Five years ago, “luxe” publishers—glossy, high-end magazines that were freely distributed to select demographics, hotels and retailers—were all the rage in the city and regional market. Modern Luxury, 944 Media, Niche Media and Greenspun were boasting big city glitz and fat books full of ad pages from high-end national and international brands.

Today, however, several luxe publishers have fallen on hard times. In April, Modern Luxury announced it was on the block in hopes of either being acquired or finding a new equity partner. The company lost its founder and previous chief executive, Michael Kong, earlier this year after lenders including GE Business Financial Services took control of the company after Kong was said to have defaulted on $120 million in debt. However, In a memo announcing the sale, current CEO William Cobert said that Modern Luxury’s advertising revenues spiked 15 percent for its May issues and that the company has booked more than 2,100 advertisers in 2010.

Meanwhile, 944 Media, which covers markets from Miami to San Diego, filed for Chapter 11 bankruptcy protection, spurred by “several potentially burdensome lawsuits,” including one around 944’s 2008 Super Bowl event that alleges mismanagement and even racial bias. According to the filing, 944 has between $1 million and $10 million in assets and $50 million in liabilities.

Too Much PE, Too Few Local Advertisers

Some of the problems can be linked to private equity investment gone bad—something plenty of national consumer and b-to-b magazines are familiar with as well. “Similar to b-to-b, there was suddenly a lot of money around for investing—Shamrock gave a ton of money to the Kong brothers at Modern Luxury, Greenspun bought out Niche Media and Ocean Drive,” says one observer. “A couple years ago, everyone was making money, the financial people were getting paid on time and they didn’t take an active role in the business. When things turned south, they came in with a very heavy hand.”

One of the biggest successes of the luxe publishers turned out to be one of their biggest weaknesses—national advertisers. “What fueled the expansion in luxury publications was national advertising—they came in droves, they paid higher prices than local advertisers and those publishers generated a lot of revenue very quickly,” says one publisher. “The problem with relying on that is when national dollars went away, these companies didn’t have a huge amount of local advertising. The typical CRMA magazine didn’t get the uptick these luxe publishers saw but they didn’t get hit as hard in the downturn either.”