Meredith's first step is to remove tarnish from titles

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Last week's surprise acquisition of four Gruner & Jahr USA publications lands Meredith Corp. with several challenges to reinvigorate the titles it's adding to its stable.

The addition of Child, Parents, Fitness and Family Circle to its bevy of woman-focused publications, including category leader Better Homes and Gardens and Ladies' Home Journal, was largely cheered by analysts and media buyers. But the first order of business is to clean off the taint of G&J's circulation misstatements, a big black eye that helped seal the fate of the German publisher's U.S. outpost.

Given its widely-lauded track record for circulation, that task may not be too tough. Its executives said over an 18-to-24 month process they will apply its direct-to-publisher practice to the new titles rather than the subscription-agent model that led to problems for G&J and other publishers. That means "significant investment in direct mail and Internet-related subscription generation," said Steve Lacy, Meredith president-chief operating officer.

"From what we've seen, there's no disaster here," Mr. Lacy said. "There's a matter of making financial investments and changing the source mix over a period of time."

"Any enduring concerns about circulation goes away when Meredith buys them," said Mark Edmiston, managing partner, AdMedia Partners, which has been hired to handle the sale of G&J's two remaining U.S. titles, Fast Company and Inc. "They are known as being very good circulators and going strictly by the book."

A range of suitors, including Time Inc., Conde Nast Publications and CurtCo, are said to be in the hunt for the business publications. Industry executives said a variety of potential scenarios exists for Fast Company, from a list transaction, to a deal where it is folded into another magazine, like Wired or Business 2.0, to a situation where a buyer decides it's a diamond in the rough and maintains it as a standalone publication. One thing that's certain is that the publications will fetch only a fraction of the $540 million that G&J spent to get them.

"The bottom line is who's going to pay the most and close before June 30," said Reed Phillips, a partner at the investment bank DeSilva & Phillips, referring to the date when G&J's option to sell the two business magazines to Meredith expires. "That's a challenge because a buyer is going to want to understand the businesses before they buy them for a big price."

FAMILY PROBLEM

A knottier problem facing Meredith is that of Family Circle, whose ad pages were down 6.3% last year, according to Publishers Information Bureau. Along with the six remaining Seven Sisters, the monthly has in recent years faced declining circulation due to a variety of competitors for women's attention. (G&J turned the seventh sister, McCall's, into Rosie, the ill-fated venture with entertainer Rosie O'Donnell that ended in a nasty court battle where circulation mismanagement charges at the company first came to light.) Some expect a new weekly service magazine from Hearst to foment a category shakeout initiated by diverse titles like Time Inc.'s Real Simple, Hearst's O, The Oprah Magazine, and Meredith's More. One industry insider summed up a common sentiment: "It will probably benefit from being in a different company, but Family Circle is in a pickle."

A Meredith spokesman said that the company's circulation prowess should help Family Circle. In any case, the magazine's still-massive reach, added to the rest of Meredith's holdings, will be a boon to marketers. To that end, Meredith will integrate them with its current publications into three operational groups: parenting titles, lifestyle titles and mass-reach titles.

looking for growth

It's easy to see why Meredith viewed the deal as advantageous: It needs to find growth somewhere. Even though the addition of the G&J titles nearly doubles its company ad-page count, it remains fifth behind leaders Time Inc., Advance Publications, Hearst Magazines and Hachette Filipacchi Media U.S. (see chart, P. 4).

Meredith now can offer advertisers what one observer called an unrivaled "womb-to-tomb" access to American women. A greater reach-a combined circulation of 30 million-that comes with a younger audience should entice more health-and-beauty advertisers, now a strong suit for the G&J publications and a relative weakness for Meredith.

"These are strong brands in the marketplace and having them strategically under the Meredith roof will provide better opportunities for them," said Robin Steinberg, senior VP-director of print investment at Publicis Groupe's MediaVest. "Meredith will create buckets that will provide more opportunity for advertisers."

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