New York Mag Considering Options, Including Sale, Investors
Folio: "A spokeswoman for New York Media has confirmed that the Wasserstein family is considering 'investment interest and strategic opportunities' and 'evaluating the market' following reports that New York magazine and its digital offshoots are up for sale. Bruce Wasserstein acquired the magazine for $55M in 2003, shortly before installing Adam Moss as its editor--beginning a 15-year stretch over which New York has earned more National Magazine Awards than any other title. After Wasserstein’s passing in 2009, control of the company shifted to his family, with his daughter Pam taking over as New York Media’s CEO in 2016. After an initial Wall Street Journal report dropped Tuesday afternoon, CNBC obtained an internal memo from Pam Wasserstein, which it presented as confirmation that the family is indeed considering a sale of the magazine and its other properties, including the online brands The Cut and Vulture.'We very much believe in this exceptional institution; we are proud owners and would be happy to continue owning it for years to come,' wrote Wasserstein in the memo, adding, 'Partnering to support acquisitions or other ways of growing might make sense. Or it might not. The point is that I’m trying to make our company the best version of itself, as I know all of you are.' In an email exchange with Folio:, New York Media spokeswoman Lauren Starke provided the following statement--implying that the Wassersteins are at least accepting bids, though stopping short of confirming any specific motivation to sell: 'We are focused on building our business organically, but we also explore investment interest and strategic opportunities as a general practice (including the acquisition of Splitsider earlier in 2018). Given the growth New York Media has seen, it makes sense for us to evaluate the market for opportunities to continue to develop the business.'" WSJ: "'Partnering to support acquisitions or other ways of growing might make sense. Or it might not,' Ms. Wassterstein said in a memo to staff Tuesday... The print magazine, which was founded as a weekly in 1968 and moved to biweekly in 2014, reports circulation of 404,000 per issue, according to the Alliance for Audited Media. Nearly a quarter are copies distributed to places like doctor’s office waiting rooms and hair and nail salons. Some 288,000 are categorized as paid subscriptions and 7,350 are sold on newsstands on average"... WWD: "An industry source noted that the sites are doing well, with traffic increasing month-over-month at least at New York Magazine, but it makes sense to bring in some outside money through a minority stake in the company to make way for further expansion of its key brands, or even another acquisition. The source noted growth is the key at New York, not divestment... 'Given the growth New York Media has seen, it makes sense for us to evaluate the market for opportunities to continue to develop the business,' the [NY Media] spokeswoman added. She declined comment on the likelihood of a strategic investment or if potential buyers or investors have put a valuation on the company, but it seems safe to assume it’s worth much more than $55M, so maybe Pam Wasserstein...is looking to cash in... Should the company be looking to bring in an equity partner to further grow its business, however... one of the former Gawker websites Univision is looking to offload could be a match with New York’s tendency toward pithy commentary, or there could be interest in expanding its popular fashion and celebrity coverage at The Cut by bringing on W magazine from Condé Nast, which was just put up for sale as that publisher is looking to tighten up its business. With the right equity partner, New York can probably take its pick." NY Post: "New York magazine has become the latest legacy title to hang out a 'for sale' sign, and the guessing game has already begun to see who will make a run at it. Supermarket magnate John Catsimatidis and American Media Inc. CEO David Pecker are expected to be among the tire-kickers. 'I’ll at least look at it,' Catsimatidis told Media Ink. 'After we look at the numbers, I’ll make a decision.' AMI is said to be perpetually cash-strapped, but somehow keeps coming up with money to do deals such as the $100M acquisition of US Weekly and the $80M purchase of In Touch, Life & Style and other titles from Bauer. Pecker did look at New York last time it was on the block, but was outbid. A source close to the company said he’d certainly be taking a look this time around. It could not be learned if billionaire hedgie Nelson Peltz, who was part of a coalition that was outbid by the late financier Bruce Wasserstein 14 years ago, would take a look again.... New York Media said Tuesday it was exploring strategic options"...
Magazine Paper Shortages, Price Hikes to Worsen; Printing Costs Also Likely to Rise
Writing in PE, pseudononymous production pro "D. Eadward Tree" reports: "At the beginning of next year, magazine publishers will be paying about 25% more for paper than they did just 18 months earlier--assuming they can find any paper to buy. There are no signs that the scarce supply and rising prices afflicting all U.S. buyers of publication papers will abate in 2019. Magazine-quality paper is in such short supply that some publishers, unable to obtain their usual stock, are having to fall back on whatever they can get their hands on to print their issues. 'Keep an eye on your favorite magazines the next few months,' one industry source says. “You’re going to see issues containing an odd mix of papers.' Some U.S. mills stopped taking orders for coated papers recently while they cleared their backlogs. Others are quoting lead times of about three months to existing customers and capping how much they can buy. If you need additional paper or don’t already have a regular supplier, good luck. 'If we place an order today, it may not arrive until early next year,' says one publishing manager who buys from a European mill. 'We’re selling more ad pages than expected, so we’ll have to cut back on newsstand distribution to be sure we don’t run out of paper.' Shortages and price spikes are usually driven by spikes in demand, but the irony of the current paper squeeze is that it was caused by declining demand. Expecting the market for coated paper to continue shrinking rapidly, paper companies have been shutting down coated-paper machines or altering them to make products for which demand is growing, such as packaging grades. (You can thank Amazon for the boom in boxes and other packaging materials.) The ability to ratchet down the amount of coated paper they make while ratcheting up the non-publication papers produced on the same machines has enabled the paper companies to keep supply and demand in balance. But things don’t always go as forecast. Sappi has struggled with a project enabling it to produce packaging grades on a machine that used to making only coated freesheet (the kind used in fashion and photography-oriented magazines). As a result, North America’s #2 CFS producer fell behind schedule this summer, forcing it to limit what even regular customers could buy and, for a while, to stop taking orders altogether. I suspect the demand for magazine papers didn’t drop as much as expected. Magazine-industry statistics tend to report results mostly for the type of big-name, big-circulation titles that are cutting back or closing while overlooking the regional, enthusiast, and other niche titles that seem to be thriving. Also flying under the radar may be an increased use of coated papers for direct mail... Duties and tariffs on uncoated paper from Canada probably drove some demand up the value chain to coated papers. (Side note: The tariffs on Canadian newsprint are jacking up costs for U.S. newspapers and could be the last straw that drives many out of business. That could be a boon for publishers of regional magazines.)And there’s no question that, as prices bottomed out in mid-2017 and then started rising, buyers ordered extra paper to beat future increases. Major printer Quad/Graphics recently said it had built up an extra $15M worth of paper inventory in anticipation of a tight market and rising prices. Even if the shortage eases next year, prices may continue rising as buyers restock their depleted inventories. That has usually led to a market crash, with rapidly falling prices, once the inventory building stops.This time may be different, however, because high pulp prices limit how much the paper companies can discount their products. The forces driving up pulp prices--such as ecommerce-related packaging production (thanks to Amazon) and the recent trend of recycled paper ending up in landfills rather than pulp--seem unlikely to abate.And more so than in the past, paper companies have the ability to shift production to other products rather than creating a glut of magazine papers.One paper-company CEO recently summed up the industry’s attitude in predicting that more firms will stop producing publication papers: 'Why not just make more tissue or toilet paper? That would be easier.' Publishers should be used to such a dismissive attitude because it’s rampant at our industry’s largest supplier, the U.S. Postal Service. Postal officials are focused on boosting their growing package business (thanks to Amazon) and seem to have given up on fixing the problems that bedevil magazines and other flat mail"... The author details the USPS problems that threaten, among other things, to result in double-digit price hikes for magazines. He continues: "Until the tight paper market eases, 2019 won’t be a good time to switch printers unless you have your own paper supply. Because of a trucking shortage (Thank you, Amazon.), you should expect printers to hike their freight rates, adjust schedules, and perhaps cut back on dropshipping"...
Real Simple Launching Its First 'Idea Home,' in Brooklyn
Release: Meredith's Real Simple will launch its first "Idea Home" on Sept. 26. The home, which will showcase DIY organizing strategies, modern design ideas and innovative products chosen by home organizers, interior designers and RS editors, will be located in Brooklyn, NY. "Each room in the apartment will be curated by a notable interior designer and a team of home organizers, including: designers Nate Berkus and Jeremiah Brent, who are debuting anr exclusive new furniture collection for Living Spaces, which will be featured in the home... The apartment will also spotlight design and organizational tips from "The Real Simple Method to Organizing Every Room," a book from the brand (Oxmoor House, $26.99) "available wherever books are sold."
More on Kalmbach's Success With Digital-to-Print SIPs
Folio: Although its new special interest publication "Strange Science" is the first digital-to-print SIP under the Discover brand [see Aug. 14 MBR Daily], "it is not the first for Kalmbach’s other brands. Earlier this year, MR Video Plus, a subscription-based video hub for model railroading enthusiasts, produced an SIP called “Model Railroading: The Ultimate Guide,” which was meant to serve as a catalogue for the website in order to draw readers of Model Railroader, another Kalmbach hobbyist publication, to the MR Video Plus website. 'We saw a strong and profitable response from it,' [Stephen George, Kalmbach’s VP of content and the Science Group editorial director] tells Folio:, who says that publishing SIPs has been a lucrative area for the company. 'I expect that Kalmbach will do similar projects in the future where we feel our customers have an interest.' With a cover price of $7.99, about 70,000 copies of Strange Science will be distributed to newsstands, available until November"...
June Bookstore Sales +5%; 6-Month Sales Down 1%
PW: In June, bookstore sales rose 5.3%, to $699M (vs. $664M last June), according to U.S. Census Bureau preliminary estimates. "Bookstore sales have largely recovered from a weak January when sales fell 9.1%, due to what some industry observers saw as soft sales at college stores. For the first six months of 2018, sales were $4.71B--down 1% vs. the same period a year ago."
'Great American Read' Vote Count Tops 2M
PW: "The Great American Read," PBS's "forthcoming eight-episode documentary on reading in American culture, has attracted more than 2 million votes as part of the program’s ongoing effort to find "America’s Best-Loved Novel." The show will return to PBS on Sept. 11 with an hour-long episode hosted by Meredith Viera, and continue through the fall with a new show each week on books and reading. Voting for "Best Loved Novel" will also continue through the fall. The winning book will be revealed during TGAR’s final episode in October. PBS has revealed the top 40 titles leading the vote (listed alphabetically, not by vote total). They include "1984," "Atlas Shrugged," "The Color Purple," "The Handmaid’s Tale," "Little Women," "Lonesome Dove," "To Kill a Mockingbird," and "Wuthering Heights." Viewers can vote in a page
on the PBS site. The search launched during TGAR’s 2-hour kickoff program in May, when the show unveiled a list of America’s 100 best-loved novels, chosen by polling and a panel of 13 literary experts, and called on fans to cast a vote for their favorite book. TGAR also features a companion book, "The Great American Read: Explore America’s 100 Best-Loved Novels" (Black Dog & Leventhal, August), a Facebook book club with 36,000 members, and educational resources for teachers."
Publishers' Anti-Facebook Site Goes Live Despite Legal Threats
NY Post: "FacebookZoo--a new, anti-Facebook blogging site--went live on Tuesday despite threats from Facebook’s legal team. The site is pitching itself as a haven for small and midsize publishers who are looking to vent about Facebook algorithm changes that slashed their customer and ad bases earlier this year... Mark Zuckerberg’s legal team tried to kill FacebookZoo in its crib earlier this year after The Maven, a tech platform for niche publishers that’s backing the site, trademarked the name while the site was still in beta mode. Maven CEO Jim Heckman has thumbed his nose at the warnings, claiming there’s no chance of marketplace confusion because 'FacebookZoo is a site that is obviously criticizing Facebook.' Facebook claims that its algorithm change, which favored friends and family over media sites, was a way to get back to its roots as a site that connected people. 'Publishers would not have moved their audiences over to Facebook in the first place if they knew what was in store,' Heckman said... Now the publishers are often being charged for access to the very viewers they attracted to Facebook in the first place, Heckman said"...
Apple Pushing App Subs
AppleInsider: "According to a report this week by Business Insider, Apple convened an invitation-only meeting in New York in April of 2017, aimed at letting developers know that the model for apps was changing. The developers, Apple told them, needed to be concerned with recurring revenue from subscriptions rather than one-time sales. This has resulted in more apps switching to a subscription model, leading to Apple's announcement in its last quarterly earnings report that paid subscriptions from Apple and third parties had passed $300 million. The report does not make clear which developers were at the meeting, who was there representing Apple, or who owns the Tribeca loft where it took place. What we do know is that what Apple introduced to the developers at that 2017 meeting is reportedly internally referred to as "Subscription 2.0," an initiative that has been in the works since 2016"...
OTHER NEWS OF NOTE:
Kroger to Sell Private-Label Products on China's Alibaba
SN: "Following months of speculation, The Kroger Co. plans to test sales of own-brand groceries through Alibaba Group, China’s largest e-commerce retailer. Kroger said Tuesday that it will pilot the sale of items from its Simple Truth natural and organic brand via an online store on the Alibaba Tmall Global platform. With the move, Kroger said it’s introducing its private-label portfolio, Our Brands, to international customers for the first time. The initial test will give Alibaba’s 500M-plus Chinese consumers access to the Simple Truth brand. "E-commerce enables Kroger to quickly scale to reach new customers and markets where we don't operate physical stores, starting with China,' Kroger chief digital officer Yael Cosset said. 'We anticipate Chinese consumers will love Our Brands--starting with Simple Truth products--just like our American customers do. Kroger is proud to continue to lead the way in making natural, organic and free-from products more mainstream and accessible. Sharing Kroger's exclusive brands and status as a food authority the world over is exciting.' Kroger noted that the partnership with Alibaba supports its Restock Kroger strategic plan to redefine the grocery customer experience by growing its private-brand program, creating customer value and driving top-line growth via alternative revenue streams. In terms of the bigger retailing picture, Kroger looks to be traveling a similar path as Walmart and Amazon, which have faced off to boost their e-commerce presence in potentially lucrative global markets such as China and India. 'Kroger is the world's third-largest retailer by revenue, $122.7B in sales in 2017,' according to Cosset. 'We are creating the grocery retail model of the future by focusing on digital and technology.' Simple Truth has become the second-largest brand sold in Kroger stores since launching five years ago. This year, the brand topped $2B in annual sales, which Kroger said makes it the nation’s largest natural and organic brand"...
More On: Walmart's Rising Costs Could Hurt Consumers
Bloomberg: "Soaring costs for transportation and raw materials--some related to tariffs--have prompted Procter & Gamble Co., Nestle SA, Coca-Cola Co. and others to announce price increases this summer on a wide swath of consumer staples. The companies are betting that demand will remain steady even though wage growth is tepid and Americans’ wallets are already getting pinched by higher gas prices during the peak summer driving season. Now it’s Walmart’s move. Walmart faces some hard choices as it prepares to release Q2 results Thursday. It may choose to pass along those price hikes to consumers. But that’s a riskier move nowadays as shoppers can easily defect to Amazon.com Inc. or deep-discounters like Dollar General Corp. and Aldi. Walmart could also play hardball with suppliers, perhaps by demanding rebates elsewhere or promoting its own portfolio of more affordable store-brand products. 'The consumer-product makers are seeing their costs go up, and they have to pass them through,' said Ken Harris, managing partner at Cadent Consulting Group. 'But the retailers are negotiating hard against price increases because they know that whatever they do from a pricing standpoint is totally transparent in this environment.' If Walmart does end up passing along some of the manufacturers’ price increases, it would be a departure from its strategy of reducing price tags across the aisles in recent quarters to blunt the appeal of other grocery chains, particularly the German discounters whose stores increasingly dot the landscape. Walmart executives call the practice 'investing in price,' and while it depresses profit margins, it’s widened the price gap between Walmart and rivals in recent quarters, which improves shopper traffic, according to analysts"...
The Amazon Challenge, One Year Later
SN: "The closing of Amazon.com Inc.’s $13.7B acquisition of Whole Foods Market shook up the supermarket arena... Nearly a year later, the competitive scene is taking shape but still disconcerting for supermarkets. Amazon has brought savings for Prime--its hugely successful, 100M-member benefits program--to all Whole Foods stores in the U.S. One-hour grocery delivery via Amazon Prime Now is in 19 major markets and counting. Amazon Go, a futuristic, cashier-less food and C-store format, opened in Seattle earlier this year and is adding locations in Chicago and San Francisco, with more to come. 'The big thing everybody has been looking at over the past year was, what is Amazon’s game plan? How are they going to take this expertise of complete dominance in the digital world and move it over into the retail world? While we can’t see everything, it’s becoming clearer what that is,' said Cameron Peebles, CMO at digital marketing firm inMarket. Brick-and-mortar food retailers haven’t taken the Amazon-Whole Foods challenge lying down. Operators of all sizes are headlong into the expansion of online grocery shopping, curbside pickup and home delivery services. Many also are adding popular, convenience-driven products like meal kits. At the same time, grocery chains are revamping their front- and back-end processes to cater to an increasingly e-commerce-driven marketplace where an omnichannel approach is paramount... 'Grocers have said they’re not going to cede this territory as we’ve seen in other categories, like office supplies and sporting goods. They’re going to fight Amazon tooth and nail to maintain their relevance and serve the consumer,' [said Manny Picciola, managing director, partner and head of the Chicago office at L.E.K. Consulting]… InMarket noted that one of Amazon’s early moves with Whole Foods--deploying Amazon Lockers at select stores--already has paid dividends. Since the close of the acquisition, average microtrips (less than five minutes) to WF have risen 8.7% chainwide. 'With the pickup lockers, they’re trying to get people into the store that have never tried the Whole Foods experience,' Peebles said. 'And we’re seeing this work fairly well.' Indeed, inMarket’s customer data research found that the number of shoppers at WF is growing 5.5% faster than at traditional grocers, likely stemming from the locker traffic and the curiosity arising from the chain’s acquisition by Amazon. WF also instituted several rounds of price cuts on select items shortly after the merger closed. Whole Foods’ private brands have seen sales grow 15% since Amazon took control... Still, the net new shoppers are visiting Whole Foods stores for only one out of every five grocery trips, compared with three out of five trips for Whole Foods “regulars.” InMarket said this suggests that Whole Foods doesn’t meet enough of the new shoppers’ needs--at least not yet... Going forward, the potential market opportunity for online grocery remains huge. According to Wilson, only about 2% of sales in the $800 billion food and beverage industry were online in 2017, but that share stands to swell to 20% by 2025. Amazon’s acquisition of WF has expedited the grocery industry’s transition to an online retail environment, said Darren Seifer, food and beverage industry analyst at The NPD Group. 'In the last year, we’ve seen a big jump in the number of people shopping online for groceries. We’ve also seen delivery time shortened--from two days to one day, to same day and then to two hours,' he said. 'That’s one of the biggest things we’ve noticed as a result of that acquisition'... To compete with the Amazon-Whole Foods juggernaut, as well as with growing e-commerce giant Walmart, supermarket chains must focus on becoming solution centers for customers, not just places where they can buy products, Seifer stressed. 'Brick and mortar is still alive and well. It’s just different. Retailers will need to rethink what their purpose is for consumers,” he said. “How do you remain relevant with your customers? That will be ever more important going forward.'"
Metro Gets Q3 Lift from Acquisition
SN: "Metro Inc. got a sales boost in its fiscal 2018 Q3 from the recently closed acquisition of Jean Coutu Group, while earnings were in line with analysts’ forecast. For the 16-week quarter ended July 7, revenue totaled C$4.64B, up 13.8% from a year earlier... Q3 included slightly more than eight weeks of results from the acquisition, which closed May 11. Excluding $467M in sales from Jean Coutu, Metro’s Q3 sales were up 2.4%. Food same-store sales edged up 2%, vs. a 0.2% dip a year ago. Metro said its food basket experienced inflation of about 0.5%"...
Big Agriculture Now Threatened by Farmers
WSJ: "Across the U.S. Farm Belt, the balance of power is swinging away from multibillion-dollar agribusinesses.For over a century, companies such as Cargill Inc. held sway over markets for U.S. corn, soybeans and wheat, quoting prices to farmers who trucked their crops to company grain elevators. Cargill and its peers would then market crops to food and beverage makers across the country. Now farmers are increasingly calling the shots. Running expanded, consolidated farms, big farm operators are pushing grain giants for better prices or striking their own deals to directly supply manufacturers, cutting out the middleman"...
OTHER NEWS OF NOTE: