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WWDStyle issue 01/12/2011

NEW YORK — It was a few minutes before 10 p.m. on Monday night and Hearst Magazines top executive David Carey had something to say about his company, a comment his rivals would try to deny but probably fear is true.

“The current environment favors the Hearst way of doing things,” he said.

This story first appeared in the January 12, 2011 issue of WWD.  Subscribe Today.

While other magazine publishers in town are preaching to their colleagues the importance of practical management and sensible spending, Hearst wrote the book on such an approach years ago. By the time Hearst finishes acquiring Hachette from Lagardère, the company will have spent more than $1 billion in a little under a year while the rest of the magazine industry is still recovering from the Great Recession.

Hearst has long been derided as playing second fiddle to the Condé Nasts of the world for being the home of dull brands, slim staffs and a no-frills attitude — in other words, hardly the dream of any youngster aspiring to get into the glamorous, free-spending world of glossy magazines. Now its long-standing corporate ethos is looking more and more enviable in a topsy-turvy world.

The magazine division’s culture was set by Frank Bennack, the plump, mild-mannered Fezziwig-like ceo at parent Hearst Corp. who returned to that position in 2008 after ostensibly retiring from a 23-year run in the role. Bennack hired current New York City schools chief Cathie Black to run the magazine division in 1995, and in June, poached Carey from Condé Nast to replace Black as president of the magazine division.

It was the 77-year-old Bennack’s tight-fisted management style that allowed the company to withstand the brutality better than its rivals in the last two years (Condé Nast has shuttered six magazines; Hearst hasn’t closed any). And now that there appear to be some signs of life in the beleaguered publishing world, Bennack’s parsimony has positioned Hearst to make a blockbuster deal. The company is on the verge of spending $700 million to $800 million to pick up the Hachette International portfolio from Lagardère that includes Elle, Elle Decor, Woman’s Day and Car and Driver (Lagardère would keep the French titles). The deal will make Hearst the second-largest magazine company in the U.S. in terms of circulation, audience and advertising, surpassing Condé Nast. Adding those titles will boost the company’s market share among major publishers to 23 percent from 15 percent, which will be a smidgen behind Time Inc.’s 24 percent and well above Condé Nast’s 17 percent, according to data from the Publishers Information Bureau. They’ll get these titles after a year in which ad pages at Hearst’s monthlies grew by 9.5 percent, outpacing every other publisher in town (although it’s not clear how much Hearst titles discounted — and Hearst still trails total number of ad pages at Condé Nast and Time Inc.). And for a company that has bread-winning yet aggressively unsexy titles like Good Housekeeping, it will now gain a magazine — Elle — that can compete with other rivals’ marquee brand names (another caveat: One source said, however, that Hearst’s challenge with Elle will be to bring its average ad page rate up to that of Harper’s Bazaar, which itself charges less than Vogue).

Nor is this the only deal Hearst has been making lately. In its own quiet way, the publisher has been making small, Web-related acquisitions over the last few years. In June, Hearst bought iCrossing, a digital marketing service agency, for $325 million, and on Monday it revealed a $3 million investment into VillageVines.

Further proof that while other companies are contracting or changing their philosophies on the fly, Hearst is expanding.

“We had to course-correct far less than anyone else,” said Carey, describing his new home. “We’ve built our company in a very sensible way in both flush times and more challenged times. Take my experience with Smart Money way back when.” He was the founding publisher in 1992.

“This was a product that had eight employees at the very beginning and we shared one open bullpen with one open office. Whenever Norm Pearlstine, [who was at Dow Jones] when he was still involved, would come, [editor] Steve Swartz, who had the office, would have to leave so Norm could use it for a while. This is the mode the company has always operated in. It operated that way when I was at the company in ’95 and it operated like that, from what I understand, in 2006 and 2007.”

At that time, Carey was founding publisher of the high-gloss, high-spending Condé Nast Portfolio, which shuttered two years after launch.

In October 2008, Hearst set out its own project to create Food Network Magazine, one other publishing companies at the time held their nose to. But for Hearst, it was a coup, and only a couple of years after it launched, the title is the best-selling food magazine off the newsstand, the third best in selling ads, and its ad pages rose 78 percent in 2010. At a time when magazine executives are saying the words “revenue” and “bottom line” more often than talking about the magic of glossy magazines, Food Network Magazine is a property even its rivals would be proud to own.

It’s also a model that Hearst, having proven it successful, is ready to adopt again. WWD has learned the company will launch a magazine later this year in a joint venture with Scripps for an HGTV Magazine. It will be run the same way as Food Network: soft launch, lots of testing, cautious approach and, if it’s a hit, will be expanded.

The company has also embraced the world of reality TV in a way no other publisher has, with shows such as Marie Claire’s “Running in Heels” on the Style Network; “The Fashion Show,” which partners with Harper’s Bazaar on Bravo, and now it is close to snaring Elle, the magazine that essentially kicked off the genre with “Project Runway” (after a long legal battle, Hearst’s Marie Claire now works with the show).

Elle and creative director Joe Zee had a decent run more recently on MTV with “The City,” a spin-off of “The Hills.” And now Zee is getting a show of his own, “All on the Line,” on the Sundance Channel, which will make its debut in the spring. The show has been advertised as having Zee show a little tough love to struggling designers who need help salvaging their businesses.

“The world isn’t that siloed anymore,” a former executive at Condé Nast and Hearst said. “Will Oprah or Food Network ever be highbrow? No. But those are viable businesses.”

“A few years ago, when everyone made fun of us, and Condé was the big thing, there was a sense of why not me?” said a Hearst staffer. “Now there is a sense of optimism and that things will change.”

Hearst has had layoffs over the last few years, but they were not nearly as public or gut-wrenching as those at places like Time Inc., Condé Nast or elsewhere. In fact, the overwhelming sentiment at Hearst is how, despite some cuts, life feels relatively the same.

“I give Cathie credit for leading us through really tough times of recession,” said Ann Shoket, the editor in chief of Seventeen. “Those were crucial decisions that Cathie made to get us through tough times. Heads down. Tight budgets and staffs.…Was very well done there, well managed.”

Not that Condé Nast and Time Inc. are rolling over. Both have new senior management and both are stepping up their own investments in the Web world. While Time Inc. executives declined to comment, a Condé Nast spokeswoman said, “Condé Nast continues to be positioned for success, with the highest quality editorial products in print and digital — representing unique value to both our consumers and advertisers.”

Still, the long downtrodden feeling that used to permeate the hallways of Hearst as staffers would watch their competitors zoom around Manhattan in Town Cars and order takeaway from Balthazar appears to be diminishing. Hearst employees who spoke to WWD gushed about the recent citrus festival in the cafeteria at the Hearst Tower (“I bought two clementine oranges for 50 cents!” said one) and the recent video campaigns in the elevator that feature editors from Cosmopolitan and Redbook (“It’s so nice! It means the company likes us and is really nice!” said yet another).

People are definitely looking differently at Hearst than they used to,” said one former Condé Nast and Hearst executive. “I don’t think Hearst has felt the sea change in corporate culture. It’s always run very efficiently and this is the Hearst that they’re used to. If anything, I think there’s a great sense of energy because there’s new management there.”

“After David got here I definitely received more résumés from people at Condé Nast and rival titles,” said Joanna Coles, the editor in chief of Marie Claire. “I do think the building helps. Such a steeple on the landscape of New York. And an expression of Hearst power.”

Hearst…Power? It is a topsy-turvy media world indeed.

Take the Elle deal: Observers might interpret it as a vanity play by Hearst — a move, in the Rodney Dangerfield method, “to get some respect.” Not so, Hearst executives insist. Sure, it will create better group-buy opportunities given the bundling of Elle, Marie Claire and Harper’s Bazaar. But Hearst wants Elle for a much more important reason: the rights to a portion of its 43 total international editions. That’s where the big revenues are. It’s a numbers game and, for Hearst — and, slowly, the rest of the industry — that’s all that matters these days.

Carey sums it up: “For us, prestige is a business with a healthy bottom line.”


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