December 12, 2017 Last Updated 12:40 pm

Launching a new media brand versus acquiring an existing one

Seems like everyone is looking for investors who will provide buckets of money to fund a takeover of an existing publication — but sometimes, if done properly and modestly, a launch is the better way to go

There are times when buying an existing brand makes a ton of sense. Brands — that is, recognized existing newspapers and magazines — already have brand awareness and familiarity with readers. And as a former M&A man, there is money to be made buying and selling those titles 🙂

But there are certain times when launching a product makes far more sense than acquiring one. This has come up recently with the news that the L.A. Weekly has been bought by a group of Orange County investors, and the fired staff would love to see someone come to the rescue. And with the effort to buy the Gawker brand through a Kickstarter campaign.

Through three days I see that the Gawker effort is about 10 percent of the way to their goal. This isn’t a good sign as most campaigns usually start strong if they are to succeed. Also, it is a possibly sign that the Gawker brand has limited appeal outside of journalists who followed their plight.

I’ve been involved with both new publication launches, as well as with sales and acquisitions.

The worst situation, of course, is to be involved in a sale — that often means you will soon be looking for a new job. But both launches and acquisitions have their own sets of problems to be considered.

Launch

The first time I launched a magazine it was pretty much by accident. While working as the publisher of a trade newspaper in San Francisco with McGraw-Hill, I investigated the possibility of creating glossy special sections, ones that looked more like a magazine than our newsprint special sections.

Our newspaper competed with a magazine published by another company, and wanted to attract at least some of their ads, but our newsprint product as simply not as attractive.

What I learned was that with a short run we could print a glossy magazine for very low costs. Our advantage was distribution. Rather than mailing the magazine out, we would insert most of the copies into the newspaper, mailing out only a small number of their own. This would raise the price of distribution for that issue of the newspaper, but by a far lower amount than if we mailed the new magazine out separately.

The rules for such things have changed a bit since the launch of what we called CM Magazine (“CM” standing for construction management), but the concept still can work in certain circumstances.

Once we figured out that costs would be reasonable we were faced with how to get McGraw-Hill to approve a launch. McGraw-Hill was a highly bureaucratic company, and getting management to sign off on a launch might take years.

I quickly determined that the best way to get permission would be to not ask for it at all, but just launch.

But to not lose my job over the launch, we had to make sure that the very first issue would make a profit, even if that profit was one dollar. So, knowing the costs, we sold ads until we had covered costs. Then we sold one more ad to make a profit.

We also wanted to make sure the magazine was not just acceptable for management at McGraw-Hill, but something they would brag about. My design team, editor and I took care of that by rethinking every detail of the magazine from fonts and layouts, to photography and paper. We had a blast.

When the first issue came out it arrived via FedEx in the middle of a management meeting I attended in NYC. The FedEx package was opened with great ceremony and the issue passed around. A lot of questions were asked of me, you can be sure, but when the questions ended one executive turned to me, laughed, and said I was one lucky bastard. Meaning, I had pulled it off, I wasn’t going to lose my job over this thing.

(It is not true that it is better to ask forgiveness than permission when working at a big company. It is far better to not have to ask forgiveness at all.)

If the folks at the L.A. Weekly really think the Los Angeles market can support an alt-weekly they could go out and prove it by getting the advertisers to agree and sign up. If they can’t, maybe the L.A. Weekly brand isn’t as good as they have convinced themselves it is.

Acquire

There are two big problems with acquisitions: saying “Yes” and saying “No”.

Getting a company or investor to pony up the money to acquire something is hellishly hard sometimes. The idea of buying something is always attractive at first, then comes the realization that one has to make a go of it after the purchase.

It is hard to believe, but a large percentage of acquisitions occur without the buyer creating a realistic budget for the acquired brand. At one trade magazine company I worked, the owner specifically instructed the CFO not to create one. When asked why all I got was a shrug. But the reason, as I soon learned, was that the acquired product had low revenue and the new owners simply wanted to go forward and hope for the best. (Yes, it was the worst run company I’ve ever been involved with.)

But, on the other hand, saying “No” can be a hard thing to do.

When I was the publisher of a B2B magazine in Chicago I was considering launching a new technology quarterly related to the subject of my main magazine. There was one US competitor already in the market and its existence made me question how successful we could me, even though we felt our new launch would be somewhat different and had a larger market to attack. Still, if one we could only get rid of that competitor!

That’s when I realized that we could, if we bought the magazine. But to complete the deal we had to make sure we didn’t over pay. And we had to be patient. So, I told ownership that first we would approach the owner, a big corporate publisher with a huge portfolio of titles, to broach the subject. Then we had to be willing to walk away if the deal was not to our liking.

It worked. At first the owner said they would not sell. Then they looked at their own P&Ls and decided they might. Then they said our bid was too low, and this time WE walked away. Then a week went by while we wondered if they would change their minds. They did, and said they would accept our bid.

It was a great deal and solved our launch problems by eliminating the need to do a launch at all.

Still…

Sadly, both the successful launch and the successful acquisition have bad endings. McGraw-Hill shuttered the launch and the B2B publisher shuttered the acquisition. Both closings happened after I had left and I feel probably occurred because management really didn’t understand the reasons either publication existed. Nonetheless, both were at least minimally successful at the time I was involved.

I have been involved in far more long-term successful launches or acquired publications, but these two are examples of thinking modestly — better examples than a big, multimillion dollar launch or acquisition.

Still… most launches or acquisitions don’t succeed long-term, and most media acquisitions never achieve the level of profitability that the acquirer had originally hoped for.

All one can do is make sure that budgets have been created, and that there is enough money to survive after you’ve pulled the trigger on either your launch or your acquisition.

Unfortunately, most deals fail not so much because they were bad ideas, but because they weren’t given enough time to succeed.

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