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Tuesday, Jul 5, 2022

LA Mag



Staff Reporter

For the second time in three years, top executives at Walt Disney Co. have made what some consider to be a puzzling decision.

At a time when the Burbank-based company is shedding non-core assets like magazines and sports teams, it seems determined to hold onto a property that has lost millions, has little or no synergy with its other operations, and has repeatedly embarrassed its corporate parent.

The property is Los Angeles magazine.

The West L.A.-based publication, which Disney put on the block in 1997 only to reverse itself and fold into its Fairchild Publications division, was not part of last week’s $650 million sale of Fairchild to Advance Publications Inc.’s Cond & #233; Nast division.

Disney officials still haven’t determined where to fit the publication operationally; most likely it will be folded into the existing magazine division, which contains children’s, science and sports publications.

“It’s more of an entertainment publication (than the other Fairchild properties),” said Disney spokeswoman Chris Castro. “It deals with Hollywood movies, other entertainment stuff. It seemed like more part of our core business.”

Yet industry insiders are hard pressed to see much synergy between Disney and a monthly that focuses on local gossip, fashion, history, events, restaurants and celebrity profiles. Further, Los Angeles has published several unflattering stories about Disney Chairman and CEO Michael Eisner including having him on a list of most-overpaid executives.

Los Angeles also damaged the studio’s relationship with Dustin Hoffman by superimposing the actor’s head onto a picture of a male model wearing women’s clothing. Hoffman prevailed in a lawsuit against the magazine for misappropriating his image and was awarded $3 million in damages. The verdict is under appeal.

With all that baggage, why has Disney held on this long? And why would the company not include it in the overall Fairchild sale?

Former Editor Michael Caruso told the Business Journal in 1996 that after having lunch with Eisner, he believed the Disney chairman wanted to keep the magazine because he is a strong believer in the L.A. market and wants to have a presence in a variety of media here. It is even rumored that Eisner decided to keep the magazine because his wife Jane likes it.

“I think this is just a way of putting a nice face on the fact that Cond & #233; Nast wasn’t interested in buying it,” speculated one local magazine insider.

Los Angeles Editor Spencer Beck declined comment, and Publisher Liz Miller could not be reached last week.

For a company the size of Disney, the magazine’s losses, as revealed in public documents, represent a miniscule cost and the price it could fetch would have virtually no impact on Disney’s bottom line.

The once ad-thick and widely followed Los Angeles has long been something of a corporate orphan. Disney inherited the magazine as part of its purchase of Capital Cities/ABC in 1996. Not wanting to take direct control of the magazine, Disney officials folded it under Fairchild.

But it was never a good fit there, according to former Los Angeles magazine Editor Lew Harris, who now runs the Internet incarnation of E! Entertainment Television, E! Online. New York-based Fairchild publishes mainly trade publications, most of them focusing on the fashion industry, such as Women’s Wear Daily, W and Footwear News.

Harris speculates that Los Angeles wasn’t part of the Fairchild sale because it wasn’t legally part of Fairchild. The magazine, he said, had an unusual operating structure; while Fairchild oversaw the publication, it wasn’t officially part of the Fairchild group.

Harris suspects that Disney eventually will sell the magazine to somebody else. If it is put on the block, there will be no shortage of bidders.

Seth Baker, who owned Los Angeles before selling it to Capital Cities/ABC in 1986, says he has been in touch with Eisner about buying back his old publication. He said he had yet to hear back from Eisner as of last week.

There are other potential suitors, according to industry observers, including New York-based Primedia Inc., which publishes New York and Chicago magazines. Adding Los Angeles to its city-magazine group would mean powerful synergies for group ad sales.

Primedia spokesman David Adler declined comment on whether the company is bidding for the magazine.

Local insiders estimate the sale price at between $10 million and $15 million, though coming up with a valuation is difficult because magazine sales are usually based on a multiple of earnings and Los Angeles hasn’t had any earnings for years, public documents reveal.

Founded by David R. Brown in 1960, Los Angeles has been the only survivor among a host of efforts to launch city magazines in L.A. Such titles as New West, LA Style and, most recently, Buzz, have all folded after a few years in operation and millions of dollars in losses.

Nearly every major metropolitan area has a regional glossy publication. In the mid-1980s, many were printing issues of 300 to 400 pages. But dozens of them folded around the country in the early 1990s. Many of the survivors have been making a comeback in recent years, particularly those in magazine-hungry cities like New York, Chicago and Washington.

Los Angeles experienced all those ups and downs only more so. It went from being the king of city magazines 15 years ago to being among the most troubled in the country.

It’s especially difficult to run a city magazine in L.A. because the town’s most interesting industry, Hollywood, is covered by hundreds of other publications. Further, Angelenos simply don’t seem to read magazines as much as people in other cities, perhaps because they tend to drive to work rather than taking public transit.

Even so, Los Angeles magazine was booming well into the mid-’80s. Baker said that when he sold out to ABC in 1986, Los Angeles had more ad pages than any other monthly magazine in the United States.

So why did he sell? “Because they gave me $10.2 million,” said Baker, who after serving for a few years as president of ABC’s publishing division left to form the Baker Newspaper Group in Beverly Hills, publisher of Beverly Hills 213 and Newport Beach 714.

But the combination of the recession and competition from upstart Buzz (which folded last year) proved devastating to Los Angeles in the early 1990s. Circulation and advertising plummeted and only financial support from ABC, and later Disney, kept it afloat, according to public documents and the Audit Bureau of Circulations.

Hoffman’s libel trial offered an unusual glimpse into the magazine’s finances. According to testimony during the trial, it lost more than $5 million in 1996, more than $4 million in 1997 and more than $3 million in 1998.

On paper, the magazine appears to be making a comeback. Ad sales as of July were up 26 percent this year and circulation averaged 183,373 for the six months ended June 30, a 12.5 percent increase over the like year-earlier period, according to the Audit Bureau of Circulations.

But there are some troubling facts behind those numbers.

When Buzz folded in April 1998, Los Angeles subsequently shelled out $5.3 million to buy the magazine’s name and subscriber list, according to sources a strikingly high price for a list of names.

The list allowed Los Angeles to send its own magazine to former Buzz subscribers, providing a significant circulation boost. For the six months ended Dec. 31, 1998, Los Angeles’ circulation averaged 221,302, according to the Audit Bureau. But since then, circulation has fallen by nearly 40,000 indicating that when their subscriptions lapsed, many former Buzz subscribers did not renew with Los Angeles.

Bottom line: Los Angeles paid $5.3 million for a list that, a year later, resulted in a net circulation gain of only 23,549 readers. That’s $225 a reader a trifle rich for a cost-conscious outfit like Disney.

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