Jay Penske has finally unveiled a strategy for his vision of Variety, a necessary move but one fraught with financial risk.
On Tuesday, with the Klieg lights barely cooled from the Oscar ceremony, the trade’s new owner (below, with actress Devon Aoki) announced that Variety is dropping its daily print edition, “ending” the website paywall (which is curious, because the paywall has been gone for months) and moving editor Tim Gray aside for a triumvirate of three.
Change is good, change is necessary. But eliminating the print daily combined with the website paywall ending means taking an immediate financial hit — and a big one.
A significant portion of Variety’s revenue comes from advertising in the daily. (Do the math: four days a week of advertising must be made up for in a product that comes out once a week. Weekly Variety pages do not currently cost more than the daily, though that will probably have to change.)
I’m an advocate of emphasizing the digital, but by losing the daily print, Variety is giving up one of its only points of differentiation with competitors like TheWrap, the Hollywood Reporter and Deadline. For advertisers who want to place an industry-centric ad on a daily print platform, there is now nowhere to go.
“Our clients still like to see themselves in print,” is a phrase I heard as recently as this weekend, from a movie executive.
This same strategy — eliminating the daily and pouring all the resources in to a splashy weekly — has hurt the Reporter, despite the editorial quality of its weekly product. That trade lost millions of dollars in advertising by not having a daily product to carry ad inventory. It has struggled to replace that revenue with pages in a once-a-week product distributed to an audience it has been unable to scale.
By definitively eliminating the paywall, Penske also now has to replace another several millions of dollars a year in subscription revenue to the trade. Variety has propped up its declining subscriber numbers with $99-a-year subscriptions offers.
And will subscribers pay the same $349 a year for a once a week product as they pay for the daily and weekly? An insider recently told me that Variety had something less than 20,000 paying subscribers. Many of them (the recent customers) pay the $99-a-year rate. That’s more money to replace.
Penske is betting that subscribers will want to pay for a better-quality weekly Variety. (There is currently very little difference editorially between the weekly and the daily.) But again, it is risky: he has to replace revenue from daily and web subscriptions with more advertising.
Which leads to what is probably the next step: layoffs. To offset these revenue losses, Penske is expected to announce deep editorial cuts. They have been widely reported, including by Finke, his own employee.
Gray is being moved aside to edit international fare. Claudia Eller, who is the latest major talent to leave the Los Angeles Times (after Patrick Goldstein and Geoff Boucher), is returning to Variety, joining veteran Cynthia Littleton (left) and Andrew Wallenstein (below right) at the top of the editorial hierarchy.
It remains to be seen how three editors in chief resolve editorial differences, but perhaps they can get some advice from the former co-presidents at Warner Bros.
And then there is the wild card: Finke. Her site continues to embarrass Variety by beating its sister publication on breaking news. And today she further embarrassed her boss by accusing him of lying to her and trashing his new hires — like the angry insider she has become. [Update: Finke has since deleted her reference to Penske lying to her about Eller, substituting it with: "Penske says he didn’t know if she would take the job."]
Needless to say, editorial morale at the entertainment trade is at its lowest ebb and anxiety is running sky high. As a source told me earlier, “There is complete editorial disorganization from the top down.” Even worse, advertising is nonexistant [sic] and readers few and far between. Penske’s idea is to transform Variety into a thumb-sucking weekly about the entertainment business, leaving breaking news coverage to Deadline Hollywood. But both media already do and still will feature commentary and analysis.
Variety fired its deals reporter Jeff Sneider, leaving an opening for Mike Fleming to return to where he spent most of his career, should Penske decide to move him.
Or perhaps he’ll fold Deadline into Variety, which by far makes the most sense to me and most observers.
And from an optics standpoint? Penske's PR moves are curious: CBS Sunday Morning did a splashy feature last Sunday about Variety in which Penske gave no interview and instead put Tim Gray on camera as his spokesman, giving no hint about the changes to come two days later. Gray seemed hesitant, as in hindsight is not unexpected.
And also predictably, CBS interviewed me about the changing media landscape, and I referred to the trade as a "print dinosaur." Even CBS compared Variety to "an aging leading lady."
With Penske's move to eliminate the daily and give Gray a new assignment, one can only wonder if he agrees.