EISNER & WENNER EXPLAIN THEIR DEAL TO ADAGE.COM

Published on .

March 2, 2001

By Jon Fine

"This isn't as big a deal as AOL Time Warner," Michael Eisner, Disney's chairman and CEO, told AdAge.com. "I gather you hear I'm being facetious."

Still, the Feb. 27 deal in which the Walt Disney Co., via a 50-50 partnership, will inject unspecified millions in cash into Wenner Media's troubled US Weekly has many

.Photo: AP
Jann Wenner and Michael Eisner at their joint announcement on Tuesday.
executives in TV, magazines and advertising not named Jann Wenner or Michael Eisner scratching their heads.

"I think it's a vote of confidence" in the magazine, said Valerie Muller, senior vice president-director of print for Grey Global Group's MediaCom, New York. "I haven't quite figured out why Disney wants it."

In the eyes of skeptics it's easy to see what Wenner Media chairman Jann Wenner gets: a white knight to keep a money-gobbling project going.

What's the upside?
But Disney's upside -- an annual US Weekly-branded awards ceremony, US-branded segments for Good Morning America, Disney-owned ABC's radio networks and local TV broadcasts, as well as other TV properties -- is questioned even within the company.

Referring to the plans for the awards ceremony, a mystified Disney executive asked, "Couldn't they have done this without the [US Weekly] deal?"

When journalists late Monday afternoon received cryptic invites to Tuesday's press conference, the knowledge that Mr. Eisner would be there led many to assume that any announcement had to involve Wenner's prized property, Rolling Stone -- although attached Microsoft Word documents to the e-mails were tellingly titled "USMedia1" and "USMediaAlert1."

"Someone asked yesterday what was my motive for doing this," Mr. Eisner said. "And I said, 'Well, I like the magazine. I like to read it more than its competitors.'

"It's just light and fun and interesting and non-threatening," Mr. Eisner continued. Reading US Weekly after a long day of reading "a lot of serious stuff" is like "a nice souffle at the end of a heavy meal," he added.

Deal reportedly worth $35 million
We should all be able to afford such souffles: Though Disney and Wenner executives staunchly denied to comment on the financial aspects of the deal, The New York Times quoted a Wenner executive saying Disney's investment was $35 million.

Messrs. Wenner and Eisner have denied the deal gives Disney any sort of future first dibs on Rolling Stone or Men's Journal should Mr. Wenner ever decide to sell those properties. Mr. Eisner's told AdAge.com that "there is no legal provision" for anything concerning Rolling Stone or Men's Journal in the future.

"It's hard to believe" some kind of future option does not exist, said a magazine executive. "It might just be a handshake."

Money-losing venture?
At the conference and in a subsequent interview, Mr. Wenner said that so far US Weekly had spent slightly less than half of the $50 million he had earmarked for its launch last March. However, one former Wenner executive said in-house estimates were budgeted for the title to lose $1 million a week at a circulation level of 1 million.

That level proved unattainable, owing to slower-than-projected newsstand sales, which led that executive to surmise that the title's weekly losses exceeded $1 million. The magazine reduced its launch rate base from 1 million to 800,000 last June. (The rate base was bumped to 850,000 in January.)

A stubbled and ruddy Mr. Wenner, who said he had wanted a partner for Us Weekly from the beginning, told reporters Tuesday that the two companies had had discussions about a deal prior to the weekly's launch last March and that those talks reignited "four to five months ago."

"I never stopped wanting a partner," Mr. Wenner said.

Newsstand woes
US Weekly's troubles essentially stem from its underperformance on the newsstand. For the last half of 2000, its newsstand sales averaged 300,810, according to Audit Bureau of Circulations. This makes it, as Mr. Wenner pointed out, the seventh-biggest selling newsstand title among all magazines. But the company had the misfortune of launching into a tough newsstand market -- which is only getting tougher -- without the clout that, say, an AOL Time Warner or Hearst magazine has with distributors. Simply put, Disney will not help US Weekly directly in the arena it needs it most.

Last June, Mr. Wenner told Advertising Age magazine that switching US from a monthly to weekly meant money "pours out." "You're not putting out one monthly, you're putting out a couple million every goddamn week and paying for all those [newsstand] racks," he said.

Still, the cross-promotional opportunities have some convinced of the deal's success. "If newsstand sales have been a problem, what better way to stay in consumers' minds than by being a segment on multiple broadcasts?" said Charles Valan, vice president-associate director of print services at Universal McCann, New York.

Other execs are less certain. "It's certainly conceivable a lot of promotional support, a lot of exposure, will help their single-copy sales," said Chip Block, publishing consultant at Ziff Davis Media and a former Wenner executive. But "putting a magazine on TV is not a strategy that has worked for anyone."

Promotional boost
The boost for US Weekly from Disney comes "not so much from circulation but from promotion," said Eric Blankfein, vice president-director of media planning for Horizons Media, New York. But asked if such promotion would necessarily drive circulation, Mr. Blankfein said no.

"I believe there is a significant upside" for US's circulation because of the deal, Mr. Eisner said. "I won't even admit what my goal is."

At the press conference, the two execs said that many of the details of selling ads for an upcoming US awards program had yet to be determined, though Mr. Eisner said he "suspected" they'd be handled by ABC.

Mr. Eisner also dismissed notions that the deal may be a relatively inexpensive way to tweak the AOL Time Warner monolith. "I was talking to [Mr. Wenner] before [AOL Time Warner CEO] Jerry Levin ever had his job," he said. "What would you get out of it? Some kind of secret delight in having a millisecond of concern cross [Time Inc. editor in chief] Normal Pearlstine's face?"

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