Four years ago, David Pecker took over American Media, publisher of the National Enquirer and the Star. Since then, he’s been busy. A partial list of his moves to date includes buying a rival tabloid publisher, repositioning the Enquirer and the Star as credible sources of celebrity gossip, launching the Spanish-language tabloid Mira, buying health and fitness publisher Weider and most recently hiring away Us Weekly’s editor in chief Bonnie Fuller. Pecker recently took a break to talk with Media Life about how he became a big spender, what he has planned for the Weider titles, and why the magazine industry has been hurting at the newsstand.

  You have to remember that when I was at Hachette, back in 1990,  I relaunched Elle magazine. I spent a ton of money.
    Every time I hired a great photographer or a great editor, within six months I lost them to Vogue magazine. After doing that for 10 years, it sinks in pretty well.
   One thing I learned from that experience that helps me today is that whoever your competitor is, you take the person who has the most impact against you and then you hire them at any cost.
   When I bought American Media in 1999, when I bought the Enquirer and the Star together, 50 percent of the book was in black and white. 
   There was no photo management system, everything was hard copy. Things were still done in hot type like in an old newsroom. I spent a minimum of $10 million in upgrading all those systems. 
  Also, when we acquired the company we acquired a great distribution company, but they also had no systems. I spent another $10 million investing in very sophisticated systems. 
   When we bought the Globe in 1999, in launching Auto World, in launching in the Latino market, I spent a lot of money. I’ve spent $50 million in the last five years on advertising campaigns, changing into four-color, upgrading the paper, because I’ve always believed that if you have a product that can please the reader, the advertisers will follow.
   Now comes Bonnie Fuller. In the 16 months after she took over Us Weekly, I lost 1 million readers from Star magazine. Going back now to my days competing against Si Newhouse, it was very clear that I needed to get a top editor. I had to compete in the sandbox against People and Us Weekly and In Touch in New York. I can’t do that in Boca Raton, Florida. I knew I would have to open up my pocketbook.
   It’s the old cliché but it’s absolutely true: You have to spend money to make money. When you take a look at People magazine, the most profitable magazine in the world, making $400 million a year, and I take a look at the success in the short period of time of Us Weekly, going from losing millions of dollars to making millions of dollars--and since I’m the distributor for Us Weekly and In Touch, I know what the real newsstand sales are--I believe wholeheartedly that, No. 1, you need a great editor with a vision.
   It was very fortunate that Bonnie was in fact available. Bonnie had the same exact vision of what I’ve always wanted to do, which was take the Star and make it a glossy magazine. But you have to pay for it.
   We’re going to do a test starting in two weeks on a rotogravure coated-stock paper. That will go for eight weeks in about 21 percent of the country. 
   Then, on January 27, we’ll be doing a test on a 124-page glossy Star with better paper stock, body stock and cover stock than Us Weekly and People put together. 
   We’ve been conducting focus groups all over the country. The Star readers who left us said that they would come back, and the people who’ve been buying People and In Touch and Us Weekly said that they would be very interested in buying Star.
   The paper gives the believability and credibility that we think right now Star doesn’t have, but I have to invest and pay for that. I believe in doing that I’m going to get my return when we launch nationally some time in March or April of next year.

     We’re researching the Enquirer and the Globe right now. There will definitely be upgraded paper stock for both tabloids. We’re right in the field as we speak about how the readership of the Enquirer and the Globe would feel about converting to a glossy. From the numbers that have just come back recently, the readers of the Enquirer and the Globe are really true tabloid readers. 
   The Enquirer and the Globe don’t compete against In Touch and People. They have their own true tabloid audience, so unless something comes back at the end of the study, they will probably remain the way they are, just with better paper.

   Yes. We’re negotiating with Richard Desmond and his team on launching OK! America. Right now in the U.K., you have OK!, Now, Heat, Hello! 
   OK! is selling around 600,000 copies a week at roughly two-plus pounds. Here in the U.S., what we’re looking to do is adopt that same oversize, so this would be a mainline launch, not at the checkout. 
   We feel that if you take a look at the celebrity market--People, Us Weekly, In Touch, Enquirer, Star and Globe--if you take that market, which sells north of five million copies a week, there’s an audience that’s missing, which is the upper end of the audience. 
   Those are high-income, highly educated readers, 85 to 90 percent women. So OK! is something we will most likely be launching as soon as we finish our agreement.

    When I look at the celebrity journalism market, I think the mass market is covered pretty aggressively. What I think is open is the upper end of the market, which I think Gala and OK! America are going to enter. 
   As for the mass market, I don’t really see another launch. A mass market launch really has to be at the front end of the supermarket. Right now the three major magazines, People, Star and the National Enquirer, are really the only three magazines in the United States that have 100 percent distribution, which is 275,000 pockets throughout the United States. 
   That blankets the whole of North America. To replicate something like that is an investment of hundreds of millions of dollars. 
   You had In Touch launching last October, penetrating the market pretty successfully. They have probably 50 percent of the penetration that the big three have. Us Weekly probably has north of 50 percent. But it’s very difficult for somebody else to come in because there are only 55 positions at the front end of the supermarket.
   You’re risking probably $100 million on a launch. It’s almost like making a major motion picture. When you look at the publishers who are interested in this marketplace, I don’t see it as U.S. publishers. 
   The ones who are interested now are the European publishers, and their level of risk is not going to be at the front end of the supermarket. You might see somebody else on the mainline. But I don’t see a major entertainment launch. If they did,  they’d really have to come to me, since my distribution company represents 70-plus percent of the market.

   It was right after the Jesse Jackson love child story, which was a rock-solid story, that the general media picked up and had to credit the Enquirer. Then the Clinton Pardongate story broke, a similar kind of story, taking on something that’s not just celebrity.
  There was all of that together, and then there’s the massive reduction in lawsuits from when I first bought the company.
   We were able to land Campbell’s, Unilever, Kraft, Nabisco, Paramount, Disney. When we purchased the company, entertainment advertising was nonexistent for us. It’s our No. 1 advertiser today. Tobacco, which was No. 1 then, is No. 4 now.
   Since we have a fixed format of 60 pages, our 20 pages of advertising per week is basically sold out between entertainment, packaged goods and pharmaceuticals.
    During the sweeps months, September, February and May, we have to make expanded issues because we’re totally sold out.
    So from an advertising standpoint, we’ve gone from $19 million to almost $50 million in a three-year period. Now, to take it to one more step, when I take a look at a glossy Star, since we’re going to run 124 pages, there’ll be 80 pages of editorial and there’ll be an opportunity for 40 pages of advertising, similar to People magazine.
   Forty pages of advertising really changes the dynamics on a book like this. Right now we’re 80 percent driven by circulation revenue and 20 percent advertising. Now it’ll move more towards 50/50 like other consumer magazines.
   Without Bonnie, the credibility for the Star wouldn’t be there. She has brought all this instant credibility. I’m getting calls from advertisers who want to see the prototype, want to see the launch, pretty aggressively.
   Now I’m interviewing for a very senior sales and marketing person to complement Bonnie’s position on the editorial side. It’s a huge opportunity for us – the potential for $100 million of advertising revenue.

What was the thinking behind your decision to acquire Weider Publications?

    Back in 1999 when I acquired the tabloids, the strategy was to reposition the tabloid, promote their legitimacy, and then build on the distribution company. 
  What we tried to do, what we attempted to do, was put all the tabloids in one company, the consumer magazines that we launched in a separate company, the distribution company also, and then build up our consumer magazine division. That’s really what our whole strategy was. I did pretty aggressively partner with The New York Times to buy the Times Mirror magazines, but I lost out to Time Warner. Then we reviewed the Emap properties when they were being sold.
   I have a strategy that I live by when it comes to acquisitions. I always want to be in the right markets and I always have to be No. 1. Being in the industry for 25 years, I've learned that when you’re the No. 3 or No. 4 book in the field, anytime there’s any kind of budget cuts, you are always eliminated. 
   So I was looking for the type of property that could be No. 1 in the market, almost as important to the advertisers as a quasi-trade magazine. A lot of those titles were in the Emap properties, like Motor Trend, a lot of them were at Times Mirror, like Golf. They come up very infrequently.
   Then I heard that the Weider titles were for sale. The health and fitness category is one I’ve been interested in for a number of years. When I actually studied it, I saw that the health and fitness market grew compounded 12 percent a year for the last five years. Believe it or not, the Weider titles were growing 24 percent a year. There’s seven magazines. 
  They had $175 million of revenue, $26 million of EBITDA and 500 people. Now, I run American Media. Prior to the Weider acquisition, it was a $400 million company, I was running six weeklies as well as 14 other types of consumer magazines and paperback books and so on. I had 600 full-time people as well as the distribution company. 
  When I consolidated everything in Florida, I built a very big back office facility here for manufacturing, circulation, finance. So from an acquisition standpoint we have a structure where we could add on a hundred new magazines, and that was only seven. 
  In acquiring it, I paid $350 million, but I was able to bring the EBITDA from $26 million to $42.5 million right away, basically by taking all of their back office operations and moving it to Florida. I was able to eliminate over 100 people.
  When I put the seven books together, there were some huge opportunities here. 
   No. 1, I also distribute all the Rodale product, including Men’s Health. I know that Men’s Health is selling 450,000 copies plus on the newsstand with 1.7 million circ. Men’s Fitness, which is a Weider title, has a circulation of 600,000, and it’s selling 85,000 copies on the newsstand. 
   When I look at the book, it looks like a gym rat book. So one of the opportunities we saw was to realunch Men’s Fitness. I moved it from Los Angeles to New York, I hired Alan Stiles as the publisher. Peter Sipowicz, who was an editor at Time Warner, came in as the editor in chief of Men’s Fitness and we’re relaunching it with the November issue. 
   The book is going to go head-to-head with Men’s Health. By October, I’m going to have the same number of retail outlets as Men’s Health. I’m hoping my 85,000 copies on the newsstand goes up to 200,000 or 250,000, and I feel the magazine should naturally be able to grow up to a million.
   With the acquisition , I also bought Natural Health, which was a sleepy little book in Boston with a circulation of 300,000. I look at Real Simple selling 1.2 million, I look at Organic Style selling 750,000, I look at Prevention selling 3 million, and this is only selling 300,000. So we hired a new editor, I moved it from Boston to Los Angeles and we’re relaunching it in October. Roger Black redesigned Men’s Fitness as well as Natural Health, and I think it’s going to look great.
   So we have two magazines that we’re aggressively relaunching out of the Weider properties, as well as a magazine that they launched in ’98 called Living Fit. It was for women who were over 45 and talked about how to take care of themselves. 
   What a perfect time to do that now. They put out eight issues and put out 200,000 copies per issue but they couldn’t get out any advertising. So we’re relaunching Living Fit starting in October.
    We’re going to read the results and if everything goes okay, I’ll launch Living Fit as a monthly magazine starting March or April of next year. 
   That’s very important because I think there’s a huge market that’s being underserved of women 45 and older on well being, yoga, pilates, how to take care of yourself more in a natural way.
   I also wanted to expand the Weider properties in the Latino market. We already have Mira in that market, which sells 100,000 copies per issue. It’s a friendly type of tabloid. I’m launching Shape en Espanol in October and Men’s Fitness en Espanol starting in January, then I’m doing some other specials in this category for Univision and Telemundo.
   But the point I’m making is I’m trying to expand all the Weider brands that weren’t expanded before. That’s why it was so important to buy a consumer magazine group. It utilized all the distribution areas that we have.

   When the Iraqi war broke out in March, I saw my sales start taking a dip. That was one. 
  Number two is the economy got worse. I think the economy is still very weak and I think that people are making fewer trips to the supermarket. We all know that people buy magazines at the newsstands as an impulse buy, and I think when you put all of that together it has caused a real slump in the magazine industry.
  There has been nothing out there that has caused a major recovery except the tremendous growth on Oprah’s newsstand sales. There is only really a handful of magazines that have really done well. 
  So I believe that we’re in a slump. It’s a real economic low where magazines are now. 
  Also, with 4,200 magazines out there, the market is very, very cluttered, and there is going to have to be a cleansing factor. 
   The four major wholesalers are aggressively trying to improve their margins, and the retailers are going to this scan-based trading. They want to take the inventory that is in their stores and put it back in the publishers' books, which means that they don’t want to be responsible for all these returns because they don’t make any money if they have to handle the copies over and over again.
   When you put all of this together, I think there is less point-of-purchase handling of product than has ever been in the last 10 years. 
  I think if you spoke to Jimmy Cohen at Hudson News or Joel Anderson at Anderson News or News Group or Levy, they would all tell you the same thing. They’re spending all their time trying to reduce their cost factor because the more money they have to pay the retailers, the less money that they have for servicing the product.
   Eventually, it is going to be so expensive to be out in the newsstand that I would not be surprised to see the 4,500 magazine that are out there drop down to maybe 2,200 or 2,300. 
   And I think if that happens then the stronger magazines, the big magazines, will recover some of the unit sales that they have lost.

August 25,2003© 2003 Media Life

-Jeff Bercovici is a staff writer for Media Life.

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