NEW YORK — PlanetOut, the parent company of Out, The Out Traveler and The Advocate is facing a serious cash crunch that could seriously impact those titles by year’s end. According to PlanetOut’s most recent 10-Q filing, the company must raise $7 million by the end of next month and another $8 million by August, or face default on its current loans—which would allow its lender, Orix, to foreclose on its assets.
“Depending on the market value of our common stock and other factors, it may be difficult for us to meet the capital raising obligation,” PlanetOut stated in the filing. “Without additional financing, based on current operations, we expect that our available funds and anticipated cash flows from operations will be sufficient to meet our expected needs … through the middle of the third quarter of 2007.”
PlanetOut has hired investment bank Allen & Co. to explore financing and strategic options for the company, and has already put its adult entertainment business on the block. The company has no plans to divest any of its magazine titles at this point, said Bob Cohen, president of LPI Media, the division that publishes Out, The Out Traveler, The Advocate and HIV Plus, which all target gay and lesbian consumers.
Out is profitable and has undergone a well-received redesign under editor Aaron Hicklin. However, advertising has been soft since the second half of 2006, and page counts are down for the first half of this year. “There has been a pall in the automotive category and a lot of entertainment advertising has migrated to the Web,” explained Cohen.
Additionally, Joe Landry, former group publisher of LPI and a 14-year veteran of the company, left in March to become president and publisher of Black Book Media. LPI has not named a replacement yet, but is close to doing so, said Cohen.
Operating profits from PlanetOut’s publishing division fell to $435,000, from $1.4 million in the year-ago period, for the three months ended March 31. Operating profits sank 48 percent in the company’s online businesses, which include Gay.com, while its travel and events division, including RSVP cruises, posted a steep $1.7 million loss.
Despite the financial hurdles facing PlanetOut, Cohen expects its gay and lesbian consumer titles to remain intact. LPI is investing in a complete redesign of The Advocate by outside agency Pentagram, that will be unveiled for the titles 40th anniversary in September.