The future of Emmis Communications Corp.’s iconic Los Angeles magazine is up in the air.

Shockwaves shot through the local publishing industry when Jeff Smulyan, chief executive and controlling shareholder of Emmis, announced a proposal earlier this month to take the company private and sell off what were called noncore assets, including Los Angeles magazine, Newport Beach-based Orange Coast magazine, and three other regional monthly print publications.

The company has said it will retain its Burbank radio station, KPWR-FM (105.9).

“This is pretty shocking news,” said Doug Hebbard, publisher of the Chicago-based industry website Talking New Media. “Emmis is a big player in this segment. It’s like the Condé Nast of regional magazines.”

Smulyan’s E Acquisition Corp. is offering to acquire the outstanding shares of Emmis for $4.10 a share in cash, according to a company statement. Shares of Emmis closed at $4.14 on Aug. 25, up about 4 percent from its close the day before Smulyan’s Aug. 18 offer. The company has a market capitalization of roughly $50 million.

Smulyan’s proposal is under review by an independent committee of directors and will require the approval of Emmis shareholders. The process is anticipated to take between three and four months.

The proposed leverage buyout is to be backed by a loan from an affiliate of Falcon Investment Advisors and has been guided by Moelis and Co. If the transaction is approved and completed, the Emmis board has authorized Smulyan to explore strategic alternatives for its publishing division and some of its radio stations in an effort to reduce debt.

Emmis’ publishing division posted $61 million in net revenue for the fiscal year ended Feb. 29 – a fractional drop compared with the previous year when it generated $61.1 million in revenue. However, the company saw a 16 percent drop in publishing-related net revenue during the second quarter that it attributed to the timing of its custom publications schedule.

According to the company’s most recent earnings report, Los Angeles and Orange Coast magazines boast the second- and fourth-highest circulations of the six monthly regional magazines at roughly 138,000 and 53,000, respectively. While Emmis does not break out financial figures for its individual publications, one financial adviser familiar with the magazine’s finances said the company is relatively healthy.

“Los Angeles magazine is profitable already, just not as profitable as they’d like it to be,” said the adviser, who asked not to be identified.

Separate paths

Though Emmis has built its reputation in regional magazine publishing and traditional local radio, the Indianapolis-based company sees its future in digital radio. Its NextRadio app, which allows users to stream radio stations on their smartphones, launched in 2013 and Emmis has since signed deals with Sprint, T-Mobile, Verizon, and AT&T for carriage on their mobile networks. About 7 million people have downloaded the app, and while it’s not yet profitable, the company’s leadership believes it will be a huge sell for advertisers, as it automatically provides user data to them while the app is in use.

“If you’re asking, Where’s the future of Emmis? The company believes it’s in radio,” said Hebbard. “And Emmis believes the future of radio is in its NextRadio app.”

The proposed efforts to sell off Emmis’ publishing group would follow in the footsteps of Los Angeles Times parent tronc Inc. and News Corp., which each spun off their own print divisions in order to boost profits as print revenue declined over the last decade.

“This strategy has worked well for some and not so well for others,” said Hebbard.

Tronc could become a potential bidder for Los Angeles and Orange Coast magazines, he said, because the company already owns and operates a daily paper in the market. Tronc, which owns the Chicago Tribune, purchased Chicago magazine in 2002 from Primedia Inc. for $35 million.

However, another suitor could emerge that sees the local publications as potential trophies or as valuable cultural institutions.

Eli Broad and former Los Angeles Times Publisher Austin Beutner, who last year were interested in buying the Times, would fit that mold, though neither have expressed an interest so far.

“We have wonderful people in our publications,” Smulyan said. “We obviously would want a buyer who would be a good steward of our magazine and good to our people.”

Emmis may be putting its faith in radio was a source of growth, but there is at least some reason to have faith in the future of print.

According to a study released last year by the American Press Institute and Associated Press–NORC Center for Public Affairs Research, 21 percent of millennials ages 18 to 34 said they pay for a print magazine subscription, compared with the 11 percent and 10 percent who said they own a digital magazine or digital newspaper subscription, respectively.

Digital matters

Los Angeles magazine’s readership reflects that statistic. More than 40 percent of its readers are ages 35 to 54 and report an average household income of more than $214,100, according to the publication’s media kit. The magazine charges between $12,000 to $24,000 for print advertisements.

“As an advertiser, it’s powerful to think of being left on someone’s coffee table potentially for weeks, months, or years,” said Mary Melton.

The magazine’s editor-in-chief since 2009, she has guided it to a number of regional and national magazine awards for its investigative and service pieces on the city’s people and places. Still, Melton acknowledged that her job has changed significantly through the years due to the proliferation of online content.

“Being an editor-in-chief in 2016 is completely different than it was in 2006,” she said.

The magazine’s has experienced steady growth in traffic over the past year or so. The site registered 334,000 unique visitors in September of last year, a number that rose to 492,000 in June and 690,000 in July – a month that also marked the release of the company’s flagship Best of L.A. issue.

Melton, who oversees a staff of 50, has also been focused on growing the magazine’s events division, which includes live conferences that tie in with editorial features.

“Smart media companies will continue to look for ways to viscerally connect with readers,” said Melton. “A key word to that is ‘access’: access to ideas, to celebrities, to the city.”

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