Industry Pressures Lead to Speculation on Magazine M&A.
THE STREET.COM February 18, 2017

A number of magazines reportedly are on the block or are attracting interest, including Us Weekly, Time, Playboy and The Hollywood Reporter.

It’s hardly page-turning news at this point: Print magazines are under pressure as readers flock to the internet for instant news and entertainment updates. As a result, publishers have been forced to cut costs, restructure operations and explore sales.

Classic magazines such as Time’s (TIME) namesake publication, Wenner Media‘s Us Weekly and Eldridge Industries‘ The Hollywood Reporter are among those in play or rumored to be.

“What we’re seeing in real time is the massive consolidation of the magazine industry,” said Peter Kreisky, founder of Kreisky Media Consultancy.

This long-term trend has accelerated due to the “economics of the industry,” as print continues to lose advertising share to digital offerings dominated by Facebook (FB) and Alphabet‘s (GOOGL) Google, Kreisky continued. “They need to change the cost structure of these brands,” he said, referring to publishers.

Condé Nast, Time and Meredith (MDP) (publisher of Better Homes and Gardens and Shape) are just three large publishers to recently implement layoffs and restructuring, as print publishers realize they have to adjust to the tougher environment, said Reed Phillips, co-founder of media investment bank DeSilva & Phillips.

“It’s a sign of what’s going to continue to happen over the next 10 years,” he said.

By consolidating, magazine owners also can reduce the cost of business to “publish vibrant high-quality titles,” as well as leverage each other’s technology to better adapt to the digital age, Kreisky explained. It’s important for them to find a home that will help them continue to produce superb content, he said.

Another solution for the companies is to diversify with additional businesses, such as extending further into digital media, hosting consumer events or shows, creating apps, offering experiences and getting into e-commerce, according to both Kreisky and Phillips.

“Print publications have strong relationships with their advertisers and readers,” Phillips said. “They need to take advantage of those relationships.”

A recent example from Monday is the purchase of Baseball America by Alliance Baseball from TEN: The Enthusiast Network. 3STEP Sports CEO David Geaslen, whose company also will be part of Baseball America‘s ownership team, said in a statement the new owner wants to boost subscriptions to the biweekly print publication as well as its online presence.

The actions aren’t necessarily a fight to stay alive, but rather it’s publishers accepting reality and doing what’s necessary to stay in the industry long term, Phillips said. Print is obviously a declining business, and those who adapt to the changing environment will be more likely to end up as acquirers rather than the acquired, he added.

For publications that remain stubborn and unwilling to create new revenue streams, they will have to sell at some point, Phillips noted.

With talk of consolidation in the industry swirling around Wall Street, what follows is a look at five subjects of speculation.