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Jay Penske has emerged as one of the most powerful figures in the world of entertainment news for industry professionals.
A virtual unknown in Hollywood just over three years ago, the 33-year-old son of auto magnate Roger Penske acquired editor Nikki Finke's news site Deadline.com and today acquired one of the industry's oldest brands and best-known trade publications, Variety, for about $25 million.
Penske's 9-year-old company, Penske Media Corp., started off as the owner of website Mail.com. It then began moving into the world of digital media, using the cash from its sale of Mail.com to acquire such brands as Deadline and Movieline, and launch new ones such as Hollywood Life and TVLine.
Penske also owns rare-book store Dragon Books and the auto-racing team Dragon Racing. In an email interview Tuesday morning, he answered questions about his reasons for purchasing Variety and his plans for the 107-year-old paper.
This has been a long and seemingly arduous bidding process for Variety. Why has it taken so long? Did you buy Variety for the right price? Is it worth $25 million?
The process has taken much longer than we expected, but we couldn't be happier in its outcome. And frankly, the deal came to us in the last few weeks, and only time will tell if it's the right price. But I do believe we did the right deal, at the right price, and now it's time to execute the plan.
Will Variety and Deadline maintain separate and distinct websites and different content?
Yes, both brands will maintain distinct websites and editorial offerings. I guess a recent parallel would be Bloomberg's purchase of BusinessWeek from McGraw-Hill. Though both brands generally cover business news and finance, each brand has an independent platform advantage, certain brand strengths, valuable non-editorial products, and editorial collaboration that overall is very accretive. And to be clear, this is very different than the The Daily Beast-Newsweek arrangement.
What (if anything) do you think has gone wrong at Variety over the past few years? And what is needed to fix those problems?
It's always hard to diagnose the weaknesses of a business that you're not directly operating. But in the simplest terms, I strongly believe that Variety got too comfortable thinking they had the unconquerable No. 1 brand and a broadsheet that everyone HAD to read. And during those years it stopped investing in its brand, and started to lose some of that brand equity.
And even more importantly from my perspective, Variety should have invested further in its editorial team, specifically highlighting and platforming their leading voices and talent, while exposing them to other new platforms. Comparably, this is something that we have excelled at with Deadline, where an entire industry knows four of our editors by their first names only, Nikki, Mike, Nellie, and Pete.
Variety's financial situation has deteriorated significantly over the past several years, in part because of the state of the print media business and partly because of more robust competition from Deadline and other outlets. Do you believe you can actually begin to grow its revenue again?
Variety’s financial situation has changed over the last five years, no question about it. But we wouldn't be buying this business if we didn't have a plan to correct the recent deterioration of both revenues and profits.
Do you intend to continue Daily Variety as a five-day-per-week newspaper? Will you continue Variety as a weekly magazine?
Before we make any substantial changes to Daily Variety or Weekly Variety, we need to spend more time with the current team, specifically asking questions and hearing from those who have had their hands on the wheel. We need more data.
How can Variety improve its editorial side of the business, and do you plan to go after a new (larger) audience?
The questions I believe are critical and that we must answer immediately are, "How do Variety's readers want to consume their content, in what forms, and on which platforms?" and, more specifically, "How can we make the Variety content even more essential and valuable to those who work in the industry?"
If the Variety content isn't absolutely fundamental and indispensable to its readers, then we won’t be meeting the needs of our consumers. And to be clear, this isn’t just marketing [speak] about "influencers" or fans of entertainment, but a precise product and content focus on the professionals who drive the business of entertainment.
Will Deadline and Variety share editorial staffs? Do you intend for Nikki Finke to be editor of Variety or involved with it at all?
While many view Variety and Deadline as strict competitors, we see an incredible opportunity for future collaboration, while remaining editorially independent.
What Nikki has architected at Deadline Hollywood is simply amazing. She is without question, one of the smartest, most gifted journalists working in any editorial field today. And to alter or change the chemistry of Deadline.com would be in our opinion a huge mistake.
Many staffers at Variety are understandably nervous about what this purchase means for them. Do you expect there will be layoffs or staffing changes? Do you intend to invest in the editorial side of Variety?
We are not buying Variety to gut the newsroom, we are buying the business to build it. Are there going to be changes? Yes. Do we want to reduce our dependency on print revenues? Yes. How quickly can that happen? We'll know more in the coming months.
On a personal level, what does owning Variety mean to you?
Anyone who knows me, knows I have a great reverence for things that stand the test of time -- particularly great authors, journalists, and books. Variety is a brand that the entire PMC organization respects, and a publishing business that I have admired for most of my life. As I have told Reed Elsevier, we at the Penske Media Corporation look forward to continuing the legacy of Variety.
Why did you end up working with hedge fund Third Point as your financial partner, rather than Shamrock Capital?
Though Shamrock is absolutely one of the best private equity firms in the US, at the end of the day we made a decision to partner with Third Point LLC on the acquisition of Variety for three reasons. They have a long-term investment horizon that matched PMC's, and the approach we think best for Variety; they have a commitment to and comprehension of media, specifically digital media; and we share a similar core thesis on the [business-to-business] publishing industry. During the print-to-digital transformation that is occurring today, many leading brands will struggle with this evolution, but the brands that can navigate this transition successfully will ultimately have even greater value.
Why do you believe you ended up with Variety and not one of the other bidders, including Ron Burkle and Avenue Capital?
I think we entered this sale process thinking differently about the future of the business in comparison to the other potential acquirers. We were not thinking about squeezing more profits by slashing print costs, or how we could enhance the current paywall system, or could we add another 15-20 conferences or will a better iPad app be a panacea for the brand. We think those tactics and approaches are short-term fixes to a more fundamental challenge.