Berner Aims to Jolt RDA by Realigning Assets -- and Playing Some New Tunes
NEW YORK (AdAge.com) -- As they have twice daily for decades, soothing bells still swath the leafy Pleasantville, N.Y., campus of the Reader's Digest Association with easy-listening interpretations of songs such as "New York, New York," "Yesterday" and even "Send in the Clowns," to name some recent examples. But Mary G. Berner, who became the now privately held company's president-CEO on March 2, is prepping a new soundtrack for Pleasantville.
"Everything we do sends a message about the culture, so you really have to sweat it," Ms. Berner said last week, during her first extended interview since taking over. "I said, 'Those damn bells -- it's like naptime.' So we resolved we can play anything we want. We can't wait. In the next couple weeks they're going to start playing Bruce Springsteen." Also, she said, probably the "Rocky" theme -- and David Bowie's "Changes."
Her four months at the helm have seen a big number of changes already, including the company's reorganization around areas such as food, health and home in a bid to better package similar assets for both consumers and advertisers. She said she expects these North American affinity groups to expand ad revenue to the company in the coming year.
Break with the past
But the list of plans is so ambitious that updating and invigorating the company's traditional ways has emerged as priority No. 1.
"Ninety percent of the people, one of the first things they said they needed to change was the culture," Ms. Berner said. "They characterized it as too slow, not innovative enough, probably too set in our ways. So for me it was heartening that what the people wanted there was what I could see from the outside."
Few of us naturally operate at Ms. Berner's level of intensity. She left publishing in January 2006 primarily because Fairchild Publications, where she had been president-CEO since 1999, had recently been turned from a sibling into a division of Conde Nast Publications.
After an enjoyable interlude spent picking up her four kids, doing bake sales and trying all the things her corporate responsibilities never allowed, Ms. Berner did as the industry expected and started making the rounds of private-equity investors to find a way back in. By last August, she and Ripplewood Holdings had decided to make a run at taking the Reader's Digest Association private in a $2.8 billion deal. They succeeded.
Ms. Berner acknowledged that RDA was never going to resemble the old Fairchild -- but called that good. "I was less into the sex appeal of the Fairchild thing than probably most of the people there," she said. "They're very different. One's a much bigger company, one's a fashion company. Reader's Digest is a heartland company, with all the benefits of that."
Nobody in the industry is much surprised that she's charging hard in her new position. "Mary is one of the most straightforward and direct people I've ever dealt with in business," said Jack Kliger, president-CEO of Hachette Filipacchi Media U.S. and a one-time Conde colleague of Ms. Berner's. "That's in short supply now and very valuable. She is very demanding of the people who work with her, but she's not off playing golf while she's doing it. She rewarded those who overachieved very highly, and she basically dealt with those that didn't very directly."
Ms. Berner, 47, is going to need overachievers to make good on many of her early goals. The company reported an operating loss of $45 million on flat revenue of $2.4 billion for the fiscal year ending June 30, 2006.
The consumer-business-services division was the weakest of the public company's units in that period, turning in an operating loss of $30 million. The division's Books Are Fun business, in particular, suffered from intensified competition, lower sales per school and high staff turnover. Without significant one-time charges primarily related to Books Are Fun, the company would have reported operating profit of $156 million in fiscal 2006, down from $158 million the year before. The international and North America divisions increased their operating profits.
Despite high margins at Reader's Digest magazine, whose worldwide operations contribute 15% of the company's total revenue, there's work to do there, too. Ms. Berner and Reader's Digest President-Group Publisher Eva Dillon -- one of more than a dozen executives whom Ms. Berner has poached from Conde Nast -- are considering "right-sizing" the magazine's paid circulation in the U.S., now guaranteed at a hefty 10 million copies. The magazine is also getting a redesign for January, while its marketing support is turning away from direct mail and toward digital.
An even more challenging opportunity awaits in China, where the company recently received permission to launch an edition of Reader's Digest -- the culmination of a quiet but intense eight-year process. Unlike other American titles now being published in China, this won't be a licensing deal, either; the company will use locally hired staff to start putting out the magazine in 2008.
Then there's the Time Life direct-sales business, which Reader's Digest Association secured from Ripplewood as part of the March deal to take the company private. Ms. Berner wants Time Life to share its direct-response-TV expertise as the association starts selling its own products that way too.
The school-and-educational-services group has similarly been bolstered by the addition of the Weekly Reader Publishing Group and Compass Learning, which Ripplewood moved from its portfolio into RDA.
Under Ms. Berner, RDA has also entered acquisition mode, hunting mainly digital assets that could help connect the company's content on health issues with a new audience. She and her executive team are also considering creating a global health magazine for Canada, the Czech Republic, Germany and England next January.
Al Perruzza, senior VP-global operations and business redesign, has been tasked with finding $220 million in savings in the next few years -- almost entirely from the company's supply chain, not via layoffs. He said he has seen the company go through big ups and downs since he joined in 1972. The early private iteration, founded by DeWitt and Lila Acheson Wallace in 1921, was successful enough to sow complacency, he said. After Reader's Digest Association went public in 1990, the emphasis on quarterly results complicated long-term strategy. Now Ms. Berner has the reins.
"This is, for me, the opportunity," she said. "This is everything I like doing. I like to have all the levers, and I like to be able to put the right people on the right team and push it forward."