Magazine Marketplace: A highly selective industry chronicle

Folio: The Magazine for Magazine Management, April 1, 2003

THE DEALS

The month of March - indeed all of the first quarter - was slow going for magazine M&A. "A lot of the deals getting done are pretty small," says Joseph Berkery, CEO of media investment bank Berkery, Noyes & Co. "The problem is that there's lots of money and buyers looking for good properties, but there aren't a lot of sellers around." Though there won't be a boom, Berkery predicts midyear will prove more fruitful. "My guess is 2003 will be up a little bit over last year, but not until third and fourth quarter."

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RHC Media shuts down Red Herring and puts subscriber list and Web site on the market for est. $2 million

Just shy of its 10th anniversary, San Francisco-based New Economy title Red Herring was shut down by owner RHC Media at the beginning of March, and its assets - which include a 275,000-name subscriber list and a Web site - were put up for sale. At the height of the tech boom, the magazine reportedly turned down a $200 million acquisition offer. Media bankers expect the list and Web site will fetch less than $2 million.

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Ascend Media acquires Atwood Publishing and Gem Communications from Veronis Suhler Stevenson

After securing $50 million from JP Morgan Partners last October, onetime Intertec CEO Cam Bishop founded Ascend Media with the intention of building a diversified b-to-b company. Las Vegas-based Gem Communications publishes Casino Journal and owns several conferences and trade shows. Overland Park, Kansas-based Atwood owns Expo and Pro AV magazines, and custom publishes show dailies, directories, and exhibit guides. Investment bankers say they expect Bishop - based on his experience running Intertec's diversified portfolio - will buy into a variety of markets in the next two years. - Sarah Gonser

THE DEVELOPMENTS

MARTHA: COLOR HER EGGSHELL BLUE

Last month, Martha Stewart Living Omnimedia reported its first-ever quarterly loss (for the fourth quarter of 2002) and warned that more trouble may lie ahead. The media, publishing, and merchandising empire has begun to fray at the edges as an SEC probe continues into alleged insider trading by its namesake and founder, Martha Stewart. The news was not all grim, however: Overall performance for 2002 was encouraging, given the dismal ad climate and store closures by Kmart, which carries the Martha Stewart Everyday product line. For 2002, revenue increased 2 percent, to $295 million, despite the 6 percent revenue decrease reported for the fourth quarter. But the inquiry into Stewart's trades of ImClone stock is starting to take its toll. Since the allegations became public last June, MSO's share price has dipped 50 percent, and newsstand sales of Martha Stewart Living have plummeted almost 22 percent, according to the Audit Bureau of Circulations. MSO also reported an increase in "corporate overhead" in the fourth quarter, from $6.5 million to $9 million, because of "higher legal and professional fees" associated with the investigations into Stewart's stock trades. In a conference call last month, she said she hoped her legal situation would be resolved in the "near future." Until then, ad buyers are treating the magazine with some caution. "Folks on our side are watching what's going on," says Cyndi April, director for print strategy at Omnicom. "It was riding high for a lot of years, but it's not as strong a brand as it once was."

In other earnings news, Ziff Davis Media, which was nearly dead a little more than a year ago, has managed a major turnaround. Though the company's total revenues dropped from $300 million in 2001 to $209 million in 2002, its EBITDA for last year was $8 million, compared to a loss of $44.3 million the year before. This resulted in Ziff Davis having $41.3 million in cash at the end of 2002. "The company is back in the black, back to being profitable on EBITDA," says Bart Catalane, Ziff's chief operating officer. "Now we have the ability not only to pay our interest on our debt, but also to generate free cash flow that we can reinvest in our businesses." OUR TAKE: In view of the lousy ad environment, both MSO's and Ziff's reports were encouraging. But while Ziff looks to be out of the woods and on the upswing, Martha's toughest days may await. - Michael Learmonth and STP

'US' CONTINUES ITS NEWSSTAND DRIVE

Looks like Jann Wenner's fat contract to keep Bonnie Fuller in charge of Us Weekly was worth every cent. News of the contract, reportedly worth more than $1 million a year for three years, broke just as the latest numbers from the Audit Bureau of Circulations were released in late February: Us Weekly was up an eye-popping 55.2 percent on the newsstand, to 505,005 copies, for the second half of 2002. Although subscriptions were down 1.3 percent, total paid circ was up 18.5 percent, to 1.1 million. "[Bonnie's] impact has been monumental," says Wenner spokesman Stuart Zakim. America's three newsweeklies fared less well on the newsstand. All three were down more than 25 percent compared to the second half of 2001 (when single-copy sales soared after 9/11). More sober-minded books have performed better than the newsweeklies, suggesting that serious times demand serious journalism. The Atlantic Monthly jumped 52.4 percent on the newsstand - and saw a 5.1 percent increase in total paid circ - and Harper's was up 28.1 percent, with an 8.2 percent increase in total paid. (The New Yorker was down 9.7 percent on the newsstand, but total paid circ was up 6.8 percent.) While these newsy mags asserted their primacy in current events and analysis, personality-driven books suffered: O, The Oprah Magazine's subs, single-copy sales, and total paid circ all dropped more than 10 percent. OUR TAKE: With war on the horizon, look for the newsweeklies to rebound on the newsstand, though they likely won't reach their post-9/11 heights anytime soon, if ever. - Geoff Van Dyke