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media
Checkout Clout
Jann Wenner has unleashed his new 'People'-killer
magazine, 'USWeekly.' His secret weapon? Not celebrity snaps and juicy
dish but 200,000 supermarket-checkout pockets.
BY MICHAEL WOLFF
Not
long ago, I saw Jann Wenner at Michael's, the media-business canteen on
West 55th Street, sitting at the front table in the bay window eating his
Cobb salad with Mick Jagger. It occurred to me that these two guys were
probably the most intact survivors of the sixties. And that, in some fathomless
irony to anyone who remembers anything, they had probably survived and
flourished, triumphing over periods of excess and ridiculousness, and achieving
their current elegance and courtliness, on the basis of their business
skills.
There is certainly no more
perfect rock-and-roll career -- for accomplishment and longevity and financial
rewards -- than Mick's, and there may not be, in that regard, any more
perfect media career than Jann's.
Wenner Media, which consists
of Rolling Stone, Men's Journal, and Us, is a private
company owned by Wenner and his wife, Jane (from whom he is separated,
but "with no plans to divorce," as the company officially phrases it),
worth somewhere between $500 million and $750 million, with earnings in
the $40 million-to-$60 million range. Wenner Media has no outside investors
and no debt. This is a kind of personal and business perfection that, in
the age of venture capital, technology-infrastructure costs, and IPOs,
does not exist anymore. Indeed, Wenner Media may be the last surviving
closely held independent midsize publishing company in America.
"When
you talk to Wenner, you can hear a tinge of regret, the vague and compelling
call of roads not taken. What he might have done with Geffen, or Pittman."
That's one of the reasons
Wenner doesn't have to worry too much about taking Us magazine,
his monthly People imitator, to a weekly schedule -- an ambitious
and by some estimates perilous undertaking that begins this week. It's
one of those I-can-do-it-because-I-want-to things you can do when
the business is your own. It's your itch to scratch.
But the other reason is that
after 33 years of doing what you do, it's not unlikely that you know more
or less what you're doing -- and it's likely that you're not going to risk
the farm. Wenner -- star, starfucker, friend to stars and other starfuckers
-- is in fact a conservative business guy.
"I know how to publish
a magazine. It's what I do, for 33 years now," he says with pride but with
some fatalism too.
Although Wenner has
used his life as the playbook for the Zeitgeist-ish magazines he has developed
-- Rolling Stone, Outside, Family Life, and Men's Journal among
them -- what he and his company have particularly excelled at is the technical
side of magazine publishing. Magazine numbers -- newsstand draw, sell-through,
response rates -- tend to be precise, unforgiving, and immutable (far from
the soft numbers of the movie business or the record industry or the new-media
world). Wenner and his company turn out to be very good at analyzing those
numbers, and fearing them (reading the numbers, Wenner Media recently killed
its Internet-magazine start-up). What's more, the magazine business is
a business made up of a very small circle of older, unglamorous men --
in which circle Jann Wenner fits very tightly -- who have been doing business
together over many years. Indeed, who do business not least of all because
they like to do it together. (Wenner is a lot more like these guys than
he is like David Geffen; then again, even the mighty mogul David Geffen,
in the end, is probably like these guys, too.) While it is a good bet that
at their lunch at Michael's, Jann and Mick touched on the subject of the
weekly launch of Us -- this is, after all, Wenner's biggest professional
challenge in decades -- it's likely that they talked less about the stars
who would be in the magazine than about Jann's plan for making the numbers
work.
Us,
as a magazine, or as a magazine-business proposition, has been hanging
around the media business almost as long as Wenner himself has. Us
is the collective fantasy of that small circle of guys who make up the
magazine business that they could somehow compete with People, perhaps
the most successful magazine of all time -- the Holy Grail of magazine
publishing.
Us was started,
in a quirk of corporate character, by the New York Times in 1977,
because People had launched so successfully three years before.
After losing $10 million or so, the Times came to its senses and
sold Us for small change to magazine entrepreneur Peter Callahan.
With nowhere near the resources to publish a biweekly national magazine,
Callahan turned to the magazine-distribution company Steve Ross acquired
on one of his buying sprees for Warner Communications (before it was Time
Warner). It agreed to put up the money.
But by 1985, Warner
was tired of funding a consistent money-loser and pulled the plug. Wenner,
who had some brief experience as a celebrity-picture-magazine publisher
when he helped revive Look with the French publisher Daniel Filipacchi
(Filipacchi pulled the plug on that one), stepped in and purchased Us
from
Warner and Callahan for $5 million. But Wenner didn't have the resources
to publish the magazine, either. So he went into partnership with Don Welsh
and his company Telepictures, which published MuppetMagazine. Then,
in short order, Telepictures was acquired by Merv Adelson's Lorimar (the
producers of Dallas). Then, two years later, Lorimar, which meanwhile
had lost $30 million publishing Us with Wenner, was itself acquired
by Ross for Warner Communications.
Wenner, once again, went
over and bought Us from Warner -- the 75 percent he didn't own now
went for $10 million.
Almost
immediately, the recession of 1989 became a depression in the magazine
business, forcing most midsize independents into sales or bankruptcy. Wenner
downsized Us from biweekly to monthly.
By 1993, after total
losses of $70 million or $80 million (most of it other people's money),
Wenner stabilized Us into a modestly profitable venture.
Meanwhile, Callahan
was building himself a tabloid business, buying the National Enquirer
(from
the Blackstone Group, the investment-banking boutique) and the
Star
(from Murdoch). Suddenly, Callahan was a powerful force in supermarket-checkout
publishing.
It was Callahan who, at a
lunch at Le Bernardin in 1997, suggested to Wenner that he take Us
weekly, and offered to put up the money. As the deal was being negotiated,
Roger Altman, formerly of the Blackstone Group (and the former deputy Treasury
secretary), which had sold the Enquirer to Callahan, bought both
the Enquirer and the Star back from Callahan and put longtime
Wenner friend David Pecker, former Hachette Filipacchi CEO (Wenner had
previously sold his start-up Family Life to Pecker), in charge.
Shortly thereafter, Altman and Pecker bought the Globe, making American
Media the strongest force in supermarket magazine distribution, ahead of
even TDS, the Time Inc.-owned distributor of Us's arch-competitor,
People.
At that moment, with
Pecker's agreement to distribute Us to supermarkets across the country,
Jann Wenner effectively entered the packaged-goods business.
Okay.
It takes many years and a
vast investment to turn a profit on magazine subscriptions, which are highly
discounted.
Newsstand -- single-copy
sales, which are not discounted -- can be immediately profitable, however.
But there are no real newsstands (outside New York, anyway); there are,
instead, checkout counters. And only a certain kind of magazine (a women's
magazine, for one thing) sells at checkout counters. And it only sells
if it is properly positioned -- in a choice spot at eye level.
There are, by best
count, 300,000 checkout counters (i.e., cash-register lines) in the U.S.
On average, each counter has twenty wire pockets.
TV Guide and
the National Enquirer, for instance, have pockets at virtually all
checkout counters, selling, on average, six copies from every pocket every
week. People has approximately 240,000 pockets. Us launches
this week with 150,000 pockets and will shortly bring that number up to
200,000.
These wire pockets
cost $21 each to manufacture and last for three years -- $1.4 million a
year, in other words.
It costs $40 per year,
per checkout counter, to rent the space to put your pocket at eye level
(monthly magazines take the cheaper bottom pockets). So that's $8 million
for the year.
Then there's a onetime
charge of $20 per counter. That's $4 million.
Once you have the pockets,
the mantra is, Cover your wire.
In other words, you
have to have enough copies out there to fill all your pockets and all the
space in your pockets, because at the least sign of an empty space, the
retailer will put someone else's magazine there.
To keep his 200,000 pockets
filled, Wenner has to print 2 million copies of Us (an additional
300,000 cover traditional newsstands and airports and bookstores).
It costs 32 cents to
print and transport a copy of Us to the point of sale.
People, the
category leader, sells, on average, 45 percent of the issues it prints.
You might reasonably assume that Us, a recognized name but still
not People, will sell 35 percent of its issues.
Of Us's $2.99
cover price, Wenner will get 60 percent for each copy sold. The remaining
40 percent is divided between distributor, retailer, and wholesaler. So
Wenner keeps $1.80.
That is $1.4 million a week
against $736,000 in manufacturing and transportation costs, for a gross
profit of $33.2 million on 50 issues.
From the gross profit,
subtract $13.4 million in racking costs. Then there's a staff of 125 or
so, which costs about $7 million or $8 million a year. Then a freelance
budget, overhead charges like rent (a couple million), and the cost of
capital.
Net-net, you're safely ahead
by $10 million or so, and you haven't even factored in advertising revenues.
Of course, it's the
35 percent sell-through number that's your variable. If you're off, if
you're tone-deaf to the American public (or American female public), if
you slide much below 30 percent for very long, you're bankrupt.
And that's the magazine business.
Wenner
has one of the great offices in the city, which you can see into from the
corner of 52nd and Sixth. It's as large as a reflecting pool and filled
with choice art and cool memorabilia and wood and marble and other glinting
surfaces. It is, in fact, not really the office of a magazine publisher.
Rather, it maintains the illusion that Wenner is sui generis, which he
is, sort of.
Indeed, when you talk
to him, you can hear a tinge of regret, the vague and compelling call of
roads not taken. What he might have done with Geffen, or Pittman. Stuff
he might have been or done in the music business. How he might have merged
with MTV, and what that would have meant in terms of Viacom and Paramount
now. Maybe he'd be that company's largest shareholder. "I could have been
a record producer. I would have been good at that," he can't help himself
from saying.
But in some sense,
the more interesting thing is that he isn't . . . an icon, a mogul, a playboy.
But is purely a magazine guy.
And if you're a magazine
guy, why not take a real shot at People? (Why leave all that money
uncontested on the table?)
If you have the checkouts,
the pockets, and the muscle -- and nothing else to prove -- why not go
for it?
From the March 27,
2000 issue of New York Magazine.
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