TheWrap has confirmed that Jimmy Finkelstein and Guggenheim Partners are looking to exit their investment in THR's Prometheus Global Media. But Beckman denies it
Update at 1:10 PST:
The Hollywood Reporter and its four sister publications — Billboard, AdWeek, MediaWeek and Brandweek — are up for sale, an individual with knowledge of the proposed transaction told TheWrap on Friday.
The individual confirmed a report that broke earlier in the day in the New York Post that investors Jimmy Finkelstein and Guggenheim Partners were looking for a way out of the investment that they made barely a year ago.
The publication is losing "a lot," said the individual, stating what is clearly visible to the Hollywood community.
The latest issue is a heavy-duty 73 pages, with only 8 pages of ads.
With a pregnant Rachel Zoe on the cover, tongues in town are wagging at how the magazine has quickly turned into something that looks like a women’s health and beauty product. It’s not a cover that you’d easily see male Hollywood executives carrying under their arms.
Of the five publications, Billboard is believed to be profitable. The Reporter – the big bet by Prometheus - is particuarly mired in red ink. It went from being a thin, out of date daily trade to an ambitious, glossy weekly with covers that skew increasingly to a female audience. But without a demonstrable business plan.
WaxWord has been vocal about this since CEO Richard Beckman made known that this was his strategy.
Second update: In a memo to staff on Friday, Beckman denied that the property is for sale. "I can reassure you that my partners at Guggenheim and Pluribus and I are committed to making Prometheus Global Media into a world-class media company," Beckman wrote in a Friday staff memo obtained by The Cutline. "We are only interested in expanding our business and not contracting or selling."
Have the investors in the Hollywood Reporter had enough of bleeding cash?
That’s the word from the New York Post on Friday, which reports that the private equity firm Guggenheim Partners and Jimmy Finkelstein’s Pluribus Capital are looking to sell – already – out of their investment in the Hollywood Reporter, Billboard and three other trade publications.
The Post’s Claire Atkinson writes:
“According to sources familiar with the talks, Guggenheim Partners is 'desperate to merge out of its investment.'"
According to the Post, the private equity company has been holding talks with publishing houses about a swap that would fold the trade publications – housed in a company called Prometheus Global Media – into a larger publication company, but “the price tag has ‘everyone’s balking’” (sic).
That is not that surprising; only the early panic is.
The private equity guys bought the five publications for $70 million in December of 2009, and the print publication just launched in the fall of 2010.
But a lot of money has gone out the door since then. Not only has not very much come in, the more serious problem is that there’s not a clear path to the kind of revenue that will make this venture profitable.
Indeed, one of the more popular parlor games in Hollywood these days is calculating how much money The Hollywood Reporter is losing on an ongoing basis.
I was at a lunch at the French consulate last week where one of our competitors put the bill so far at a vertiginous $120 million.
This person calculated: $70 million for the five titles (including Adweek, Mediaweek and Brandweek). He figured another $12 million in talent acquistion (CEO Richard Beckman, Ed-in-chief Janice Min, etc.); $30 million a year in overhead, sales commissions, etc.; and something well north of $250,000 per week just for the hard costs of printing the glossy magazine. That presumes that THR is printing 100,000 copies, as Beckman has been quoted saying.
The vast majority of those copies have to be given away.
Meanwhile, the Oscar season is over, the last few issues are out, and there are precious few ad pages. It’s the low season, for sure, but in order to make sense as a business, THR has to appeal to a consumer audience, where average folks will buy the magazine at the newsstand in big enough numbers to appeal to Beckman's friends on Madison Avenue.
We counted eight ad pages in that issue, and seven in the one before that. A pal at Variety says these pages are selling for $5,000 each.
That is not the kind of math that makes investors confident.
For the record, Finkelstein denied to the Post that the property was for sale.