Conde Nast plugs into Wired - Editorial

Folio: The Magazine for Magazine Management, March 1, 1994 by Lorne Manly

After spending nearly a year searching for a passive minority investor to add a fresh infusion of funds, Wired found a most unlikely partner in Conde Nast Publications, a company not usually given to taking a back-seat role in any of its dealings.

But Conde Nast chairman S.I. Newhouse Jr. thinks so highly of the San Francisco-based monthly technology/lifestyle hybrid that he was willing to forgo any editorial or management involvement and overlook some nagging questions about Wired's circulation numbers and ad sales efforts. "It's a magazine of great quality and interest, and I thought it would be an excellent investment for us," says Newhouse.

Neither Wired nor Conde Nast would place a price tag on the minority interest, but industry sources say Newhouse paid between $3 million and $5 million for a 25 percent stake. But both sides say the deal doesn't include opportunities for Conde Nast to increase its stake in the future.

Wired plans to use the money to step up its circulation-acquisition efforts and has already hired former Lighthouse Communications Inc. executive and Health circulation director Greg Jones as a consultant. The title claims a paid circulation of more than 100,000--including 35,000 subscribers.

The funds will also enable Wired to open a New York sales office, and even though the magazine will not become part of the Conde Nast ad package, the connection should help to garner more lifestyle advertising, says editor/publisher Louis Rossetto. "As a new magazine, people look at you like you have two heads, worried that you won't be around much longer," says Rossetto. "This deal says we'll be around for a long time."

Wired, which launched in January 1993 as a bimonthly and became a monthly last November, went searching for funding early last year. The initial prospectus valued the business at $10 million, and the limited partnership that owns Wired offered a 15 percent stake for $1.5 million. But as the positive response grew, Wired nearly doubled its estimation of the business and the amount of money it was searching for, according to a number of spurned suitors--among them, Wenner Media, Telemedia Communications, Disney Magazine Publishing and Meigher Communications.

Still, the stumbling block in almost every discussion was the issue of control. While the prospective investors liked the magazine's editorial direction--exploring the culture created by new media technology--Wired stuck to its offer of a purely passive stake.

Newhouse's interest swayed Conde Nast from its usual method of launching magazines or buying ones outright. The chance for a stake in Wired overrode any concerns that some outsiders have raised about Wired's circulation and advertising efforts. One publisher, who had extensive talks with Wired last year, thought its direct-mail assumptions were too high, and others found its circulation numbers sketchy.

One media director, whose client advertises in Wired, complains that requests for rate cards and media kits go unanswered; volume discounts are considered alien; and skipping an issue is greeted with "yelling and screaming."

But Conde Nast is unfazed. "Wired is a magazine of great quality and interest, and has achieved a remarkable penetration for a young magazine," says Newhouse. "I didn't need an exhaustive study of all the details."