Memo Pad: Magazine Publishers Cut Budgets Again… RDA’s Advisers…

After a much tougher-than-feared first quarter, almost every magazine publisher is going back in and cutting its 2009 budget again.

EVERYBODY’S DOING IT: After a much tougher-than-feared first quarter, almost every magazine publisher is going back in and cutting its 2009 budget again. (According to Media Industry Newsletter, advertising in beauty and fashion titles alone fell more than 20 percent during the first three months of the year.)

This week, Hachette Filipacchi Media and Rodale realigned their sales staffs and consolidated some positions in order to find efficiencies within their rosters, while Condé Nast (owner of WWD) and Hearst are also making further adjustments.

This story first appeared in the March 6, 2009 issue of WWD.  Subscribe Today.

At Condé Nast, insiders say all publishers have been asked to show how they might cut up to 10 percent from their overall budgets, although no specific targets have been set. This follows a company-wide mandate in November that required each title to trim 5 percent of its overhead and 5 percent from head count. Additionally, Condé Nast has instated a company-wide wage freeze and has suspended the tuition reimbursement benefit for employees.

To meet the 10 percent goal, most publishers are expected to spend less on events, travel and other areas. But observers speculate further layoffs could come in certain departments, including Condé Nast Media Group, which is not producing two of its biggest programs, Fashion Rocks and Movies Rocks, this year.

A Condé Nast spokeswoman declined comment, but chief executive officer Chuck Townsend sent a memo to employees Thursday. “Unavoidably, as the downturn extends, we have to make additional difficult decisions to manage costs and ensure our financial well-being,” he wrote. “These decisions involve all of us. We’ll all have to do more with less and accept that some of the benefits and resources that were available to us in robust economic times will have to be scaled back — and revisited when the economy and our business recover lost ground. The best course of action is for us to prudently and responsibly manage our business costs and expenses through these troubled waters, assuring us the opportunity to fully participate in the recovery that lies ahead.”

Meanwhile, over at Hearst, there has been talk of small staff reductions at a few titles, but insiders say the extent of any future cuts will be far from the “floor-by-floor” ones made last fall. “How we do business is always evolving, and that includes beefing up in some areas and streamlining in others. It’s all about being smart and managing your business efficiently,” a Hearst spokeswoman said. “Unlike many of our competitors, Hearst continues to hire and introduce new products, like Food Network Magazine.” One way the company has cut costs, according to several insiders, is not to provide employees with cell phones or PDAs. Instead, Hearst will ask staffers to purchase their own phones and give them a stipend toward the hardware, as well as a monthly allowance toward their bill.

— Stephanie D. Smith

RDA’S NEW ADVISERS: Earlier this week, it was reported Reader’s Digest Association had hired law firm Kirkland & Ellis to explore restructuring options, including a possible bankruptcy filing. On Thursday, Mary Berner, RDA’s president and chief executive officer, confirmed the move, but denied the publisher is mulling bankruptcy. In addition to Kirkland & Ellis, she said the company has hired Miller Buckfire to advise on a wide range of restructuring and financing issues. “They will assist the company in staying ahead of the problems in the market by exploring strategic initiatives, including (but not limited to) raising additional capital and easing our debt burden,” said Berner. She added second-quarter fiscal 2009 earnings were down versus last year, but RDA continues to meet its debt covenants and “in no way are we in default under our financing arrangements.” In a conference call to lenders last week, chief financial officer Tom Williams explained the company expects to achieve $50 million in additional second-half fiscal 2009 EBITDA from cost saving initiatives. “…We believe we are better positioned than most to appeal to customers during a steep recession,” Berner added.

And while the company is launching three magazines this year, it is closing two others: Backyard Living and Cooking for 2. Both titles were produced by teams and no positions will be eliminated as a result.

— Amy Wicks

MUSIC TO ITS EARS: LVMH Moët Hennessy Louis Vuitton said Thursday it has settled a lawsuit it brought against Bad Boy Records in which the luxury goods firm accused girl group Danity Kane of unauthorized use of its intellectual property. According to LVMH, it filed suit against the Sean Combs-founded record label, a division of Warner Music Group, in the District Court of Paris last August. LVMH said that as part of the settlement, Bad Boy agreed to remove visual references to Louis Vuitton trademarks in Danity Kane’s self-titled album and two videos. The company said Bad Boy agreed to revise the videos and album in future releases. LVMH did not release the financial terms of the deal. Warner Music Group did not comment on the settlement.

This is the second resolution LVMH has reached with a record label on intellectual property rights issues in recent months. Last August, Sony BMG Music Entertainment agreed to a similar deal and to pay the luxury company more than $150,000 for its use of LVMH designs in albums and videos by artists including Britney Spears, Ruben Studdard and Da Brat.

— Matthew Lynch

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