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Sunday, Jun 4, 2023

High Times On Horizon?

A trio of historic publications owned by a Los Angeles-based private equity group are hoping for a revival through an expansion of branded events instead of traditional media revenue streams.

Cannabis lifestyle magazine High Times and gay, lesbian, bisexual and transgender-focused magazines Advocate and Out – both headquartered in Westwood – are moving toward more events and other changes focused on their brands. The shifts have come since West Los Angeles-based Oreva Capital got the titles in two separate deals last year.

Oreva founder and Chief Executive Adam Levin last month named magazine veteran Nathan Coyle as the first chief executive of newly named Pride Media Group. Coyle arrived on June 26 from a post as publisher of New York-based interior design quarterly publication Domino.

Hightimes Holding Corp., meanwhile, announced last month a variation of a public offering, and declared in a June 28 Securities and Exchange Commission filing that it foresees a 370 percent revenue leap over the next two years, with most of the increase coming from events.

Even observers optimistic about High Times future, such as cannabis industry consultant Evan Eneman of Ello Insights, called High Times’ self-projections “aggressive,” and noted legal restrictions on public cannabis use appear to be a roadblock to a rapid increase in events.

Levin nonetheless speaks exuberantly about his ability to capitalize on generations-old media brands with niche audiences – be it marijuana smokers or self-identified LGBT community members – which he believes mainstream society is increasingly adopting.

“We’re trying to improve on the institutions they’ve created.” Levin said.

Levin’s initial, mid-2000s ventures were with new media models, including mobile TV programming. He recently turned to older, niche media facing transition or outright turmoil.

Levin owned the intellectual property to “Girls Gone Wild,” which declared Chapter 11 bankruptcy prior to his stewardship.

Oreva last bought the debt of Penthouse Media Group, and then unloaded it through the bankruptcy sale of the company to Dream Media Corp.

High Times has not been in bankruptcy, although Levin said it was in distress when Oreva Capital paid $70 million for the company in July 2017. High Times finished last year with an operating loss of $13.4 million.

Levin moved the headquarters of the 44-year-old monthly, which has circulation of 236,000, to Los Angeles from New York last year. It now shares offices with the Advocate and Out.

Public listing on hold

The office move isn’t the only change under Levin, who named himself High Times chief executive.

Levin announced the company would go public by merging with Origo Acquisition Corp., a special purpose acquisition company that formed in 2014.

Nasdaq Inc. delisted Origo in February for breaking rules of a special purpose acquisition company, including not consummating a merger within three years of its initial public offering.

Levin sought to revive the merger last month, announcing it would be completed by third quarter’s end.

Levin also unveiled last month a Regulation A offering, an investment tool created under federal law in 2015 through which companies sell shares to accredited and unaccredited shareholders alike, and face reporting requirements whose stringency depends on how much money the company seeks to raise.

High Times wants to raise $15 million, according to Levin, selling shares at $11 each. A federal filing designed to solicit shareholder interest expressed the publication’s desire to build upon its brand, with additions including a digital media platform.

But High Times is mostly focused on a “world class events business.”

The filing projected that 69 percent of 2019 revenue would come from events. The publication would count on print media revenue – it didn’t distinguish between revenue from advertising sales and subscriptions – for four percent of 2019 revenue, according to projections.

The company wants to go from 14 to 21 events a year, leveraging the legalization of marijuana in California, other states, and other countries, including Canada.

High Times’ flagship event, the Cannabis Cup, feature various competitions including best marijuana strain or edible.

Other events would include concerts and cruises.

The filing projects revenue to zoom from $14.5 million in 2017 to $53.7 million in 2019. Levin’s outlook on operating income also is cheery, with $8.7 million projected next year – a $22.1 million swing from last year’s loss of $13.4 million.

The projection is unrealistic, said Alan Brochstein, an accountant at 420 Investor, who has analyzed the cannabis media industry.

“Right now the regulatory environment is much harsher than they think,” Brochstein said.

Event issues

The new event focus for High Times comes at an interesting junction in the push to legalize cannabis. Recreational marijuana legalization in California was accompanied with regulations that strictly limit public consumption and allow municipalities and other local government entities in the state to ban events outright.

In some ways, Brochstein said, public use in California was more permissive before legalization for recreational purposes, as state residents with a medical marijuana card were freer to publicly consume cannabis.

For example, recreational, outdoor consumption of cannabis is legal in only 10 California jurisdictions, and one in Los Angeles County: West Hollywood.

Even in those locales, Brochstein noted, High Times must seek local and county approval for an event, and cannot allow the sale or consumption of alcohol, a potential high-margin add-on sale at events.

Brochstein acknowledged that marijuana has become increasingly mainstream even with the heightened regulation on events, but said High Times’ appeal is limited to a “non-growing, stoner demographic.” He said other publications and websites have filled the space of covering marijuana from a health or political perspective.

“The general world doesn’t care about the Cannabis Cup,” Brochstein said.

Eneman of ELLO Insights is more optimistic, however.

“It comes down to execution,” he said. “It is a challenging regulatory framework, but they certainly have the platform to draw significant revenue.”

High Times could find new revenue thanks to a further loosening of marijuana laws, which might make it easier to forge deals with big corporations such as Lyft Inc., which provided coupons at recent Cannabis Cups, and Scotts Miracle-Grow Co., the lawn-care specialist that’s made the move into the marijuana fertilizer business.

Advocating change

Advocate and Out, the two titles of Pride Media Group, have so far kept a relatively low profile compared to High Times, and Levin declined to disclose the publication’s financials.

The Advocate was first published in 1967 in the Silver Lake neighborhood, and by the 1970s had become established as a nationally focused political and cultural publication. Out, meanwhile, formed in 1992 as a lifestyle magazine, and the Advocate purchased it in 2000. The publications each have circulation of about 200,000.

A Columbia Journalism Review article published before Oreva’s takeover last year included a claim by the Advocate that its online page views climbed 50 percent in the first quarter of 2017, partly due to fears readers had of the Donald Trump presidency rolling back LGBT rights.

Coyle and Levin would not confirm the page view spike, or give online readership numbers.

Coyle is a veteran executive at Creative Artists Agency, where he oversaw digital initiatives. He more recently led a revamp of Domino’s online presence before selling it in March to Multiple, a St. Louis-based company.

Coyle said he wants to “restructure the digital operation” of the Pride media properties, and sees events as a way to leverage “the institutional knowledge and expertise held within the company as it regards the LGBT audience.”

Pride Media was known as Here Media until Oreva took it over, and despite its current name has rarely held pride parades, festivals, or any other events.

Marquita Thomas, executive director of the Los Angeles Gay and Lesbian Chamber of Commerce, noted that the Advocate is a longtime chamber member, but has typically limited its involvement in community events to co-sponsorships.

Nonetheless, Levin is laser-focused on events in Los Angeles and across the country.

“Events this year will be 20 percent of our revenue,” Levin said of Pride media. “And in 2019, it will be 40 to 50 percent.”

Levin declined to say what these events would be, but said, “We’re taking over some legacy staples in the LGBT community.”

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