Several publishing company executives report being approached with partnership overtures for Bob Guccione Jr.'s Gear, and with offers to acquire News Corp. unit NewsAmerica's Maximum Golf and Mary Engelbreit's Home Companion, a Missouri-based home-decor title.
The struggles of standalone magazines indicate the crunch in which publishers-particularly smaller ones-find themselves. The titles above join Working Woman Network, publisher of Working Woman and Working Mother; Standard Media International, publisher of The Industry Standard; and hip-hop title The Source on the deal market.
Reader's Digest Association's Walking, also recently on the block, was shuttered last week. A deal, most likely for its subscription file, could come this week, but its death could foretell another ugly trend.
"There are so many trends working against marginal titles," said Jason Klein, former CEO of Times Mirror Magazines. "You'll see a lot of titles in the bottom quartile [of profitability] get pushed over the edge. They just really won't be viable in this environment."
Since recovery in the magazine ad sales may not come till late 2002 or into 2003 (see story, P. 12), deals will only accelerate. "Many properties are waiting until the fall to come to market," said Kim Mac Leod, managing director of media investment bank DeSilva & Phillips.
Even in the ad-mad delirium of 2000, industry executives predicted a coming consolidation. It took until midyear to begin, though the grim tidings of 2001 were clear on the horizon late last year.
Notions of a second-half turnaround had to be dashed before titles hit the block, executives said. "Publishers never want to believe the inevitable until it smacks them over the head with a bat," said one.
But by not selling in flush times, potential sellers have hurt deal valuations, and face a diminished pool of potential buyers. Deal-side veterans said bankers' reluctance to lend is hurting demand. (Big players like Time Inc., which late last week neared a billion-plus deal for the European IPC titles, are less affected by lenders.)
Chip Block, a publishing strategist for Ziff Davis Media, compared the magazine industry to "a beautiful shiny car-beautiful and shiny because of a paint job but inside it's rusting away," with circulation and structural woes. In 2001, with the ad boom gone, "Now everyone can see it for the rust-bucket it really is."
Mr. Guccione denied talks concerning a Gear sale, but said he was feeling out financial players for "future projects" and acquisitions in the pop-culture and fashion realms. A spokeswoman said Standard Media merely seeks a second round of financing, although a staffer conceded it could substantially change the Standard's ownership. A spokeswoman for International Data Group, The Standard's majority owner, declined comment.
A spokeswoman for Greg Hoffmann, CEO of Mary Engelbreit Cos., said "at this point in time, we are not seeking a buyer or a partner."
Regarding Maximum Golf, a News Corp. spokesman declined comment "on rumors or speculation."
While Jay MacDonald, chairman of Working Woman Network, sent an e-mail missive to staffers June 28 citing several "companies and one consortium" making offers in the next week to 10 days, executives familiar with the company cite its $15 million debt load as a sticking point to even a fire-sale deal. MacDonald's spokeswoman declined comment.
One potential buyer for at least part of Working Woman Network-Richard Huttner, former CEO of Baby Talk magazine-declined comment.
Bids for The Source are due at the end of July. Executives familiar with the title said earnings before interest, taxes, depreciation and amortization last year were almost $7 million on revenue of around $25 million, a higher profit margin than in previous years. Potential buyers include Wenner Media, which had previously considered buying the title, and Miller Publications, which owns Spin and Vibe. Ed Lewis, CEO of Essence Communications Partners, said he was interested as well, either in conjunction with his 49% owner Time Inc. or alone.