“Human sacrifice, dogs and cats living together, mass hysteria!” — Ghostbusters.
No, that wasn’t an earthquake you felt this morning, it was the type of seismic shift of the surf industry that raises mountains and buries entire cities. After almost 40 years as bitter rivals, Surfing magazine and Surfer magazine are now owned by the same company.
In a conference call this morning it was announced that Primedia (parent company of Surfing) had acquired Emap U.S.A. (parent company of Surfer) for 505-million in cash and warrants and two-million shares of Primedia stock at nine dollars a share — making the entire deal valued at 515-million dollars. The deal involves the acquisition of 60 Emap titles including Hot Rod, Guns & Ammo, and of course Surfer.
It also puts a dramatic exclamation point on Emap’s failed attempt at entering the U.S. magazine market. In 1999 Emap paid more than 1.3 billion for the same group of titles — which puts its loss at about the equivalent of 250,000 trips to the Mentawais. Ouch!
Questions during the conference call centered around the relative financial strength of the new company. Not surprisingly, there was no information on how the once rivals of Surfing and Surfer would find a way to coexist under one ownership roof — apparently under the leadership of Primedia Outdoor Group Publisher Bob Mignogna. However, it’s been widely speculated that after the deal Surfer would skew toward an older demographic and Surfing would tackle the youth market.
Regardless, Mignogna now faces the very daunting task of sorting out the staffs of not only Surfing and Swell.com (whose editorial staff Surfing recently acquired), but also the strong personalities of his long-time competitor.
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An Inside Look At The Deal.
Here’s four perspectives on the deal from Primedia Outdoor Group Publisher Bob Mignogna, Surfer Editor Sam George, Quiksilver CEO Bob McKnight, and Steve Pezman (who served as Surfer‘s publisher for more than 20 years).
Bob Mignogna is the Outdoor Group Publisher for Primedia.
TransWorld SURF Business: Surfer and Surfing owned by the same company? That’s a little like cats and dogs living together isn’t it?
We’ve been very competitive over the years, that’s for sure. We’re going to continue to fight and it’s our intention to try to make that competition stay very strong.
TransWorld SURF Business: How will this change the editorial focus of both magazines?
No decisions have been made yet as to how exactly it’s going to change. Surfer magazine has been viable for 42 years. They have a very powerful and very effective place in the marketplace. There’s not a whole lot they need to do to tinker or change Surfer magazine to make it more successful. They’re doing pretty well. We’ve had more of the handle of Surfing being the mag for high-performance surfers and for younger surfers, and I don’t think we really need to tinker or change much there. Both magazines have done pretty well as they are, and they’ve been in the number one and number two spots for a very, very long time. There’s not much need to change one or the other.
TransWorld SURF Business: Are you planning to keep both offices separate with the same sort of support staff?
We’re at a period right now on the acquisition where’s it’s like you’ve bought your home and you’re in escrow, but until the escrow closes it’s really not yours to paint. We’re in that stage right now where there’s nothing we can or want to do. So it would be premature to say, but I would offer that you’re not going to have editors from the two magazines working side by side.
TransWorld SURF Business: How much did the Surfer Group influence Primedia’s desire to put the deal together? Because on the revenue side of things, the Surfer group isn’t as profitable as some of the car magazines.
Yeah, it’s not. Some of the car magazines are probably as big as my entire outdoor group. But Primedia has really wanted us to have titles in the boarding sports area.
TransWorld SURF Business: Will the readers of either mag be able to tell that some sort of deal occurred? Will either magazine feel or look different?
The magazines are already different and they may become a tad bit more different — surely we aren’t going to do anything that’s going to make the magazines look more similar. The reader and the advertiser would react against anything that would make the magazines look the same.
TransWorld SURF Business: To what degree will you now be involved with day-to-day operations at Surfer?
Well, I’ll be involved in the overall strategic planning for the whole group. But the final org chart will probably be worked out in about two weeks and I’ll definitely be actively involved in the management of the group.
TransWorld SURF Business: Someone said to me today that you can take Bob Mignogna out of Surfing Magazine, but you can’t take Surfing Magazine out of Bob Mignogna. What’s it going to be like to be teamed up with a magazine that you’ve spent decades competing against?
You know, there’s an aspect of business of wanting to deliver a great product that has nothing to do with gamesmanship. I look at this as, we’ve been given a playing field and an incredible opportunity to take the two largest surf magazines in the world and make one plus one add up to something more than two. It’s once in a lifetime that you get an opportunity to take the top two products in the marketplace and try to make something really fantastic out of them. So it’s an incredible opportunity — and certainly a lot of fun. Whoever said to you that you can take Bob Mignogna out of Surfing magazine, but you can’t take the Surfing magazine out of Bob Mignogna is correct, but that doesn’t mean he can’t grow.
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Sam George is currently the editor of Surfer magazine and also worked for nine years at Surfing magazine.
TransWorld SURF Business: How will this change Surfer magazine?
At this point, we don’t really have any details of how the structure is going to work. Any time a company acquires and owns the two biggest names or products in any field, it’s an ideal situation for them. They would also want to, I would think, ensure each product diversifies. If you have the two top products, you wouldn’t want them to more alike, you’d want them to be more separate. You’d help each one develop its own voice and its own personality. In that sense, for me personally, I don’t see much changing.
TransWorld Surf Business: So would you guess that both magazines will stay pretty much the same?
I would say that seeing how Surfer has obviously the stronger, more cohesive editorial direction, Surfing would be the magazine that would probably change the most visibly, in that it would probably — I’m just predicting — become more teen oriented. It would make sense. Surfer is the more sophisticated title.
TransWorld SURF Business: When did you hear the news?
TransWorld SURF Business: When you read about it, did it cause your stomach to churn a bit?
Sam George: Laughs No, my stomach’s not churning. It doesn’t matter to me who owns the magazine — personally. Some people might think, “Well is Bob Mignogna going to be my boss?” The fact is, Bob Mignogna’s been my boss before.
Who knows, there might be forces at work that I’m not thinking about, but to me I don’t see this as that big of a change.
If Bob becomes the group publisher for both magazines, I can’t see h
im wanting to sabotage one title for the other. Like I said, I just heard about it this morning and for some reason maybe I’m not worrying about it as much as I should.
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Bob McKnight is the CEO of Quiksilver and has been doing business with Surfing Magazine for 25 years and with Surfer for 23 years.
TransWorld SURF Business: So what’s your impression of the deal?
I really don’t know much about the deal at this point, but at first blush, I think that it’s a shame. It the acquisition wasn’t done just for that to merge Surfer and Surfing, but that’s the byproduct of it. It’s like if we bought Billabong and took Quiksilver in one direction and Billabong in another so the brand’s didn’t cannibalize each other. It’s a shame. I think it takes away some of the competitive spirit between the two magazines, which made both the magazines better I think.
Like I said, I don’t know a lot about it, but at first blush I’m just taking a big sigh of disappointment. I just hope we continue to have two really good magazines.
TransWorld SURF Business: If you could call the shots, what would you like to see at this point?
long pause That’s a really hard one. I don’t know. I really like some of the people at both magazines, and I would love to see the people who I consider good — and I don’t want to get into names — get together and operate on a really unreal level, so that we can have two outstanding magazines going forward. That’s going to be the trick for whoever the CEO is — to feather the two groups together and make sure they’re all happy and they have career paths and that their morale is good and that they can see that they are a team versus something like “Fuck you! Well, fuck you too. Well fuck you again!”
TransWorld SURF Business: It does seem weird that you can be arch rivals one day and partners the next.
That’s why I think the Billabong/Quiksilver thing is a good analogy. Obviously the Surfing group is doing the acquiring, so they’re going to be in the superior position. But there are a lot of very strong people at Surfer who have egos and opinions and they’re very good at their job and whether that ruffles some feathers and they can remain in that environment — like I said it’s a sad thing, because both magazines are very good and we enjoy our relationship with both of them and both do a really good job. Now that’s gotta change. All their customers — which means all of us manufacturers — are thinking the same thing. Once again, it’s just like if Billabong acquired us or we acquired them, all the customers would be saying “Oh shit! There’s room for both, they both have their specialties, we enjoy our relationship with them, and they both have a great team. Now, together as one they won’t have to try as hard because they basically own the market.”
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Steve Pezman is the publisher of The Surfer’s Journal and was Surfer magazine’s publisher from 1970 to 1991.
TransWorld SURF Business: What did you think when you heard the news this morning?
: Having them both owned by the same company is like living in an upside-down universe. I’m not sure what it means to the sport or the industry. There were checks and balances in having rival publications. How those publications will be handled right now is anyone’s guess.
I always thought Surfer should be owned by a well-to-do surfer who operated it out of his beach-front home somewhere. Owned by someone for whom profit wasn’t a driving force — run like a reasonable business, but not having the profit-growth element — which for a public company is always the case.
The true ramifications of it are yet to be understood, but purely from the vision of an old warhorse, it’s like we Surfer thought of ourselves as good and Surfing as evil. In our minds it was the fight of good over evil. We thought of ourselves as the soul of the sport and Surfing as the title that pandered to the lowest common denominator. In truth, they had fine moments and in truth the competition spurred both publications to greater heights of creativity. Hopefully that sense of competition will find a way to continue to the betterment of the sport and the industry.
We used to say that there was room in the market for 1.5 magazines. That was Surfer‘s favorite slogan. The advertising dollars would support 1.5 magazines, and that Surfer usually had .9 and Surfing had .6, but the truth of the matter is both titles made money. Then TransWorld SURF came in and proved that whole formula was fallacious anyway.
My perception is that Surfing tries to be everything to everyone — which is an impossible task. Surfing takes the middle ground, trying to skew low. TransWorld skews lower yet age wise. I’m not sure how the market perceives it, but trying to be everything to everyone is probably the most ticklish task of all.
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Here’s what the Associated Press said about the deal:
Primedia Buys Magazines From Emap
LONDON (AP) – British media company Emap PLC is selling its U.S. magazine group, which includes Motor Trend, Hot Rod and Teen, to rival enthusiast magazine publisher Primedia Inc. for about $500 million.
The deal ends a disastrous foray into the U.S. magazine market by Emap, which paid $1.34 billion for the magazine unit three years ago. Emap will hold on to FHM, a men’s title that competes with Maxim and Playboy.
Primedia, which has more than 200 special-interest and trade magazines, beat out National Enquirer publisher American Media Inc. and other suitors for Emap’s 60 titles.
Several of Emap’s largest titles had competed directly with similar magazines from Primedia in the automotive, outdoor sports and teen areas. Primedia also publishes a few consumer magazines such as New York and Seventeen.
Primedia CEO Tom Rogers told investors in a conference call that he expected cost savings from combining the magazines to result in a 35 percent increase in cash flow at the Emap magazines next year.
Rogers said he thought Primedia’s expertise in marketing special-interest titles on newsstands and selling advertising for niche titles would help turn around the struggling Emap magazine group.
Primedia will pay $515 million for Emap USA, formerly known as Petersen Publishing – $505 million in cash plus warrants to purchase 2 million Primedia shares at $9, which the company valued at $10 million.
The deal gave a boost to Primedia’s stock price, which has languished as it digests its acquisition of About Inc., an Internet company it acquired in March. Primedia’s shares rose 91 cents to $7.70 in morning trading on the New York Stock Exchange.
Emap said the sale would allow it to focus on its assets in France andBritain. It will continue to develop internationally via the men’s magazine FHM, now published in 15 countries.
“In the context of a difficult U.S. market we regard the sale as a reasonable result,” said group chief executive Robin Miller.
The transaction, which is subject to customary closing conditions including regulatory review, is expected to close by the end of the third quarter.