Overview
This profile considers Primedia, a leading (albeit ailing) US magazine publisher that expanded into commercial education services (Channel One) and a variety of web sites.
It covers -
- introduction
- history
- studies
Introduction
Primedia claims to be the largest special-interest magazine publisher in the US and the second largest magazine publisher per se.
Sales in 2000 were around US$1.7 billion, with assets of US$3 billion and debt of US$2.6bn in 2001. By 2002 those figures had worsened to sales of around US$1.5 billion, income of around minus US$0.6 billion, debt of US$2.5 billion and shareholder equity of minus US$0.6 billion. Continuing difficulties were reflected in sale of key assets such as Seventeen.
At its peak it encompassed over 300 titles, ranging from Seventeen (acquired from Murdoch and sold to Hearst) to American Baby and American Demographics. More questionably, it claims to be the number one "news and information group on the Internet", with over 1,000 special-interest sites.
It has had little success as a distributor or creator of video content, primarily the Channel One commercial television service for secondary schools developed by Chris Whittle of crashed-&-burned Whittle Communications and the grandiose Edison Project.
The group is an assemblage of bits and pieces from other empires, for example remnants of the Cowles Media group, magazines such as Seventeen offloaded by Murdoch's News group in 1991 and Cahners titles from Elsevier. It was established under the auspices of junk bond specialist Kohlberg Kravis & Roberts (KKR), which later acquired Scandinavian broadcaster SBS in alliance with Permira. KKR is a competitor of Hicks Muse Tate & Furst (HMTF), responsible for Capstar/Chancellor (now part of Clear Channel) and LIN TV.
In December 2001 Advertising Age suggested that "Primedia is the Poster Child for Media's Future". In April 2003 the New York Times quipped that
"In fall 2000, Primedia acquired About.com, a collection of special-interest Web sites for $690 million in stock. Primedia instantly received a dot-com valuation, though not in the way it had hoped. Its stock fell 25 percent the day the deal was announced and has dropped further since — to a low of 76 cents a share last year from a high of more than $34."
The following page provides an indication of Primedia holdings.
History
Primedia traces its origins to establishment in 1989 of K-III Holdings under the auspices of junk bond financiers Kohlberg, Kravis, Roberts (KKR).
KKR and Macmillan Inc. executive William F. Reilly had failed to gain control of that publisher, which was instead acquired by Robert Maxwell and dismantled. In 1989 K-III paid US$143 million for Macmillan Inc's Direct Marketing Group, which included Macmillan Book Clubs (rebadged as Newbridge Book Clubs) and Gryphon Editions, along with technical magazine publisher Intertec Publishing Corp. for US$167 million. During the following year it acquired purchased auto industry publisher Ward's Communications from Thomson, Field Limited Partnership and Funk & Wagnalls for about US$200 million and book club group Reader's Garden Inc.
In 1991 it was renamed K-III Communications. It paid Murdoch's News US$650 million for Soap Opera Digest, New Woman, Seventeen, Premiere, New York, Daily Racing Form and two other magazines. It then acquired Krames Communications (publisher of pamphlets distributed by doctors to patients) from Hachette, Musical America Publishing and Films for the Humanities Inc. During 1993 it absorbed the Pharos Books division of United Media, Nelson Publications and three trade journals from Wiesner, Inc. Its titles thus extended from horse racing guides to directories for corporate pilots, the Funk & Wagnalls encyclopaedia and Soybean Digest. Losses for that year were US$86 million on sales of US$844 million, dispelling claims that KKR had a magic touch.
In 1994 it acquired Katharine Gibbs Schools Inc. from Phillips Colleges. Macmillan had sold the chain of seven secretarial schools to Phillips in 1989. The spree continued with purchase of Channel One Communications from Whittle Communications L.P. for about US$250 million, Haas Publishing Companies, Stagebill and interests as diverse as child development products from Gruner + Jahr and publishing about construction industry equipment.
In 1995 it acquired PJS Publications, the 'shotguns to cross-stitch' publisher of specialty magazines such as Sew News, McCall's Needlework and Shooting Times. It acquired Maclean Hunter's US publications (including American Printer and Coal) for US$55 million, unloaded Premiere to Hachette and New World Communications for about US$20 million and engulfed McMullen & Yee Publishing (eg All Chevy and Truckin'). Bacon's Information (PR industry information) and Craftrends Magazine were bought at that time, along with Chicago magazine from Landmark.
The company by then was awash in debt, with sales of US$1.05 billion and a loss in 1995 of US$75 million despite an income tax credit of US$59 million after interest expenses of US$105 million on US$1.1 billion debt. It went public, with fund raising of US$141 million being absorbed in purchase of 14 magazines (including American Baby, Sail and Modern Bride) from Cahners Consumers Magazines. Despite underwhelming performance by Channel One it paid US$422 million in 1996 for Westcott Communications, producer of training programs delivered on tape and by satellite. Other 1996 acquisitions included Tri-State Publishing & Communications, Theatre Crafts International, the news services division of Facts on File Inc., Lighting Dimensions, Millimeter and Horticulture magazine. Operating income in that year was US$85 million, with net income of $8 million after US$125 million interest payments on US$1.57 billion long-term debt and US$53 million tax credits. Times Mirror reduced the burden through purchase of Krames; New Woman was acquired by Rodale Press.
1997 saw the group being renamed Primedia. During the following year it acquired Cowles Enthusiast & Business Media (25 enthusiast titles, 11 technical and trade magazines, 15 trade shows) and seven youth entertainment magazines from Sterling/Macfadden Teen Network and two from Laufer Publishing, unloading Just CrossStitch and Woodworker's Journal. That sale was followed by disposal of its Supplemental Education Group and pictorial for US$129m. Some transport and arts publications were shed through an MBO as Commonwealth Business Media Inc in 2000.
Undeterred, Primedia acquired emap usa (formerly Petersen Publishing) from EMAP for US$515 million and amid the last frenzy of the dot com bubble bought About, Inc for US$374m to "supercharge" Primedia for growth. Analysts were unimpressed: a Deutsche Bank observer for example argued that Primedia's assets were worth US$3 billion, not much more than its debt of US$2.6 billion. Primedia sold Bacon's Information group to Observer AB for US$105 and began unloading what it had earlier identified as flagship publications, with Chicago magazine for example going to Tribune for US$35 million, Modern Bride magazine group to Advance for US$52 million, American Baby Group to Meredith for US$115 million and Seventeen magazine and Cover Concepts to Hearst. About.com was sold to the New York Times for US$410 million in 2005.
Studies
There have been no major study of Primedia.
For KKR see Connie Bruck's The Predators' Ball: The Inside Story of Drexel Burnham & the Rise of the Junk Bond Raiders (New York: Penguin 1989) and Barbarians at the Gate: The Fall of RJR Nabisco (New York: HarperBusiness 1991) by Bryan Burrough & John Helyar.
The New Financial Capitalists: Kohlberg Kravis Roberts and the Creation of Corporate Value (Cambridge: Cambridge Uni Press 1998) by George Baker & George Smith is an authorised, laudatory and - to us - unconvincing, study. It might be read in conjunction with George Anders' Merchants of Debt: KKR and the Mortgaging of American Business (New York: Basic Books 1992), superior to Sarah Bartlett's The Money Machine: How KKR Manufactured Power & Profits (New York: Warner 1991).
For Channel One and Whittle Communications see Vance Trimble's unduly sympathetic An Empire Undone: The Wild Rise and Hard Fall of Chris Whittle (New York: Birch Lane 1995).