Hearst and Condé Nast Joint Venture Seeks More Publishers to Join

Magazines Follow a Path Blazed by Newspapers

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One World Trade Center in Manhattan, headquarters to Conde Nast.
One World Trade Center in Manhattan, headquarters to Conde Nast. Credit: Victor J. Blue/Bloomberg

With long-term trends exerting downward pressure on magazines' ad-page sales and newsstand appeal, two of the industry's biggest publishers said last week that they had formed a joint venture to handle back-office operations such as production, procurement and circulation.

The competitors and now collaborators, Condé Nast and Hearst Magazines, hope not only to cut their own costs but to attract other publishers as customers as well.

If it's a somewhat surprising move, bearing some potential for conflict, it reflects the challenges facing magazines. Newspaper companies have long made similar pacts, shrewdly, to consolidate print and layout operations, said Rick Edmonds, a media business analyst for The Poynter Institute.

"The move makes sense to me," he said in an email. "If they do what they do well, they should be able to attract additional clients (though a Manhattan-based operation doesn't figure to be inexpensive). Cost savings are an imperative for magazines as well as newspapers given what's happening to print advertising."

The companies have actually collaborated before, partnering on the creation of Comag, a magazine marketing company that they ended up selling in 2012.

Samir Husni, director of the Magazine Innovation Center at the University of Mississippi's School of Journalism, said he was bullish on the new joint venture, called PubWorx. "The more magazine companies combine forces, the better their future is going to be," he said.

One question is whether additional publishers will join an effort that's run by a pair of the industry's biggest powers, with advantages of scale to offer but certainly the priorities of its owners to consider first and foremost.

Condé Nast, publisher of brands including Vogue, and Hearst, publisher of brands including Elle, hope to interest other magazine publishers in PubWorx's services, and chief executives Bob Sauerberg and David Carey said they're happy with how the new company is being received by the market.

"I think it's been massively positive, and I think we have had strong interest," Mr. Sauerberg told Ad Age. "When you see the respective leaders in the industry coming together, it's turning heads."

Mr. Carey said that Hearst and Condé Nast had waited for the official announcement to start taking meetings with potential PubWorx clients.

"We were sensitive to anything leaking out before it was done and ready to go," he said of the announcement. "It didn't take long for it to develop meaningful conversations as a result."

PubWorx, a 50/50 joint venture between Condé Nast and Hearst, will be led by Albert Perruzza, who previously served as a senior executive for Reader's Digest.

Mr. Sauerberg extolled the benefits of having an "outsider" lead a company that's being formed by two existing brands.

Given the evenly divided control, however, it's still easy to imagine deadlocks on disagreements over priorities and execution. "We have a set of protocols in place to work through any issues," a Condé Nast spokeswoman said. She declined to elaborate, but said the companies have a history of working of working through potential problems.

PubWorx will be staffed initially by a little more than 130 people, comprised by staffers from Condé Nast and Hearst, with the exception of Mr. Perruzza.

Asked about potential job cuts that could result from streamlining the two companies' back-end operations, Mr. Sauerberg said "there may be minimal impact to people, but it's just minimal."

In an interview with Folio, Mr. Carey said that PubWorx will "particularly benefit medium-sized publishers," and Mr. Sauerberg told Ad Age that small, independent magazines should also think about signing on.

"I think it's always difficult for those guys to scale their business and to operate effectively," Mr. Sauerberg said of indie publishers.

Asked about potential PubWorx clients, Mr. Husni offered up one of the other biggest publishers out there: Meredith Corp., publisher of titles such as Better Homes & Gardens. Mr. Husni said he "will not be surprised if Meredith joined the group."

A spokesman for Meredith said he wasn't aware of any discussions with PubWorx, however.

A spokeswoman for Bonnier Corporation, when asked if the company would be interested in PubWorx, provided the following statement: "We are always open to hearing about new opportunities within our industry."

Signing Time Inc. as a client would be a huge opportunity for PubWorx, but a spokeswoman there declined to comment when asked if any discussions have been had.

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