Monday, May 14, 2007

Major Magazine Distributor Acquires Primedia Enthusiast Magazines

Major Magazine Distributor Acquires Primedia Enthusiast Magazines
by Tony Silber

Source Interlink Companies, one of the leading magazine distributors, announced today that it is acquiring Primedia Enthusiast Media (PEM) in a stock purchase for approximately $1.2 billion in cash.

A public company based in Bonita Springs, Florida, Source Interlink also distributes DVDs, music CDs, and books. It generated about $1.9 billion in its fiscal 2007, which ended January 31.

Source Interlink is controlled by Yucaipa Cos., a supermarket-holding company owned by billionaire businessman Ron Burkle. Last week, Folio: reported that insiders were saying the Burkle bid was coming on strong, although one source told Folio: the Burkle bid (mentioned to be in connection with American Media) was not being taken seriously. “It is a stunning development that a publicly owned distribution company controlled by Ron Burkle is buying one of the largest portfolios of enthusiast magazines,” one source said Monday morning. “It’s shocking. The valuation is significantly higher than they would have gotten from others.”

Indeed, Source Interlink also paid significantly more than sources in the last few weeks indicated the company might get. PEM, with revenue of about $524 million and EBITDA of about $100 million, turned out to command an EBITDA multiple of about 12-times.

To fund the acquisition, Source Interlink has secured a financing commitment from Citigroup Global Markets. It was unclear at presstime whether American Media was involved.

Source Interlink has been on a buying spree in recent years. In 2004, it acquired Empire News, and in 2005, it acquired Chas. Levy Circulating Co. for $30 million, giving it about 20 percent of the single-copy magazine-distribution market.

“Over the last several years Source has driven the consolidation of a fragmented and inefficient channel for the distribution and merchandising of home entertainment content at retail and the newsstand,” said Source Interlink chairman Michael Duckworth. “This acquisition is a first step to leverage what we have built by transforming Source into a fully integrated media company with both print and digital content. Primedia Enthusiast Media's industry-leading special interest magazine titles and consumer Web sites diversifies our earnings streams and accelerates our growth.”

Following the completion of the transaction, PEM will operate as a division of Source Interlink and will be headed by Steve Parr, PEM’s current president. He will report to Duckworth.

PEM is the leading special-interest magazine publisher in the U.S., with over 70 magazines. Its portfolio includes: Motor Trend, Automobile, Hot Rod, Lowrider, Soap Opera Digest and Soap Opera Weekly, Power & Motoryacht

Who says industry magazines are cozy with their advertisers?

A Nod to Journalistic Integrity Is Seen in an Editor’s Return
Who says industry magazines are cozy with their advertisers?

Last week, the International Data Group removed the chief executive of its largest-circulation computer magazine, PC World, and reinstated its top editor, who had quit days earlier over the executive’s decision to not run an article critical of an advertiser.

The editor in chief, Harry McCracken, rejoined the magazine on Wednesday after the disputed article, “10 Things We Hate About Apple,” was posted on the magazine’s Web site.

It was a hero’s homecoming for Mr. McCracken, who was praised on the message boards and in the blogosphere for sacrificing himself in the name of journalistic integrity.

“I was on the brink of canceling my subscription,” wrote one reader. “Now that McCracken’s back, I’ll stick around, too.”

PC World, a monthly magazine with a companion Web site that mixes technology news with product reviews, has a reputation for smart and sometimes hard-hitting articles that often offend big tech companies.

In recent years, it has criticized several of its advertisers for what it described were bait-and-switch tactics and price gouging. Its survey of the reliability of manufacturers has given poor ratings to several of the magazine’s advertisers. It even has a regular column chronicling the defects in Microsoft software.

Mr. McCracken says that several advertisers have withdrawn ads over the years, after their products were negatively reviewed in the magazine, most recently last month. (He would not name the advertiser.)

“PC World is surprisingly reportorial, especially against some other technology magazines that don’t invest a lot” in articles that might provoke companies, said Sam Whitmore, an analyst in Beverly, Mass., who tracks technology publishers.

That may explain why Mr. McCracken’s resignation drew the attention of hundreds of bloggers. It became a cause célèbre for many who viewed the spiking of the article as an affront to Silicon Valley’s Fourth Estate. To others, it was a confirmation of what they had long suspected — that the business side routinely meddles in editorial decisions at technology magazines, especially in recent years, as ad pages have declined considerably, leaving many magazines to rely on only a handful of advertisers.

Mr. McCracken says he did not quit to make a statement. But now, a part of him is glad that the skirmish became public. “With the conclusion we reached, this should tell everyone that computer journalism isn’t sleazy,” he said.

Even so, on blogs and in interviews, some observers noted that the final version of the Apple article appeared next to another article titled, “10 Things We Love About Apple,” making them wonder whether a compromise had been made to appease Apple, and whether the “We Hate” article had been toned down before publication.

Mr. McCracken, a 12-year veteran of PC World, said that the dustup with his boss occurred while the “We Hate” article was still a draft, and that editing was done before it was published. He said, however, that it was edited without consideration to how Apple might react. He also said that the “We Love” article had been planned all along.

He acknowledged that the “We Hate” article made for an odd source of controversy, because it required little reporting and contained no news. “We saw it as a fun little story that would get people talking,” he said. Wired News called it a “fluffy piece of Digg bait” meant to compel user-driven news sites like to link to it.

The ousted chief executive of PC World, Colin Crawford, has been reassigned to his old job of overseeing business development for International Data’s online properties. He did not respond to messages left at his office and on his cellphone.

Mr. Crawford, who had been at PC World for only two months, spent 10 years as chief executive of the company’s Macworld magazine, which is devoted to Apple’s line of Macintosh products. International Data also runs the Macworld convention, where the chief executive of Apple, Steven P. Jobs, introduced the iPhone in January.

Apple is “not just any advertiser,” Mr. Whitmore, the analyst, said, pointing out that Mr. Jobs had a reputation for trying to influence coverage of the company.

Apple did not return calls seeking comment. The writers of the Apple articles, Narasu Rebbapragada and Alan Stafford, declined to comment.

Mag Bag: Stuff Goes to the Kentucky Derby, Stack Takes a Different Tack

Mag Bag: Stuff Goes to the Kentucky Derby, Stack Takes a Different Tack
by Erik Sass, Monday, May 14, 2007 7:00 AM ET

Stuff Goes to the Kentucky Derby, Stack Takes a Different Tack
Magazines are getting into event marketing in a big way, using high-engagement activities to draw groups of readers together and form a sense of identity centered on the publications. One favorite high-interest theme, of course, is sports--from both the fan and participant perspectives. These two sides of the sporting world have rather different vibes, of course.

The fan side might best be described as "decadent and depraved," at least when you're talking about the Kentucky Derby. A party hosted by Stuff magazine figured prominently among the revels on Saturday when Street Sense won the Kentucky Derby--as well as the revels both before and after the event, a 30-second race at the center of a two-day bout of upper-class binge drinking. The magazine, whose publisher wants to head up-market, is tapping into a variety of upper-crust class signifiers, including establishing its own online concierge service and now the Kentucky Derby. The association with Hunter S. Thompson, a renowned drinker, probably doesn't hurt either.

The Stuff magazine party on the eve of the Derby, after the Derby's annual Barnstable Brown party, was hosted by cover babe Taryn Manning, with guests including Jermaine Dupri, Janet Jackson, Joey Fatone, and NSync's Chris Kirkpatrick. Queen Elizabeth II did not attend--perhaps unconvinced by the "high class" vibe of the event; nor was she seen at the competing Crown Royal Playboy Lounge party.

The Derby party is one of a raft of upper-crust initiatives from Stuff and fellow Dennis Publishing title Maxim, which in recent years have both sought to shed its decade-old moniker of "lad mags." With the implosion of that category confirmed by the demise of down-market competitor FHM, the magazines are trying to reposition themselves as vehicles for advertisers to reach affluent, employed young men, both married and single, with (slightly) more highbrow content and lifestyle advice. Maxim is opening a chain of steakhouses with Jeffrey Chodorow, and has teamed with Concord Wilshire Partners to build a 2,300-room Maxim-themed hotel and casino on a 9-acre plot on the famed Las Vegas strip.

Meanwhile, Stack--a magazine targeting high school athletes with training tips and celebrity profiles--is taking a rather different approach: it's hosting a series of events where ambitious high school athletes can meet hundreds of coaches and recruiters from the nation's best collegiate athletic programs. In addition to helping readers get a shot at the big time, the recruiting events fit with the publication's multimedia delivery strategy: video of the events will be posted on the site, which also features exclusive video of celebrity athletes. Users are also invited to post clips of their workout routines and "best of" moments.

Since its founding in 2005, Stack has grown from an initial circulation of about 300,000 to 400,000 this year. With advertisers like Nike, Gatorade, U.S. Marines, Adidas, Sony PlayStation and New Balance, the magazine has a cover price of $4.99, but is distributed free to high school students through partnerships with school athletic directors. Its "Elite Tour" for high school football players will visit five cities: Atlanta on May 13th, Miami on May 19th, New York City on May 20th, Dallas on May 26th, and Los Angeles on May 27th.

Meredith to Map Home Renovation Projects, Consumer Behavior

Meredith Corporation is launching a research effort to figure out what consumers need for home renovations, when and how much of it they need, and where they typically go to procure it. The new research program, called HomeSight, promises to open a new area of business for Meredith's already substantial custom marketing efforts. HomeSight is being launched in partnership with CNW Marketing/Research, a consumer research organization based in Portland, Oregon. CNW's robust database of 5 million households covers a spectrum of geographic locations, financial attributes, "lifestages," and various related demographic attributes. Meredith will begin presenting the data to major homeware manufacturers and makers of other products used in home renovations, focusing on specific areas like bathroom or kitchen projects over the next couple of months.

Vibe's Gertler Steps Down

Eric Gertler, CEO of Vibe Media, is stepping down after 10 months, leaving the Wicks Group looking for a new publisher. No reason for the move was given; in January of this year Vibe President Ari Horowitz also stepped down. The Wicks Group, which owns Vibe Media, is said to be looking for a replacement for Gertler.

Mansueto Names Tebeau Publisher of Inc. Magazine

John Tebeau has been named publisher of Inc. magazine, effective immediately, according to Mansueto Ventures, which publishes both Inc. and Fast Company magazine. Mansueto CEO John Koten remarked: Under John's leadership, several new advertisers appeared in Inc. in the first quarter of 2007, including Comcast, Ketel One Vodka, Nissan Altima, Northern Trust, BMW, Wachovia, American Chemistry Council and UPS. His drive and vision will be instrumental in leading our advertising sales team as we continue to expand the Inc. brand with new ventures and programs." Tebeau was hired in 2005 as national sales director.

Affluent Regional Magazine Readership in 87 Markets

Affluent Regional Magazine Readership in 87 Markets

According to a new report by The Media Audit, Texas Monthly, which is read by more than two million adults across the state of Texas, reaches 38.7% of all adults in San Antonio who earn $75,000 or more in household income, making it the number one publication in reaching affluent households among The Media Audit's 87 measured markets.
And Austin came in second! The surveys, through March 2007, found that Texas Monthly in Austin ranked second in reaching affluent households (38.2% of affluent households read one or more of the past four issues). Affluent households are defined as those adults who earn $75,000 or more in household income. Next are:

Texas Monthly in Houston (33.5%)
Tucson Lifestyle (31.7%)
Boston Magazine (31.6%)

The conversion rate used by The Media Audit (the percent of total readers who are likely to read every issue) points to the loyalty or frequency of exposure of a media's audience. Among the affluent reading the Texas Monthly in San Antonio and the Tucson Lifestyle, more than three quarters of the total readers also read the past issue, suggesting that these publication's affluent readers are very likely to be exposed to every issue, concludes the report.

Bob Jordan, President of Houston-based International Demographics, Inc., comments, "The degree of audience loyalty for these City and Regional Magazines is significant when you compare them to other media such as radio or television..."

Rounding out the top ten publications reaching affluent households one or more times in the previous four issues are:

Pittsburgh Magazine (30.6% of affluent adults)
D Magazine in Dallas-Ft. Worth (30.4%)
Sacramento Magazine (29.5%)
Gulfshore Life in Ft. Myers-Naples (28.6%)
Milwaukee Magazine (28.3%)

For Magazine Industry, Less may be More

For magazine industry, less may be more
Time magazine's move to shed subscribers aims to shore up the publication.
By Randy Dotinga
Correspondent of The Christian Science Monitor

These days, Time magazine may not have much time for its 2006 Person of the Year – you.

A few months ago, the venerable newsmagazine announced that it will cut the number of paying readers that it guarantees to advertisers from 4 million to 3.25 million. Publicly, at least, Time doesn't care if 750,000 subscribers throw all those pesky renewal notices in the trash.

On the other hand, Time is reaching out to its most loyal readers through a beefed-up website, a new arrival date on newsstands, and a stable of spotlighted writers who fill its pages with commentary instead of traditional news reporting.

Why the extreme makeover? While the magazine industry is doing well as a whole, Time and its rival newsweeklies are struggling to stay afloat. Gutted by staff cuts and suffering from sluggish circulation, they're trying to figure out how to avoid the grim future facing the newspaper industry.

Time's solution is to adopt the philosophy that's ruled the wider magazine industry for years: Don't try to please all readers all of the time. Instead, just make some readers happy most of the time.

"The trend in the whole magazine industry has been from the general to the special interest," says Shirrel Rhoades, a consultant and a former vice president at Reader's Digest. The result: hundreds of magazines geared toward miniature dollhouse aficionados, surfers, and owners of old houses.

While there have been some high-profile magazine failures in the last decade (including Talk, George, and, most recently, the movie magazine Premiere), the total circulation of American magazines rose to 370 million in 2006, the highest since 2000.

High-brow magazines like The New Yorker and The Economist are doing especially well, and there are some 200 more magazines about just three subjects – dogs, golf, and interior design – than there were just a decade ago.

But the circulation of the Big Three newsmagazines (Time, Newsweek, and U.S. News & World Report) was largely flat in 2006, reaching a combined audience of about 9 million. They've each lost readers over the past 20 years, despite the growth of the US population.

"The extent of their influence has declined," says journalism professor David Sumner, coordinator of the magazine program at Ball State University in Muncie, Ind. "News has become more of a commodity, and it's cheap and easy to find."

As a result, the newsmagazines "are trying to reinvent themselves to compete with all the free news available on the cable channels and online," Mr. Sumner says. "They're trying hard to provide more interpretation, insight, and context, as well as soft entertainment stuff."

But cost-cutting has hobbled the news magazines. According to the Project for Excellence in Journalism, Newsweek and Time cut their news bureaus from a combined total of 62 in 1983 to 37 in 2006. They've also drastically reduced their staffs over that time period, with Time going from 362 to 226 employees, and Newsweek falling from 348 to 165.

Advertising doesn't appear to be saving the day, financially. While statistics suggest advertising in magazines in 2006 reached its highest level in six years, the newsweeklies reported little growth in total ad dollars.

Among the Big Three, Time has been in the forefront of change with its redesign and the change in its publishing date from Monday to Friday, intended to allow the magazine to be more timely for a weekend audience. Time is also publishing more original content on the Internet and devoting extra space in the magazine to commentary.

Time declined to make any company officials available for interviews for this story, but an editor's note in the magazine said Time hoped its redesign would make it "more meaningful and more forward looking."

In perhaps its most drastic move, Time is hoping to persuade advertisers to consider its cumulative reach, including website readers and those who read someone else's copy of the print magazine.

Traditionally, advertisers focus on a magazine's paid circulation, but Time is reducing the number of paid readers it guarantees to advertisers by 19 percent. In 2005, TV Guide made a similar move by slashing its guaranteed circulation from 9 million to 3.2 million.

While it may seem counterintuitive, dumping paid readers can save magazines money by allowing them to reduce the amount they spend persuading fickle subscribers to renew. And advertisers may appreciate being able to reach a more select and loyal audience.

Newsweek, meanwhile, continues to publish on Mondays and offer a more traditional mix of stories. Writers still tie up stories with pithy conclusions, using what staffers have called the authoritative "voice of God."

Newsweek wants to report less and interpret more, says worldwide publisher Gregory Osberg. "In the past, you followed the news. Now we're getting out in front of it and providing analysis."

Along those lines, Newsweek's website may offer a more specific focus on topics like politics, technology, and healthcare, Mr. Osberg says.

As for the third-place newsweekly, U.S. News & World Report remains the most serious – or the stodgiest, depending on your point of view – of the Top 3. It continues to focus heavily on topics like international news, politics, and business. It gives scant attention to, say, Paris Hilton's latest shenanigans. In fact, an analysis of eight months of 2006 issues by the Project for Excellence in Journalism found that U.S. News allocated less than 1 percent of its pages to celebrity and entertainment news; Time and Newsweek devoted 11 to 12 times as much of their space to those topics.

In regard to the future of magazines as a whole, industry insiders will be closely following the success or failure of a glossy new monthly business magazine called Condé Nast Portfolio, which published its first issue in April.

"Portfolio is being held up as the last big example of whether an old-school print magazine launch can still make it," says Matthew Kinsman, managing editor of the industry journal Folio:. "Their fate will have a lot of impact on the rest of the magazine world."

Overall, there seems to be much less hand-wringing in the magazine industry compared with, say, the newspaper business. There's plenty of speculation that your local daily newspaper could vanish in 20 years or less, but no one is saying that People, Good Housekeeping, and National Geographic will go the way of Life and Look magazines.

People move from place to place and encounter different newspapers, but magazines remain longstanding parts of people's lives, says journalism professor Sumner. "People feel more of an emotional bond to magazines, particularly if they've been long-term subscribers," he says.

Then there's the simple pleasure of reading a long, fascinating story on the couch instead of in a desk chair, staring at a computer monitor. "The portability and convenience factor will ensure that print magazines will be around for a long time," Sumner predicts.

'Paper dumping' hotline planned

'Paper dumping' hotline planned
Mark Sweney

Ditched: copies of the London Paper and London Lite in a bin. Photo: Christian Sinibaldi

Londoners fed up with seeing dumped copies of London Lite and the London Paper around the capital may soon have an outlet for their frustration, with plans afoot for a complaints line people can call to report alleged dumping.
A complaints line is one of four proposals the Audit Bureau of Circulations, the body that audits newspaper sales, is considering as it seeks to stamp out dumping of the two London freesheets.

The ABC said its investigation of alleged dumping had found evidence that copies of London Lite, published by Associated Newspapers, and the News International-owned London Paper are being ditched.

As a result ABC is asking the publishers of both freesheets to adhere to a tighter code of conduct, including giving "consideration" to setting up a dumping complaints phone line for members of the public to report offences.

"The review has identified that copies of newspapers are being dumped which is, obviously, not compliant with the ABC rules," the organisation said.

ABC added that it was, however, "satisfied" that the reported circulation figures for April are "materially compliant".

"Having identified the distinct risk associated with hand distribution, ABC, in conjunction with publishers, has been working on improving the publisher management controls still further," the organisation added.

"ABC will be requiring additional improvements to the management control and reporting of the distribution."

The body's four-point plan to stamp out freesheet dumping in London also includes increased focus on internal publisher controls, compliance checking and complaints handling.

ABC is proposing more regular spot checks within London Lite and the London Paper distribution areas to monitor the effectiveness of publishers' compliance procedures and an ongoing review of hand distribution and ABC certification by industry representatives.

The circulation body launched the review following tit-for-tat allegations made last month by News International and Associated Newspapers - including the latter's release of video and photographic evidence that distributors were dumping free papers.

ABC said the review was instigated despite the fact that neither publisher made a formal complaint.