-room distribution agreements with top hotels. "When we went out there to survey the market, Greenspun had a big lock on distribution in-room in hotels and we thought that was essential for us," says Powers.

So Powers played nice and approached Greenspun about a partnership. "For two years I went to see them, for two years they made lavish lunches that we'd eat in the boardroom, and each time they would say no," says Powers. After going to see Greenspun at least two or three times per year, Powers offered them a small percentage to open up Vegas hotels to him, including Wynn hotels and The Venetian. "They said, ムIf you're really willing to just give us a percentage and leave it at that, let's be partners,'" says Powers. "That was the breakthrough. The advantage was I didn't have to build from the ground up in a new market."

Today Vegas Magazine generates "millions of dollars," according to Powers. City and regional magazines have long teamed up to offer syndicated ad buys for national advertisers (the City and Regional Magazine Association offers a national ad sales network for its members) but strategic partnerships could become more prevalent for publishers looking to expand. Today, most partnerships focus on publishers targeting large metro areas, but suburban regionals are one of the fastest growing categories in magazine publishing.

"We've done advertising partnerships and gone out into the national arena and presented ad packages to advertisers that can take advantage of frequency and discounts," says Barney Fonzi, group publisher of Walnut Creek, California-based Diablo Publications.

A little over a year ago, Diablo entered a joint venture with Modern Luxury LLC to re-launch Vine Wine Country as Napa/Sonoma with a four-color, glossy, oversized format. Napa/Sonoma is distributed to affluent households in the North Bay area.

"Modern Luxury handles national advertising for it, we handle the local market and we publish the magazine," says Fonzi. "It's not like an edit share or anything like that."

Establishing Responsibilities
With Greenspun, SoBe decided it would handle editorial and production and the partners would split sales duties, with Greenspun handling the local market and SoBe handling national accounts. "We agreed on which partner was stronger in doing different things," says Powers.

Partnerships don't have to be with another publisher either. "Five years ago, we decided we were missing out on the high end Latin market," says Powers. "We had launched Ocean Drive in Espanol, but the top people in the company weren't Latin. We needed a Latin partner that was respected in the community who could open doors."

The publisher teamed with former pop star and Miami entrepreneurs Gloria and Emilio Estefan for Ocean Drive in Espanol. "They opened doors that would have taken years to open on our own," Powers says.

But Powers says choose partnerships where it makes sense. When SoBe eyed Chicago for the launch of Michigan Avenue, other local magazine players included Tribune Co.'s Chicago, and Modern Luxury's CS. Neither one necessitated a partnership, in Power's opinion, for different reasons. " We don't need Tribune as a partner because that's an old school city magazine," says Powers. "Modern Luxury is up for sale and the people responsible for its success are no longer in Chicago."

While they do help, don't let partnerships become a web that prevents you from realizing the full potential of a future sale, according to Powers. "At the end of the day, if you have too many of those partnerships going, when you go to sell your company, it's the break-the-egg concept," says Powers. "Once you break an egg, you can't put it together again. You can't have too many joint ventures at one time, because it's difficult to put the pieces back together again."

Planning a Magazine Partnership
Everyone hopes their partnership will be fruitful and long lasting, but sooner or later, one party will need to bow out. "How do you value something two partners made successful and suddenly one partner has to get out?" asks SoBe News president Jerry Powers. "If you ask me what the surefire answer is, I don't know. But you do your best and you have to protect against future business."

Powers advises setting up a non-compete clause to keep relations friendly. "In our Greenspun deal, we agreed that if we ever fell apart, that neither one of us would compete with each other for a year or so," he says. "They wouldn't compete in Florida, we wouldn't compete in Nevada. Those are elements you have to cover, as well as funding and how you determine dividends."

By Matt Kinsman
04/10/2007







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