BizJournals Portfolio
Jun 30 2008 12:00am EDT

'Us' and Conde Nast: The Pros and Cons

So Condé Nast isn't going to buy Rolling Stone after all -- but it might buy its sister title, Us Weekly. That's the rumor, anyway. Do we believe it? Maybe.

Start with the seller. There are a couple good reasons why Jann Wenner might want to unload Us right now. Whereas Rolling Stone is a clearly distressed property, Us is a cash cow whose fortunes area just beginning to turn. While the market has probably already peaked, if Wenner can find a buyer who sees rosier prospects for Us than he does, he should still be able to fetch a handsome price for it.

Keith Kelly sees it going for $750 million, but he also places Us's newsstand sale average at 1 million. In fact, the title's newsstand sales are substantially down this year. Its newsstand average is only about 879,000, according to the numbers it has reported to the Audit Bureau of Circulations; if you factor in the more recent numbers supplied to me by an industry source, the average falls below 850,000, down more than 12 percent year-over-year.

"If you think it's a permanent trend, this is the time to get out," says another source with detailed knowledge of the weekly market.

But there's another, less-obvious reason Jann Wenner might want to sell now: the presidential election. If Barack Obama wins and carries through on his pledge to raise the capital gains tax, it would make the sale of a magazine like Us much less profitable. By selling now, Wenner stands to save $40 million to $60 million in tax.

Of course, Condé Nast (which owns Portfolio) doesn't care about Wenner's tax hit, but there are still reasons it might find Us attractive, at the right price.

A big one is the web. Thanks to Wenner's reluctance to invest in digital development, Us has an under-realized web presence, attracting fewer than 1 million users a month, compared with 6.7 million for People.com and 3.7 million for TMZ, according to Quantcast. But celebrity news is an area with huge potential online; Condé, which is less stingy about investing in its properties, could find a major upside there.

On the other hand...despite a source's claim to the Post that "Us Weekly is respectable now" (wonder which side that source works for?), not everyone sees it that way. Condé likes to play at the high end of the market, and gets antsy about anything seen to diminish its brand. (Remember how quick the company was to shut down Mark Golin's embarrassingly loutish Details?)

Condé is also a company where the most powerful editors have an extraordinary amount of pull. What's going to happen the first time Us runs an unflattering story about, say, Jennifer Aniston, and her PR firm reacts by yanking an exclusive away from Vogue or Vanity Fair?

For all these reasons, while a deal isn't inconceivable, a high-ranking Condé source says, "It would feel like a real stretch."


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