City and regional magazines are among the hottest segments of the publishing industry. Plenty of regional titles have launched over the last year;many of them, like those of Jason Binn’s Niche Media, focus on luxury lifestyle and real estate;at a time when most national magazines are still struggling to grow. Many regionals, such as Dallas’ D and Minneapolis/St. Paul, consistently outsell major national titles on the local newsstand. “I haven’t seen so much activity in years,” says City and Regional Magazine Association president Jim Dowden. “Any person with two dollars in his pocket is out there creating some title to take advantage of the local market.”
A Different Model
But when it comes to publishing mergers and acquisitions, regionals exist on a bit of a different plane. Sure, they’re there;the New York-based media banking firm DeSilva & Phillips shows 23 regional deals on their ledger since 1997, including 6 in 2004;but they often go overlooked by the larger strategic players who are seeking as many publishing acquisitions as they can.
“In general, regional magazines don’t tend to be great business acquisition opportunities for large publishers,” says Adam Gross, vice president of marketing for the Jordan, Edmiston Group . “Since the magazines need to be run from regional offices, it would be difficult to run a Scottsdale magazine from New York.” So, too, bigger publishers cannot consolidate back-office operations, which would enable them to “wring out cost savings” typical when a publisher acquires a collection of national titles.
But that may soon change, if it hasn’t already. A number of small to mid-sized publishing companies have begun to look at regionals as M&A targets for their niche-like local appeal with readers, instant-penetration of distant markets and relative low cost, and the larger publishing companies may soon follow. In April, Network Communications, led by CEO Dan McCarthy, bought a collection of well-regarded regional home titles owned by Wiesner Publishing for $20 million; in June, Malibu, California-based regional luxury lifestyle publisher CurtCo Media acquired San Diego Magazine and related assets for less than $5 million. Endurance Business Media, publisher of Homes & Land magazine, bought Pacific Publishing, a Santa Cruz, California, regional home and lifestyle publisher, in October, following up on its January buy of Southampton, New York-based Miller Publishing (Homes of the Hamptons, Montauk Living). Also last month, Philadelphia-based DLG Media Holdings, publisher of Philadelphia Style and D.C. Style, partnered with William Melnick to form Good Life Media, a platform company bent on building up a stable of local titles through acquisitions;one every 18 months, according to company officials.
“We’re looking at properties with $2 million to $5 million in revenue,” says Melnick, Good Life partner and chief marketing officer. “Our vision is not to run a regional publication out of New York. Outside of a national sales force, why incur the expense that would be a drag on earnings in New York?” Centralizing operations, Melnick says, would fly in the face of the spirit of these regional titles often entrenched in their markets because they are physically there. “The local equity is built up over time; a roll-up would contradict the reason you bought it to begin with.”
Still, it’s hard to approach the scale private-equity firms are seeking. “It is harder to achieve that level of desired scale without a roll-up strategy,” says John Balardo, president of Royal Oak, Michigan-based HOUR Media. “It is also much harder to compete without a regional platform or a roll-up.” The exception, Balardo says, is the so-called “Super Regional,” magazines like Veranda, Western Interiors and Florida Design that began regionally, yet have vast national appeal.
Operating a publishing company across disparate locales is nothing new, says Dan Galpern, chief operating officer, CurtCo. “The challenge that comes with buying a handful of titles in different states is not unique to regional publishing,” he says. “Each market is its own business and needs to be managed locally,” says Balardo. “There are pretty obvious administrative and sales synergies, but for the most part, these are grassroots businesses.”
The Cost-Savings Advantage
Melnick says that between consolidation of printing costs, brand extensions and customized regional editions, significant cost savings are attainable. “We can immediately affect 30 percent growth in revenue,” he says. “The problem we’ve run into is the big guys want only $100 million deals.”
But the smaller deals are clearly out there. “The dollars are just less than most other consumer magazine deals,” says Balardo. “With as many magazines as there are markets, there has always been activity and probably always will. It is just hard for a billion-dollar operation to make money on a bunch of little $5 million operations;it doesn’t make sense.”