Variety has an iconic brand and a 100-year-plus history, but analysts and experts see a weak market for the struggling Hollywood trade.
Owner Reed Elsevier placed its final U.S. magazine on the block last Friday, and Variety’s slim profit margins, coupled with a lack of demand for business-to-business publications, has many scratching their heads.
Just who will buy this company?
“Nobody jumps out as a perfect fit here,” Ken Sonenclar, a managing director at media investment bank DeSilva & Phillips, told TheWrap.
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According to Sonenclar, Reed plans to release the publication’s financials on Wednesday, a possible indication that a line of buyers did not immediately materialize. Reed Elsevier did not respond to a request for comment.
“Bankers and clients generally don’t make announcements like this” except to "to stir the pot and help the process along,” Sonenclar said.
In the past, vanity bidders such as billionaire Haim Saban and former Disney CEO Michael Eisner expressed interest in buying Variety, but those financiers are either investing abroad or building digital properties.
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Observers who know the parent company say that Reed Elsevier is probably hoping the historic Variety brand will attract someone willing to overpay, like a Russian oligarch interested in attending the Oscars.
But failing that, business-to-business publishers such as Crain’s or Bloomberg might be the best fit. Competitors like The Hollywood Reporter parent Prometheus Global Media and Penske Media Corporation, owner of Deadline Hollywood, and possibly TheWrap itself, are plausible candidates.
To those watching the marketplace, the latter seem unlikely buyers: Prometheus has its hands full with a costly investment in the Reporter and Penske as well as TheWrap have shown little interest in print, which remains Variety's core business.
“I can’t believe a straight B2B will buy it,” Ava Seave, a principal at Quantum Media, told TheWrap. “The whole issue, even at Reed, is that it didn’t fit into the areas they covered.”
Anyone bidding on Variety will take on a diminished brand that has struggled to adapt to the 24/7 news cycle.
Variety remains a profitable enterprise, but the recession and greater online competition took their toll on the company's bottom line. As TheWrap has previously reported, the company is believed to pull in $45 million in annual revenue and $6 million to $7 million in profit.
That is about half of what the trade brought in at its height a decade ago.
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Investment executives estimate the company's value from a low of $20 million to $25 million to a peak closer to $75 million.
Higher estimates factor in added value for Variety's still significant brand. The uncertainty about Variety's value also mirrors the sentiment about its potential suitors.
“There are not a lot of big players who think, 'I’ve got to own it,'" a prominent financial executive told TheWrap.
In recent years, Variety has been challenged by digital upstarts such as TheWrap and Deadline, while old rival the Hollywood Reporter has been transformed into a glossy weekly.
Variety put up a paywall to try and protect its declining print advertising revenue. While the financial verdict on the paywall is still out, there is little doubt it has lessened the trade’s presence.
“Forty, fifty, sixty years ago, everyone was waiting breathlessly for a columnist to find that there was some kind of a deal cooking somewhere, and waited every morning with baited breath,” respected media analyst Hal Vogel told TheWrap. “Today it gets tweeted within milliseconds of it happening.”
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Another possibility: a data-focused company like SNL Kagan or IHS.
“SNL and IHS do industry databases and they could incorporate those databases into the magazine and make it more valuable to some readers,” Vogel said.
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But a lot of that depends on how big a part of Variety’s business data has become. Seave, for one, thought the prospect of SNL Kagan or IHS was ludicrous.
“A data company makes absolutely no sense at all,” she said. “They could always buy the data, but there is no reason for them to buy the company. Variety would sell the data for a price.”
Seave said the key is finding a buyer, like a Bloomberg or a Dow Jones, that could leverage existing infrastructure.
“Bloomberg is super smart, and they do care about media,” Seave said. “They can, in a really intelligent way, use the content and are really great with data.”
Investment executives say there is little doubt it will get sold. But any prospective buyer will need to install editorial leadership with clear ideas how to make the company more digitally savvy.
Among other early theories circulating were whether an investor might buy the property and re-install longtime editor Peter Bart. Bart, who was pushed up out of the editor’s role three years ago, spends most of his time hosting a television show. An individual close to Bart suggested that the editor, once fiercely resistant to the web, had some ideas about how to run Variety in the digital age.
“No matter who buys Variety the real question is what do you do after you have it,” Sonenclar said. “The buyer of Variety needs to be someone who is going to reinvent the business.”