Tabloid Giant to Tap U.S. Latino Market

Folio: The Magazine for Magazine Management, March 1, 2001 by Sarah Gonser

CEO David Pecker to launch six titles and dip into a $900 million purse to buy into the women's service, automotive and teen girl categories.

* David Pecker, CEO of American Media Inc., plans to launch six magazines, two of which are set to hit the newsstands in June, targeting the U.S. Latino market. "We feel the Latino market has been under-promoted and under-dedicated by American publishers," Pecker says. "There's a big opportunity here. We want to be the print version of Univision." (Univision is the top-rated Latino TV network in the United States.) The launches will include a men's magazine, which Pecker likens to FHM and Maxim, as well as sports, music, financial, wrestling and automotive titles.

But Pecker's overall business plans extend beyond the Latino market and launches. He expects to spend $900 million to acquire consumer magazines in the women's service, automotive and teen girl categories, as well.

Since leaving the post of CEO at Hachette Filipacchi Magazines in 1999, Pecker's mission has been to reverse the declining circulations of American Media's tabloids, which currently include the National Enquirer, the Star, the Globe and others. Nevertheless, while ad pages among those titles increased a tad last year, according to Publishers Information Bureau, circulation continued to decline.

"It's hard to say whether the declines are a result of marketplace conditions -- because everybody's circulation suffered last year," says magazine consultant Martin Walker, of Walker Communications. Circulation could have suffered because of increased market competition, or because of the changes David Pecker made, he says. "The bottom line is that he hasn't been able to make the tabloids acceptable to mainstream advertisers."

Walker says that while "you don't see stories about three-headed Martians landing in your backyard anymore," the tabloid medium might have maxed-out its growth potential. "There's no home run they can hit there. They can have incremental profits from doing things better but, ultimately, I think Pecker understands that growth of this company must now come from other publishing venues."

Pecker, it seems, agrees. "I'm looking at consumer magazines; the problem is there's nothing big for sale," says Pecker, who in 1999 bid $550 million on Times Mirror Magazines. "If a big company like Meredith Magazine Group came up for sale--but I heard they denied that they're looking for buyers--that's something I'd have enormous interest in."

Between the acquisition of Globe Communications (last year for $105 million), giving the tabloids a facelift, and launching new products such as Mira! and AutoWorld Weekly, Pecker says he spent $1 billion last year. "But I still have $900 million available, and there are a lot of small magazines around--teen magazines and regionals. But I'm trying to do what we do best: large national properties. We have a huge distribution company and all these pockets through the U.S. in all the supermarkets and mass merchandisers. That's what I'm trying to take advantage of."

The prospect of an economic recession and a softer ad market doesn't appear to trouble Pecker. "I concentrate on newsstand and circulation revenue rather than on advertising. Every time we launch something, if I can't get 65 percent of the revenue from circulation, I don't have any interest in it. At least I know I can cover my costs and advertising will be the profitable portion of the model," he says. "Also, I think an economic downturn is a perfect opportunity to buy, because prices are lower."