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TV Guide: Yet another owner will attempt to keep it from dying
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Published: December 11, 2008
When a prominent 55-year-old magazine is sold, in its entirety, for less than the price of a single issue, does it have a chance at survival?
On April 3, 1953, TV Guide landed on newsstands, with a cover photograph of Desi Arnaz and Lucille Ball's baby boy, Desi Jr. It soon became a fixture of American culture.
In 1988, TV Guide was sold to Rupert Murdoch's News Corp. for about $3 billion. In 2000, it was sold for $9.2 billion.
Last week, TV Guide once again changed hands. This time, the selling price was one dollar.
It was a startling decline, even given the magazine's problems over the last several years, indicating just how miserable the market for media properties has become.
The sale put the magazine in the hands of a Beverly Hills private equity firm, OpenGate Capital. It places challenges before OpenGate, which has never owned a magazine before. The TVGuide.com Web site was not sold, OpenGate assumed $70 million to $100 million in subscription liabilities, and advertising is declining at almost every print magazine.
Andrew Nikou, the founder and managing partner of OpenGate, was confident. "We achieve quick results," he said. The plan for the magazine is to create its own accompanying Web site and acquire other entertainment magazines, television stations or Internet sites to bolster it. And, Nikou said, the magazine would be profitable by the end of next year.
OpenGate, founded three years ago, has bought distressed divisions of companies like Schlumberger. A notable turnaround was an acquisition from the power company Areva. Nikou said that in two years, the acquisition went from being barely profitable to $14 million in profits.
TV Guide has fallen far since its glory days. In 1980, it sold almost 20 million copies a week. Now, it has a circulation of 3.2 million.
It has also been battered by management troubles. It was one of Murdoch's most disastrous investments. In 2002, the chief executive of TV Guide's parent company was found to have improperly accounted for about $120 million in revenue, and the News Corp. had to take a write-down of almost $6 billion on its investment in that company in 2002.
This year, Macrovision Solutions closed its $2.8 billion purchase of the TV Guide company. But Macrovision said it just wanted the company's technology assets and would get rid of TV Guide magazine, the TV Guide cable channel and TVG, a horse-racing channel.
The magazine has faltered editorially, too. Scott Crystal is now the chief executive of TV Guide magazine. Three years ago, as TV Guide publisher, Crystal oversaw the introduction of the magazine Inside TV, which failed. Aimed at young women, it cost the company more than $25 million in its eight-month life in 2005. Debra Birnbaum, who is the current editor of TV Guide, was the executive editor at Inside TV.
Crystal also directed an aggressive revamping of TV Guide in 2005, taking it from a digest-size newsprint book packed with local television listings to a large magazine with feature stories and many fewer listings. He cut the guaranteed circulation to 3.2 million from 9 million. The smaller listings reflected an endemic problem for the magazine -- the cable systems that provided onscreen listings.
It was also a bid to attract more expensive ads, and Crystal said he had been able to raise prices by two to three times. Still, the magazine was unprofitable from the first quarter of 2004 through nearly four years.
Times have been a bit better this year. The magazine turned profitable in the first quarter. And, Crystal said, the readers are now younger, which ought to attract advertisers. But ad pages this year are down 14.8 percent from last year, according to Media Industry Newsletter data.
Asked if the magazine's sale for $1 meant it was virtually worthless, Crystal said it did not.
"That's a fair perception, but the reality is that the dollar was immaterial," he said. "The $70 million to $100 million in liability that somebody had to take on, that was the risk."
"I don't expect the average Joe out there to understand what kind of deal we've struck," Nikou said. "In these kinds of deals, whoever owns the company has to write a check for this every week, every month, so they're assuming the liabilities and any kind of capital injection the business needs in order to operate," he said.
Though private equity funds usually have a plan to hand off an acquisition within a few years, Nikou said there was no time frame, and OpenGate had held companies as long as four years.
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