The wave of layoffs currently sweeping through editorial staff belonging to Condé Nast is officially a classic restructuring measure intended to restore the group's financial health. Health made fragile due to the structural decline in sales of printed magazines and the advertising revenues that accompany these number sales - a decline not met by revenues from digital.
The group recorded a loss of 100 million dollars in 2018 according to the magazine "Les Échos". For many speculators, this restructuring is part of a logic of resale of all the titles making up the catalog of the American group. To put it more clearly, Condé Nast would be for sale, or at least, would be in the phase of strategic merger with another entity.
The buyers: Several of them will show their interest in the remarkable assets of the publishing group which owns many legendary titles from the American or world press such as The New Yorker, Vogue, Vanity Fair, GQ or Glamor. Condé Nast is owned by parent company Advance Publications currently in the hands of descendants of Samuel Irving Newhouse Sr. This media legend personally bought the Condé Nast group in 1959 for 5 million dollars in order, the legend tells us, to offer it to his wife Mitzi. A birthday present. He himself said: “She asked me to bring her a fashion magazine. I went out and brought Vogue back to him ”. The company's patriarch is 90-year-old Donald Newhouse. He passed the title of Co-President of Advance Publications to his son Steven Newhouse. Jonathan Newhouse, cousin of Donald and the late SI Newhouse Jr. (deceased in 2917 at the age of 89), had been running Condé Nast since 1990. In 2019, he officially broke away from daily obligations.
Advance also has, it is not uninteresting to point out, a stake in Charter Communications which is an American company providing cable television, access to very high speed Internet and other telephony services. It is this same company which announced in 2015 the acquisition of Time Warner Cable for 56 billion dollars. In 2017, as American consumers sought to reduce the cost of their television subscriptions, Charter Communications made an impression by launching a streaming service under 20 dollars. Advance Publications also took a controlling stake in Reddit. More interestingly, the Newhouse family owns a significant stake in Discovery, a media group founded in 1985 by John S. Hendricks. A world leader in the edition of thematic channels. Discovery Channel, the group's flagship channel, specializes in broadcasting high-end documentaries.
Apple declared its interest in Condé Nast
Condé Nast's business plan has been based for a century on the brilliance of its printed magazines. This business plan can no longer last in the century of streaming and on-demand content now provided by the tech giants. More than the traditional players in publishing, it is precisely these giants who will study with interest the manna of quality content that can be sold under the banner of the reputable brand name.
These contenders are currently outbidding on the one hand in actions consisting in producing attractive, even prestigious content, and on the other hand, in the spectacular purchase of catalog funds that can fulfill their content services on demand. In May 2021, Amazon bought the legendary Metro-Goldwyn-Mayer for 8.45 billion dollars to power Prime Video while Apple noisily offered the services of Steven Spielberg and Oprah Winfrey to preach the good word. Apple, with these prestigious ambassadors, was thus trying to catch up and impose its legitimacy in the production of content against Amazon and Netflix.
Apple has still not caught up with this delay, but Netflix and Amazon are ahead of the game. The Cupertino company, which wants to get rid of its dependence on iPhone sales (two thirds of its income), could be the ideal buyer, especially since it has, according to the sources of the Guardian, already expressed interest in Condé Nast before the Covid-19 crisis.
“Historically, Apple is a distribution platform, but they increasingly want to create their own content and this completely changes the situation,” observed Gene Munster, from the Loup Analyst firm, interviewed by “The Guardian” in 2018. Apple could spend 4.2 billion in 2022 in content, according to predictions by Gene Munster. Apple's interest in the press is well known: in April 2018, the firm bought the company Texture, which is a web service providing access to more than 200 magazines including "The Atlantic" or "Wired". Its market capitalization would certainly allow it to put a satisfactory offer on the negotiating table.
A merger between Condé Nast and WarnerMedia-Discovery?
The surprise, however, could come from another connection. That of the Newhouse family, through Discovery (currently run by David Zaslav) with the largest local and long-haul telephone service provider in the United States: AT&T. A global giant, based in Dallas, United States. The eleventh global company according to Forbes. A capitalization of 204,560,000,000 dollars, a turnover of 163.8 billion, a net profit of 13 billion dollars, or more than 10 billion euros. For more than 10 years, this titan has started its transition to new media due to the decline of traditional home telephony activities. In June 2018, AT&T completed the acquisition of Time Warner for 85 billion dollars. This mega-merger was to generate a new content offer in order to adapt to new consumer behavior. The main subsidiaries of Time Warner are HBO, CNN and Warner Bros Entertainment.
May 17, 2021: Twist, AT&T announces to divest itself from Time Warner (renamed WarnerMédia) to allow it to merge with Discovery (in which the Newhouse family has, let us remember, a significant stake through Advance Publications and Newhouse Broadcasting Corp.: 25 percent of both classes of shares, common and preferred, listed on the stock exchange). The merger of Time Warner and Discovery will give birth to a new company - dubbed WarnerMedia-Discovery - which should focus on streaming. WarnerMedia-Discovery plans to invest 20 billion dollars per year in content in HBO Max and Discovery + services in order to compete with, among others, Nexflix, Apple and Amazon. The goal: to reach 400 million subscribers worldwide. Subject of course to the approval of the regulatory authorities. The merger is expected to be completed in mid-2022. David Zaslav, 61, will head this new entity which will de facto be one of the largest media companies in the world. According to the New York Times, the Advance / Newhouse branch would represent 14 percent of this new titan, without having special privileges.
This twist comes precisely at the very moment when Condé Nast decides to radically change its face by dismissing the editorial teams and by pronouncing the end of the supplements, however profitable. The only survivors: the ambassadors, such as Anna Wintour or Edouard Enninful, also promoted to the head of a new advisory board. This timing has allowed speculators to speculate that a merger between WarnerMedia-Discovery and Condé Nast is underway. This merger, for the New York Post, would coincide with the strategy of Roger Lynch, current CEO since April 2019 of Condé Nast who wishes to develop multi-media channels (podcast, Youtube videos, documentaries and shows). Roger Lynch previously chaired Pandora, the largest music streaming service in the United States,
Peter Kreisky, investment advisor at Kreisky Media, quoted by the New York Post, approves of this merger: “Condé Nast needs wider dissemination. The new entity would have multiple flows. Condé Nast would fit beautifully and uniquely into this new portfolio. CNN could focus on its strength: news reporting while Condé Nast could develop the entertainment branch now relegated to Sunday evenings. "Always quoted by the New York Times, Thomas Maier, author of a book (" All that Glitters") devoted to the Newhouse empire, puts forward another reason justifying this session:" the founder of this empire, Samuel Irving Newhouse Sr. built the company by buying family newspapers that the owners wanted to part with. As the fourth generation emerges, many of the dynasty no longer want to work in the company but still want to keep earning money. The Newhouses could be at this point." A smart outing for the family.
This article was originally published on FashionUnited.FR, translated and edited to English by Kelly Press.
Photo credit: condenast.com