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Jason Fell

For Consumer Publishing Execs, Times are A-Changin’

Jason Fell Consumer - 09/22/2010-00:04 AM

Not even Bob Dylan could have predicted the amount of upheaval among consumer magazine publishing companies this summer. Seriously, either chief executives and/or the top staffers in charge of media divisions at all the major companies have been in constant flux.

The most recent and perhaps final example came Tuesday when Paris-based Lagardere Active announced that Alain Lemarchand, who has served as CEO of Hachette Filipacchi Media U.S. since June 2008, will be stepping down and that former Primedia Enthusiast Media and Source Interlink Media president Steve Parr will take his place.

The big managerial moves kicked off this summer when Hearst Magazines announced a new management structure that had longtime president Cathie Black moving up to chairman and former Condé Nast group president David Carey coming on to replace her. The ball kept rolling with similar changes happening at Condé Nast, Meredith, Time Inc., etc., etc.  (Instead of detailing each move here I’ve put together a timeline below…)

Arguably, the game of musical stairs really started last year when Wenda Harris Millard left Martha Stewart Living Omnimedia as co-CEO and Rodale chairman Maria Rodale replaced Steven Pleshette Murphy as CEO. (Coincidentally, Murphy resurfaced Tuesday as CEO of Christie’s International.)

While these high-profile people moves can potentially spell big changes at their respective companies, this flood of personnel action isn’t necessarily all that surprising. The industry has weathered a dramatic economic downturn that sent advertising pages plummeting more than 25 percent in 2009 compared to 2008, according to the Publishers Information Bureau. Ad pages declined nearly 12 percent in 2008 versus 2007.

These new magazine bosses will be expected not only to ride the slow but evident uptick in advertising dollars so far this year, but to embrace emerging technologies and to pave new avenues for revenue. No small order. The pressure is on.


April 2009: Wenda Harris Millard steps down as co-CEO of Martha Stewart Living Omnimedia. The company’s media division is now overseen by executive chairman Chalres Koppelman and merchandising president/CEO Robin Marino.

July 2009: Rodale chairman Maria Rodale replaces president and CEO Steven Pleshette Murphy.

April 2010: Source Interlink Companies gets new leadership by way of former Comag president and CEO Michael Sullivan, who is named CEO and director.

The Reader’s Digest Association announces the departure of several top executives, including Reader’s Digest Community president Eva Dillon and Emerging Businesses division president Alyce Alston. Allrecipes.com president Lisa Sharples replaces Dillon as president of the Reader’s Digest Community.

June 2010: Hearst Magazines president Cathie Black becomes chairman as ex-Condé Nast group publisher David Carey takes the reins as president.

July 2010: Condé Nast consumer marketing group president Robert A. Sauerberg is appointed president amidst a larger management reorganization.

August 2010: Meredith Corp. says Jack Griffin is leaving the company as president of its national media group. He is replaced by Tom Harty, president of consumer magazines.

Soon after, Griffin takes over as CEO of Time Inc., replacing longtime chairman and chief executive Anne Moore.

The following day, Linda Johnson Rice steps down as CEO of Johnson Publishing. Former White House social secretary Desiree Rogers is named chief executive.

September 2010: Alain Lemarchand passes the CEO torch at Hachette to former Primedia and Source Interlink executive Steve Parr.

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Jason Fell

Canon CEO Says $287 Million Buyout Enough to Turn a Profit

Jason Fell M and A and Finance - 09/20/2010-09:31 AM

When London-based United Business Media announced late last week that it had acquired Canon Communications, one of the initial questions that came to mind was whether the $287 million price tag—while significantly larger than any other deal in b-to-b publishing since before the economic downturn—was in fact enough for owner Apprise Media and private equity investor Spectrum Equity Investors to turn a profit.

Backed by Spectrum, Apprise acquired Canon from fellow media industry private equity firm Veronis Suhler Stevenson in 2005 for approximately $200 million. But make no mistake: the Canon that was acquired in 2005 by no means was the same company that was purchased by UBM. I drilled back through Canon’s slew of press releases over the years to refresh my memory about the company’s aggressive buying spree starting in 2006. [See a timeline of acquisitions below.]

So, will the $287 million acquisition price be enough to cover the initial investment plus all the acquisitions, and still have some left over for profit? “It’s likely that Canon was going to need to restructure its balance sheet due to debt, and was faced with restructure or selling,” one CEO tells me.  “It’s highly unusual for any media company to sell into this market unless they have to. My guess is that the deal price covered the various acquisition investments, and other investments made in the business, but that there was not much profit left for its owners.”

Not so, says Canon chairman and CEO Charles G. McCurdy. “Canon's loan facilities were set up in May 2005 at the original Spectrum/Apprise acquisition, and are set to mature in May, 2011,” McCurdy explains over e-mail.  “We have brought our leverage ratio (the ratio of total debt to EBITDA) from over 7x at the outset to under 4.5x now by growing earnings and paying down principal.  We were on a path last June to fully pay off Canon's old debt facilities with new borrowings when UBM made their approach.”

While under private management, Canon never released any specific performance details but did issue a pair of statements announcing revenue growth. In November 2007, the company said revenue for the fiscal year ended September 30, 2007 increased 22 percent and that EBITDA grew 34 percent, compared to the same period the prior year. Canon’s fiscal year ended September 30, 2008 saw revenue jump 23 percent over 2007. At the time, the company attributed its growth to its strategic acquisitions and operational growth.

UBM said that in the 12-month period ended June 30, Canon generated $106 million in revenues and $37 million in EBITDA on a pro forma basis. Apprise acquired Canon in 2005 for approximately $200 million.

McCurdy tells me Canon worked on parallel paths—preparing for new financing while also negotiating with UBM through the summer, until the deal was completed last week. He says Spectrum is “making a profit on their Canon investment.”

And another thing is for certain: After reporting on countless small multiple, fire sale-type sell offs in trade publishing over the last several months, it is important to note that this deal is the biggest we’ve seen in quite some time.

“This stands in contrast to the very disappointing investment results many have seen in the media sector in recent years, including the business-to-business sector, and the whole Canon organization is very proud of that outcome,” McCurdy says.  “UBM is buying a company with a great team, strong momentum and many avenues of growth in place.”

"The most significant thing," says another b-to-b industry CEO, "is that Canon and the Access Intelligence deal are the first two significant b-to-b media deals completed in the last two years that were not distressed transactions. These are strategic deals for high quality b-to-b media assets at more normalized multiples: not at the 10x plus of the market high but at high single digits (7-9x EBITDA) which are much better pricing than the distressed (Reed, Nielsen, etc.) deals that were completed during the last 12 to 18 months."

Canon’s Announced Acquisitions Since 2005:

March 1, 2006: Acquired Octo Media Ltd, a London-based trade magazine publisher (including Medical Device Technology magazine) and event organizer.

May 10, 2006: Agreement to acquire eight trade shows and one magazine dedicated to the U.S. advanced, technology-based manufacturing sectors from Reed Elsevier.

September 4, 2007: Acquired Engel Publishing Partners from Euromoney Institutional Investor PLC.

October 9, 2007: Purchased two leading trade shows in Germany, INTERPART and SURFACTS, as part of its expansion in the European market.

February 6, 2008: Bought the Pharmapack trade show from French organizer Oriex (Organization of International Congresses and Exhibitions).

May 6, 2008: Acquired Stamping-Days, a biannual exhibition serving the high precision stamping technology industry in Germany.

February 16, 2010: Purchased the worldwide assets of Electronic Design News (EDN), Design News, Test & Measurement World, and Packaging Digest from Reed Business Information.

May 3, 2010: Acquired Pharmalot, a blog focused on news and information in the pharmaceutical industry.

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Jason Fell

Magazine to Moving Company: Lay Off My Logo!

Jason Fell City and Regionals - 09/13/2010-14:49 PM

What would you do if you saw a truck driving down the road with your magazine’s logo slapped on the side of it? Maybe think your publishing company is trying its hand at distribution and you didn’t know about it?

In the case of Dallas, Texas-based D magazine, its owners are taking legal action.

D founder Wick Allison, who in turn owns D Magazine Partners LP, is suing Allen, Texas-based moving company D Moving for trademark infringement. The magazine claims the company’s logo—a white ‘D’ in a red box—is confusingly similar to its own and is being used without permission.

And according to D magazine’s executive editor Tim Rogers, this isn’t the first time D Moving owner Edwin Bedford has landed himself in trademark trouble. He says Bedford was sued for trademark infringement by Major League Baseball because previously he ran a moving service called Major League Moving. A judgment was handed in that case barring Bedford to use “Major League” in his company’s name.

You know, since I was a kid I’ve wanted to open my own high-end restaurant and call it Vogue Café. Hm. Maybe I should think twice about that…

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Jason Fell

Print is ‘Dead.’ Now the Web is Dead, Too?

Jason Fell emedia and Technology - 08/31/2010-10:37 AM


Ah, how so much has changed in such a short span of years. And yet, Wired’s Chris Anderson is apparently obsessed with the “death” of publishing mediums.

For those of you who haven’t seen or heard about it yet, the cover story of the Condé Nast tech title’s September issue is called “The Web is Dead.” It’s a two part story with the “What Happened” portion written by Anderson and the “And Why” portion penned by new contributing editor Michael Wolff. Ironically, the story generated a huge amount of buzz last week when the story was postedyes—to the magazine’s Web site.

Chalk it up to being too busy, but I never got around to actually reading the piece until early this week when the print copy landed on my desk. Seeing it there made me recall an issue FOLIO: published in 2006, before I started working here. The cover story for the September issue that year was an interview with Anderson following the release of his book, “The Long Tail: Why the Future of Businesses is Selling Less of More". In short, Anderson’s theory contended that the digital format makes it economically viable to offer a vast range of content that can't be offered physically.

The cover line for that issue was, Print: “Not Dead But Not Enough.” In the story, Anderson said, “Let's put aside the print version. No, it's not dead but it's not enough. The day when you could shovel your stuff onto the Web site and people would bookmark it and come back are pretty much gone. The fact is, you are one of dozens of content sources that people are consuming in an omnivorous media menu. Increasingly, it's not people coming to your Web site. It's people seeing you mentioned elsewhere. It's not people coming to your front page but coming directly to a story because someone linked to it.”

He was right. Even when I was hired here the following summer, in July 2007, one of my main objectives was to build up the news operation so that our readers online would log onto our homepage first thing in the morning and keep the site up, refreshing it periodically throughout the day. And even though breaking news is a lot different than regurgitating content straight from the print magazine online Anderson was right, even then, about a portal Web site no longer being a “must go” or a “must read.” Sure, FOLIOmag.com still gets a decent chunk of its traffic from readers going directly to our homepage, but that chunk is being whittled down as more readers are coming in through the back door, by way of aggregators, e-newsletters, other news sites and social media.

Maybe I should have read that story a little closer before I clocked in for work.

So, is the Web Really Dead?


No, it’s not dead. But the rise of mobile and apps, and the way we’re consuming media, is altering the way we turn to the Web for information. In publishing, when people were ringing print’s death knell and jumping online, no one had a surefire way of monetizing their efforts there. (How many times have I heard people complain about “online nickels versus print dollars”?) Years later, publishers still haven’t been able to adequately make money from the Web, whether from display ads or charging for content.

“The fact that it’s easier for companies to make money on these platforms [mobile apps] only cements the trend,” Anderson writes in Wired. “Producers and consumers agree: The Web is not the culmination of the digital revolution.”

Wolff also has a good point, a potentially positive one: “If we’re moving away from the open Web, it’s at least in part because of the rising dominance of business people more inclined to think in the all-or-nothing terms of traditional media than in the come-one-come-all collectivist utopian of the Web. This is not just natural maturation but in many ways the result of a competing idea—one that rejects the Web’s ethic, technology, and business models.”

I hope he’s right. I hope publishers cook up a formula(s) for making real money from apps, etc.

In the meantime, though, I have to admit that reading a story about the death of the Web in a print magazine is somewhat amusing.

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Jason Fell

What Exactly is Augmented Reality?

Jason Fell emedia and Technology - 08/18/2010-12:21 PM

A growing number of magazines over the last several months have tapped into augmented reality with the goal of expanding the traditional print content experience with Web-based video or other electronic delivery.

Last summer, Bonnier’s Popular Science unveiled an interactive cover that allowed readers to log onto the Web site, hold up the cover to a webcam and interact with a 3-D image of wind turbines. For its December 2009 issue, Esquire featured 2-D barcodes on the cover and elsewhere inside the magazine that, when scanned by a reader’s webcam, triggered interactive video “experiences.” Time Inc.’s InStyle tied augmented reality to e-commerce, making some advertisements in its December 2009 holiday gift guide issue three dimensional.

More recently, we’ve seen Time Out New York enlisting the services of an augmented reality firm to fuse AR, mobile and GPS technologies to create a guide to drinking establishments in New York City, accessed over a user’s smartphone. And the August issue of Time Out New York Kids allows readers to use their smartphones to access a video of the cover subject, the chorus from Public School 22 in Staten Island.

But, what’s the difference between, say, Popular Science’s interactive 3-D turbine and Time Out New York Kids’ video? Is one AR and the other (TONY Kids) just 2-D image recognition? With so many examples flooding the market and so few explanations, I have to wonder: What exactly is augmented reality?

Ronald Azuma, a professor at the University of North Carolina at Chapel Hill who has researched AR technologies, defines AR as a “variation of virtual environments” that “allows the user to see the real world, with virtual objects superimposed upon or composited with the real world.” Azuma says AR systems have the following three characteristics: it combines real and virtual, is interactive in real time and is registered in 3-D.

Sounds to me like image recognition/2-D barcodes doesn’t count as AR, but Bruno Uzzan, co-founder and CEO of AR firm Total Immersion—the firm that worked with In Style on its holiday gift guide issue last year—doesn’t agree. “Augmented reality is the real-time merge between a video stream and a digital object,” he tells me. “The three parallel processes that run in real time during an AR experience are recognition, tracking and rendering. Therefore, recognition off a barcode, marker or markerless image makes up a vital portion of AR, so it is less about the differences between the two and more about their working relationship.”

Lisa Murphy, a product marketing manager at AR firm metaio, contends that its work with Time Out New York Kids is in fact an example of AR. “Many people did not see the interactive 3-D model in the demonstration video and did not try it out themselves,” she says. “And, of course, this first and very simple example is not the final benchmark for this new interface. Nevertheless we are very happy to take these small steps together with innovative companies.”

Embracing Industry-Wide Standards

AR is still an emerging market, and its major players know the rules are still being hammered out. In fact, in an effort to eliminate any confusion about what is augmented reality and what is not, Total Immersion earlier this summer came up with a logo to accompany all augmented reality applications on product packaging, advertisements, marketing materials and other relevant communications.

“With the proliferation of AR over recent times, there are some campaigns that are inevitably called AR but by definition are not,” Uzzan says. “Some of these projects simply use recognition to trigger a digital graphic, but the digital asset typically has little relevance to the target and video stream around it.”

Total Immersion’s campaign also calls for the formation of an industry-wide “AR Standards Committee” that the firm says should be charged with fostering consideration of product standards, user experience definitions, and a communications framework.

Says Uzzan: “With AR growing so rapidly from a niche application to what is being regarded as one of the most disruptive digital platforms of our era, there is an overall need for universality or standardization.” He says the AR+ logo is already being used by Total Immersion and other AR creators around the world.

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Jason Fell

Photo-Driven, Multiple-Element Magazines a ‘Tough Nut’ on E-Readers

Jason Fell emedia and Technology - 08/13/2010-12:39 PM

Not long after media and information private equity firm Veronis Suhler Stevenson released its annual communications industry forecast, I spoke with partner Hal Greenberg about the firm’s projections for consumer and trade magazines through 2014. In regard to consumer publishing, Greenberg said all eyes will be on how the flood of e-readers to the market will continue to affect business moving forward.

“What will be interesting is what impact the iPads and Kindles of the world will have on consumer magazines,” Greenberg said. “Right now, the subscription models aren’t particularly good. But, that will ultimately change. We think they will be a significant factor over the next several years.”

Greenberg, a partner of VSS Structured Capital Funds, continued, adding some thoughts on how magazines might have more success than others in making the jump to reading devices:

When you look at consumer magazines, there are all different types. You have types like Time and Newsweek, which are primarily narrative, story driven. Those are easy on the iPad. When you look at, say, a beauty magazine, the whole look of the physical magazine is very important. That, I think, will be more of a challenge on the iPad—those types of magazines might actually withstand better in print on the newsstand.

A magazine like Vogue, for instance, which is so beautiful on page, is a tough nut on an iPad. The glossy design is unique and how that makes its way to an iPad is a difficult thing. Meanwhile, a Newsweek or a Time or the Atlantic is pretty easy, actually better, on the iPad. You can easily pick the stories you want to get into versus having so many smaller elements.

Well, Vogue hasn’t made it to the iPad yet, but sister title Glamour has. Like Vogue, Glamour is known for glossy pictures and multiple style elements. And still, publisher Condé Nast is excited for the app, which was built in-house and announced last week.

From Ben Berentson, Glamour’s online managing director: “There has been a well-documented affinity between magazine content and the iPad. The way you interact with the device, the quality of the screen, its size and even its weight, all of that is very complementary to a magazine experience. But the iPad isn’t just a static reader—it’s connected to the larger world of the Web—and we think that offers great potential for giving our readers an enhanced experience beyond the kinds of multimedia extras we’re already including. For example, we have special, app-exclusive tap-to-buy shopping pages that take you right to the retailer’s site to buy the items that have been chosen by our fashion team.  We’re also very excited about the potential of pairing Glamour.com—which is over 80 percent online original content, posts 50 times per day and has its own distinct style—with the magazine on the same device, hence our tagline: Monthly, daily, hourly. Instant Glamour gratification."

While the iPad has the potential to be a terrific viewing platform for high definition photos and rich media, that has to be reconciled with a friendly user experience. Despite its early success, we've heard Wired's iPad download is 500 megabytes, causing some readers to log out.

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Jason Fell

ESPN the Magazine: ‘Reimagined’

Jason Fell Editorial - 08/10/2010-11:32 AM

A lot of changes are happening at ESPN the Magazine. As it announced earlier this summer, the magazine is moving much of its operations from Manhattan to the company’s headquarters in Bristol, Connecticut. What’s more, the magazine is shifting to a single sport or theme per issue.

From a publishing perspective, I think it could be a great idea. The magazine will be able to plan content further in advance which potentially could allow the sales staff to start selling ads early, and perhaps also target advertisers that are relevant to the theme but have never bought any space in the magazine before.

Through the first six months, ESPN the Magazine reported a 26.4 percent increase in advertising pages, according to figures from the Publishers Information Bureau. Estimated revenues jumped more than 30 percent to $125.57 million.

“ESPN the Magazine reflects the belief that successful magazines embrace their inherent print qualities while innovating, both in print and digital form,” the magazine says in a statement announcing the first of its single-topic issues—a College Football Preview, hitting newsstands Friday August 13. “ESPN the Magazine’s new approach enhances its ‘page plus’ content push from its print product to TV, ESPN Insider, iPad and iPhone platforms; The Mag shares a bundled subscription model with the latter three. ESPN the Magazine is the No. 1 magazine among men 18-34 and reaches a diverse audience mix—No. 1 with both African-American and Hispanic readers.”

And although not technically a single theme, ESPN had a good amount of success with its “Body Issue” last year, which featured a throng of semi-nude athletes appearing in and on the cover. For obvious reasons the issue stirred up a lot of attention, especially with readers. ESPN’s Insider, the paid content arm of ESPN the Magazine, saw 400 new subscribers within hours of the Body Issue content being posted online.

But will single-theme issues scream out to readers off the newsstand? With the Body Issue, people presumably were gobbling up subscriptions in order to get an eyeful of tennis star Serena Williams, basketball player Dwight Howard and Australian pro surfer Claire Bevilacqua in the buff. That won't be the case with every issue. Editorially, will a model that covers mostly one sport or theme (the single-topic content in this Friday’s 150+ page issue starts on page 60) attract as wide an audience as the current iteration?

It might not matter much. According to the Audit Bureau of Circulations’ most recent FAS-FAX report, only 17,034 of ESPN the Magazine’s 2,073,813 total paid and verified circ came from single copy sales (which declined 14.9 percent compared to the same period last year—overall circ remained steady).

ESPN also unveiled two of the new multi-page front-of-book sections in the “reimagined” magazine, called Go and Play. Sample pages of those new sections are below.

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Jason Fell

Potential Arab Bidder ‘Ignored’ in Newsweek Auction

Jason Fell M and A and Finance - 08/05/2010-07:51 AM

When The Washington Post Co. announced in May that it was putting Newsweek on the block the story obviously stirred up a lot of attention all around the world. The following day, I wrote a post here speculating who might wind up buying the ailing magazine. In response to that, I received an e-mail from a man named Abdulsalam Haykal, a technology entrepreneur who serves as CEO of a Syria-based company called Haykal Media. In the e-mail, Haykal talked about the growing potential of media in the Middle East and said he was pulling together a coalition of investors to put a bid on Newsweek.

It was an interesting e-mail, although I didn’t think much more of it until late last month when the rumors about a buyer started heating up again. I asked if he was successful in placing a bid for Newsweek. He finally got back to me last night and said that although he did attempt to place a bid, his e-mail proposal to the Washington Post Co. went unanswered.

Whether or not you or I think that a Middle Eastern media company should or shouldn’t own an American icon like Newsweek, Haykal’s response was interesting in that Middle Eastern media is growing fast and is looking to make a bigger name for itself. Here’s the majority of Haykal’s message, reprinted with his permission:

In fact, we tried again, with the help of a friend, who is a well-respected American diplomat who has access to [Newsweek senior writer] Elizabeth Weymouth. He passed me the details of two people at Allen Co., and I emailed them but got no reply.  It's not strange, as Newsweek is a "national treasure" like Harman said. Our aim in Haykal Media, and that of the group of investors with me, was to help the Arab Middle East have a voice in international media, contributing to a more balanced perspective in the world. Also, the media market in the Middle East is growing fast, and international media companies are eying the region. It was a perfect moment for us to think of this opportunity, and the risk seemed justified. However, I expected with a reasonable amount of sympathy that the Washington Post wouldn't sell to a non-American group, let alone an Arab group led by a Syrian media company. It will sound like selling Aljazeera to Fox News. But it would have been nice for them to get back to me, with a diplomatic or a blunt answer, but I got neither.

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Jason Fell

Bidders Speak Out on Newsweek Sale

Jason Fell M and A and Finance - 08/02/2010-21:44 PM

A month after final bids were due, the Washington Post Co. announced Monday that 91-year-old Sidney Harman, the founder and chairman emeritus of Harman International, has acquired Newsweek magazine.

“Newsweek is a national treasure,” Harman says in the announcement. “I am enormously pleased to be succeeding The Washington Post Company and the Graham family and look forward to this great journalistic, business and technological challenge.”

But Harman isn’t the only player who sounded off about the deal. I reached out to fellow bidder Fred Drasner (a former partner of Mort Zuckerman who helped negotiate his deals for the Daily News, Atlantic Monthly and Fast Company) and received a statement from Andrew Nikou, CEO of OpenGate Capital, the investment firm that in October 2008 purchased TV Guide from Macrovision for only $1.

Here’s what they had to say about the auction process.

Fred Drasner:

"The auction process worked—Newsweek went to the highest bidder. I offer congratulations to Mr. Harman. He paid a very full price and I think it is wonderful that he has made such a strong commitment to serious journalism, a species that I fear is becoming extinct in this country. I wish him the best of luck."

On why he thought he had the best proposal:

"In two words: Alan Webber and Paul Ingrassia. We shared both an editorial and business vision of what needed to be done to resuscitate the franchise. I believed I had the best shot because I had seen the movie twice. Once with US News and once with the Daily News."

Andrew Nikou, founder and CEO, OpenGate Capital:

“OpenGate Capital made a significant bid for Newsweek and we felt we had a great strategy and plan for the magazine. Our transaction team, led by Jack Kliger, envisioned a strong Newsweek in the years to come and we regret that we won’t have the opportunity to take this iconic brand into the future. OpenGate has had great success with the TV Guide Magazine brand and many other properties, and we had great confidence that we would have had similar success and many achievements with Newsweek. We greatly appreciated the interest by Donald Graham and his management team at The Washington Post Company, as well as the team at Allen & Company, and we wish them tremendous success with the sale of their distinguished property.”

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Jason Fell

Maintaining Status Quo Will Spell Disaster for Newsweek

Jason Fell M and A and Finance - 07/30/2010-13:58 PM

Bids to acquire ailing Newsweek magazine were due at 5 p.m. on July 1. A month later, parent company the Washington Post Co. is still mum on the process and on who might wind up taking the magazine home.

Recent scuttlebutt, however, points to a couple interesting developments. The Wall Street Journal reported today that the Washington Post Co. isn’t interested in selling to bidder Avenue Capital Group over concerns with the hedge fund’s proposal to partner with National Enquirer publisher American Media Inc. to handle some of the behind-the-scenes operations at Newsweek. (AMI recently struck up a similar deal with Playboy.) The worry among Washington Post Co. brass, according to the report, is that AMI might try to impart some of its “sensationalist” journalism into Newsweek.

The second comes from The New York Times, which is reporting that, according to three people “with knowledge of the bidding process,”  the offer from audio equipment magnate Sydney Harman is pulling ahead as the favorite, especially with Washington Post Co. chairman Donald E. Graham. Under Harman’s proposal, the majority of Newsweek’s top management and editors would keep their jobs. From the NYT: “One person briefed on the bid said Mr. Harman would retain 250 employees [of Newsweek’s current staff of 325] and pay the Post Company $1 in exchange for taking on Newsweek’s considerable financial liabilities. Losses at the magazine could approach $70 million this year, this person said.”

We all know this type of deal is possible, after OpenGate Capital’s October 2008 acquisition of TV Guide from Macrovision for only $1 (in fact, Macrovision loaned the Beverly Hills, California-based investment firm up to $9.5 billion, at 3 percent interest, to help fund the acquisition and get the troubled magazine off its hands). But, as the NYT story points out, Harman’s deal is in effect appealing to Graham and the Washington Post Co. because it is undisruptive to the magazine’s current operation. It says the management team is worried that another bidder, Fred Drasner—a former partner of Mort Zuckerman who helped negotiate his deals for the Daily News, Atlantic Monthly and Fast Company—would “cut the staff too deeply” and make other changes. (I’m told Drasner wants Newsweek to have top notch reporting and journalism, and to upgrade the digital side, all while finding a market for it so the brand can gain readership and advertising.)

But isn’t change exactly what Newsweek needs? For an epic brand that has struggled in print editorially as a newsweekly and is working toward $70 million in losses before the end of the year, maintaining status quo would be a disaster. Perhaps Harman will tap into his millions to eat up those losses and prop up the magazine, but for how long?

Let’s not forget that publishing a magazine goes beyond providing a service or being some sort of trophy asset. It’s about making money. Newsweek is a business and its model is failing.

I’m not advocating any one deal or bidder over the other. I haven’t spoken directly with Harman or Drasner or any other bidder. What I am saying is that the Washington Post Co. should give serious consideration to who might give the magazine the strongest opportunity for future success. Most people don't enjoy laying off longtime, dedicated employees, but finding a new, operable model for Newsweek might be the bigger priority.

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Jason Fell

‘If You’re Not Actively Thinking About Creatively Destructing Your Brand Then Someone Else Will’

Jason Fell B2B - 07/27/2010-08:13 AM

Controversial. Insightful. Entertaining. True.

One of the best parts of covering magazine publishing and interviewing the industry’s most influential players is getting that nugget, that one quote about some important issue that stands out—leaps off the screen as any one or more of the descriptors above.

And, thankfully, there have been a lot of them. Now that we’re well past the halfway mark in 2010, I looked back at all our stories since the beginning of the year (or at least as many as I could) and collected several quotes that stood out most to me over the months. (Let me know if I missed any...)

Here's the list, in no particular order. They’re all worth revisiting, and I hope you enjoy them as much as I do.


“There’s no getting around that display advertising on the Internet is going to be no one’s salvation.” –Meredith Corp. National Media Group president Jack Griffin on the publisher’s successes and struggles.

“A lot of publishers are facing the challenge of how to inspire legacy editors to think and act on building value across platforms beyond only print.” –F+W president David Blansfield, about letting go long time Print editor Emily Gordon.  

“People are paying. We know people will pay for it … it’s a business model that is just really very delicious.” –Time Inc. CEO Ann Moore on tablets at parent company Time Warner’s Investors Day.

“Demand Media can go to hell.” –FOLIO: general manager Tony Silber on the content-farm nature of the company’s business model.

“The magazine world doesn’t have a consumer problem, it has an advertising perception problem.” –Hearst’s Michael Clinton, explaining the “Magazines, The Power of Print” initiative.

“I’m far more worried about 500 million people on Facebook than I am about 2 million people watching Fox.” CNN U.S. president Jonathan Klein at Bloomberg BusinessWeek’s annual Media Summit.

“I don’t know what you mean by social media.” –a respondent’s answer to  the American Society of Business Publication Editors’ question of whether time spent engaging in social media helpful or a hindrance to producing quality print or digital content?

"When do you need a magazine like Editor & Publisher more? When everything is going great or in a tie of crisis? It's more vital now than ever." Duncan McIntosh of Duncan McIntosh Co. Inc., on purchasing shuttered Editor & Publisher from Nielsen Business Media.

“’The channel’ is what matters. The gizmo is secondary.” –Rex Hammock on the difference between creating content and the way the content is consumed.

“My guess is that the publishers who take up the challenge won't realize any immediate financial windfall. But they'll get something better out of the deal: A chance to reimagine their content and their business on a device that offers infinitely intriguing possibilities for both.” –Technologizer editor Harry McCracken, shortly after Apple’s iPad launched, on what effect it might have on magazine publishing.

“Dare I say the National Magazine Awards have become, well, boring?” –Me, commenting on how the same big New York-centric titles win the contest year-after-year.

“If you’re not actively thinking about creatively destructing your brand then someone else will.” –David Nussbaum, chairman and CEO of F+W Media at the 2010 FOLIO: Show.

“The days of a portal Web site where everyone in the industry feels like they ‘must go’ there every day to keep up are over. Home pages on Web sites are less and less relevant.” Dave Iannone, founder and CEO of Go Forward Media, on the growing relevance of social media.

“For us, ‘brand’ is not what it was even two years ago. Our customers want us to put content on their sites, they want us to build audience for them, they want to build their own databases. If we’re not in that business, we’re going to grow backwards.” –Ziff Davis Media CEO Steve Weitzner at ABM’s annual meeting.

“Apple has been very upfront about saying, ‘Hey, we're going to watch how much data you can give people.’ The Apple process says, ‘If you do anything special with tracking, please let us know ahead of time so we can guide you’ and we wrote a long e-mail about what we wanted to track and why, and their response was, ‘We won't comment until you submit the app.’ We’re developing according to how we think they'll react but that’s not really a business partnership. You just read the spec guide and say a prayer.” –Nxtbook Media’s Marcus Grimm on the difficulties of dealing with Apple in regard to iPad app creation.

“I made the decision to stop, once and for all, before things got out of hand and I risked even more of my personal sanity and savings. I could no longer fight this fight, issue to issue, trying to counter an economic landscape that simply needs time to recover.” –founder and former editor-in-chief Anita Malik on closing down East West, for the second time.

“If we assume that the founders of Twitter really are as shallow as they appear to be, the best thing to do is the opposite of what Twitter is doing. In this case that would mean moving businesses away from advertising (the Twitter strategy).” –Internet Evolution founder Stephen Saunders on why Twitter is bad for business.

"People tend to talk about editorial and not the brand. Editors-in-chief are not equipped to do brand management.” –Atlantic Media president Justin Smith at the FOLIO: Show.

“The world is changing very fast and our company is changing very fast. We’re going to stake our claim on that tagline, that says because it’s changing very fast, we’re going to lead it.” –Cygnus Business Media CEO John French on the company’s new tagline and new organizational architecture.

“Most forms of content are not standardized and it's in the industry’s interest to focus on this quickly regardless of devices. We need to think about the way files are created and ad formats that are consistent.” –John Squires, at MPA's Magazines 24/7: The E-Reading Evolution event, on the launch of Next Issue Media.

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Jason Fell

Hefner: ‘I’m Buying, Not Selling’

Jason Fell M and A and Finance - 07/14/2010-10:00 AM

UPDATE: Penthouse Owner Offers $210M for Playboy

Apparently Hugh Hefner’s announcement this week that he wants to take Playboy Enterprises private—and the media swarm that followed—has the Playboy founder on the defensive. If not about the offer itself or if it is substantially below the fair market value for the company, then definitely about other parties stepping forward to place their own bids.

Shortly after Hefner announced his proposal to purchase all of Playboy’s outstanding shares of Class A and Class B common stock for $5.50 per share (he already owns 69.5 percent of its Class A and 27.7 of its Class B stock), I spoke with Marc Bell, CEO of Penthouse magazine owner FriendFinder Networks. He didn’t offer up many details but said he expected FriendFinder to submit a bid for Playboy “within the next few days.” (An e-mail came in as I was writing this saying FriendFinder will go public with its proposal for Playboy at 12:30 p.m. on Thursday. It has retained Imperial Capital, LLC as financial advisor for the process.)

According to Hefner, Bell shouldn’t even bother. In a second announcement, which hit news wires Tuesday afternoon, Hefner reasserted that he believes his offer “is in the best interest of the company.” Over Twitter, he (or whoever tweets for him, under his handle) also reaffirmed that he is not interested in any sale or merger of PEI, selling his shares to any third party or entering into discussions with any other financial sponsor. Here are his tweets, in chronological order:

@hughhefner: Penthouse is just looking for publicity. They're not in the picture.

@hughhefner: My interest in taking Playboy private is prompting some crazy rumors. Playboy isn't in play. I'm buying, not selling.

@hughhefner: I'm concerned about our minority stock holders & the future of the magazine & the brand.

@hughhefner: I support my management team & think we're on the road to recovery. Going private should help.

Hef could in fact block selling Playboy to other potential buyers. If bids do roll in at a value greater than Hef’s then the company’s board of directors would most likely put pressure on him. But would it make a difference? If he’s as steadfast as he says he is, any other deal wouldn’t go through without his consent to sell his stake.

Here’s the entire text of Hefner’s proposal:

July 8, 2010

Board of Directors
Playboy Enterprises, Inc.
680 North Lake Shore Drive
Chicago, IL 60611

Attention: David Chemerow

Gentlemen:

I am writing to you to inform you that I am interested in negotiating a transaction with our company to acquire all of the outstanding shares of Class A and Class B Common Stock of PEI that I do not currently beneficially own. In this transaction, I intend to partner with Rizvi Traverse Management LLC (“Rizvi Traverse”). Rizvi Traverse is a private equity firm with a special focus on the entertainment and media sector. Rizvi Traverse currently owns or has investments in International Creative Management, Summit Entertainment, Newbridge Capital and Clearscope Partners. Rizvi Traverse can bring significant resources to our company to help accelerate its growth.

Given my many relationships with our company – founder, editor-in-chief, chief creative officer, holder of 69.5% of the outstanding voting Class A common stock and 33.7% of the total outstanding shares of capital stock, I expect that a Special Committee of the Board of Directors will be formed to consider this transaction. I look forward to working with the Special Committee to move this transaction forward as expeditiously as possible.

I believe this proposal is in the best interests of our company and its minority stockholders. The proposal provides an excellent opportunity for the minority stockholders of PEI to realize liquidity for their shares at a significant premium to market values. I believe the proposal will also reinvigorate the company I founded and create a lasting legacy for the Playboy brand, a brand we have all worked hard to establish as one of the most widely recognized and popular brands in the world.

Please be advised that out of my concerns for amongst other matters the Playboy brand, the editorial direction of the magazine and our company’s legacy, I am not interested in any sale or merger of the Company, selling my shares to any third party or entering into discussions with any other financial sponsor for a transaction of the nature proposed in this letter.

I expect continuity of senior management through and following the transactions contemplated by my proposal. I am open to participation by continuing members of senior management in the new entity I and Rizvi Traverse propose to form to complete the acquisition (“NewCo”).

Based upon conversations with Rizvi Traverse which are in turn informed by Rizvi Traverse’s due diligence to date, I am in a position to propose that NewCo would acquire all of the outstanding shares of common stock not currently owned by me for $5.50 per share in cash. In accordance with the Company’s Certificate of Incorporation, the same per share price will paid to Class A and Class B common stockholders. The proposed per share consideration represents a 39.9% premium over the closing price of the Class B common stock on July 7 and premiums of 43.4% and 80.9% over the average closing prices for the last 30 days and one year,respectively.

Rizvi Traverse informs me that it has contacted major lenders regarding potential financing for this transaction and Rizvi Traverse is highly confident that ample financial resources will be available to complete this transaction. I and Rizvi Traverse contemplate that the definitive agreements will not contain a financing contingency.

This confidential indication of interest is non-binding and no agreement, arrangement or understanding between or among me, Rizvi Traverse or Playboy Enterprises, Inc. has been or will be created until such time as definitive documentation has been executed and delivered by all appropriate parties, and any proposed agreement, arrangement or understanding has been approved by the Special Committee and the Board of Directors, as appropriate. In that regard, you should be aware that while I have engaged in discussions with RizviTraverse in connection with this proposal, I have not entered into any agreement, arrangement or understanding with Rizvi Traverse concerning the transactions proposed in this letter.

This indication of interest and its contents are confidential, and should not be disclosed to any third parties, except to the extent that legal counsel to the Company advises the Board of Directors in writing that disclosure is required by applicable law or disclosure is made on a confidential basis to the Company’s legal and financial advisors.

I and my legal and financial advisors at Munger, Tolles & Olson LLP and Moelis & Company, LLC look forward to the earliest possible opportunity to discuss with the Special Committee and its legal and financial advisors the path to complete a mutually acceptable transaction.

Very truly yours,

Hugh M. Hefner

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