Wanted: Enquiring minds p.8

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By: Lucia Moses Investment firm tries to thaw the 'frozen' tabloid business

A New York investment firm bought the parent company of the National Enquirer and Star magazine and hired a powerhouse publisher to revitalize and expand the ailing supermarket tabloids.
Evercore Capital Partners LLC purchased American Media Inc. for $767 million, including $473 million in debt, and hired David J. Pecker, CEO of Hachette Filipacchi Magazines, the third-largest consumer magazine publisher with 28 titles, including Elle and George. Pecker will resign his position and receive an equity stake in American Media.
Evercore and Pecker plan a $50 million advertising and marketing campaign to boost circulation at the tabloids, which industry executives say are underpromoted, and are considering expanding the tabloids into teen and Spanish-language versions and television programming.
Evercore principal Austin Beutner says he considers the magazines "rock-solid franchises" that have the ability to pay "very, very handsome dividends."
Beutner says he plans to use American Media's generous cash flow to expand the existing tabloids and buy new properties.
He also plans to grow revenues through DSI, a subsidiary of American Media that provides business marketing services.
Pecker and Beutner say no personnel changes are planned at American Media.
Established three years ago, Evercore Partners makes private equity investments through its Evercore Capital Partners affiliate, which is headed by former Clinton administration deputy treasury secretary Roger C. Altman. Evercore clients have included Dow Jones & Co., which Evercore advised on its joint venture between The Wall Street Journal and CNBC and the sale of its former business information service, Telerate.
Pecker brings an impressive r?sum? to American Media. During his seven years as CEO at Hachette Filipacchi, he doubled sales and began new media and film productions divisions.
Bishop Cheen, an analyst who follows American Media for First Union Capital Markets, says Pecker's hiring and Evercore's plans to diversify and expand the company could give American Media the shakeup it needs.
"This company has been frozen like a deer caught in headlights," says Cheen. "It wasn't sure which way to go."
The changes come as the tabloids have fallen on hard times. The magazines lost core readers to the mainstream media during the O.J. trial and death of Princess Diana. They got slammed again over the Monica story, and all the while Internet competition was nipping at their heels.
The Enquirer's circulation dropped to 2.24 million at the end of last year from 2.72 in June 1997, while the Star's circulation fell to 1.82 million from 2.22 million in the same period.
In a recent retooling of its editorial style, the Enquirer has emphasized shorter, celebrity news items and moved away from UFO stories.
American Media's revenues fell 6% to $222.2 million in the nine months ended Dec. 28, while net income before an extraordinary item fell 60% to $2.7 million.
On Feb. 4, American Media announced it would stop publishing Soap Opera News, which lost $1.5 million in the last quarter, and Soap Opera Magazine. The company also publishes Weekly World News and Country Weekly.
Despite the mainstream media's willingness to provide readers with sex stories and the public's apparent weariness of sensationalism in the media, Enquirer editor Steve Coz says the magazine is primed to retake its place as the premiere source for celebrity gossip now that the Lewinsky scandal is over.
"Celebrities are more promoted in the American lifestyle than ever before," Coz says. "The kind of journalism we do is more appropriate than ever."
Pecker's challenges include growing advertising revenue, which now accounts for less than 15% of overall revenues, Cheen says.
Getting more people interested in reading the tabloids may be easier. Says Cheen: "Society has always had a capacity for more of the macabre."
?(Editor & Publisher Web Site: http://www.mediainfo. com) [Caption]
?(copyright: Editor & Publisher February 20, 1999) [Caption]

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