David Pecker

NEW YORK — Whatever else you want to say about David Pecker, you can’t fault him for lack of ambition. True, the company he heads, American Media Inc., is light-years from becoming the next Time Inc. or Hearst, but it’s also far...

NEW YORK — Whatever else you want to say about David Pecker, you can’t fault him for lack of ambition. True, the company he heads, American Media Inc., is light-years from becoming the next Time Inc. or Hearst, but it’s also far removed from the publisher of trashy tabloids it once was. That transformation owes much to AMI’s $350 million acquisition of Weider Publications, in November 2002, and even more to Pecker’s decision to hire Bonnie Fuller away from Us Weekly, where she had been editor in chief, and put her to work remaking the Star as a glossy celebrity title. That was a year ago. Pecker spoke recently with WWD about where AMI (which also publishes the National Enquirer) has come since then and what it still needs to accomplish.

WWD: Across the media industry, all eyes are on Bonnie Fuller and the Star. Give us your chairman’s-eye-view assessment of the relaunch so far.

David Pecker: When I came to American Media six years ago, Star was selling 1.3 million copies on the newsstand alone. I watched it go all the way down to 800,000. It was like a hot knife goes through butter. When Bonnie came in, to her credit, she arrested the circulation erosion right away. From April 5 [when the magazine’s redesign went nationwide] to today, the circulation of the magazine is up 5.2 percent in unit sales. This is the first quarter since I’ve been here that unit sales have been up, and that’s with an increase in cover price. I’m selling about 938,000 copies on the newsstand and we have 300,000 subscriptions. Before, I was getting maybe 1,000 subscriptions a month. Now we’re getting 6,000 subscriptions a week.
Before, there was a 50 percent cross-readership between the Enquirer and the Star. Today, it’s less than 10 percent, and there’s a 30 percent cross-readership between the Star and Us Weekly. Sixty-five percent of our new audience is aged 18 to 44. So, clearly, Bonnie has made a tremendous change in moving the magazine into the celebrity journalism category.
Now I’m able to go ahead and sell advertising, which I never was able to do successfully before. As a tabloid, we were doing about $115,000 a week of advertising. Today, we’re averaging close to $300,000 a week. I’m hoping that a year from now, we’ll be at $1 million a week. I look at my competitors and I think that’s very doable.

This story first appeared in the July 23, 2004 issue of WWD. Subscribe Today.

WWD: Have you found your assumptions regarding how advertisers would take to the new Star overly optimistic?

D.P.: It’s a fair question. We started out with Colleen Wyse as the original publisher. She was here 16 weeks, and when she left in February, I basically missed the selling season. That set us back six or seven months, but it did give us time to gather a lot of independent research to support the change in our audience demography.
Starting in September or October, you will begin to see a lot of beauty advertising in the book. We’ve already got commitments from Gap beginning in October, and we have a lot of business from the automotive, packaged goods and entertainment categories that run starting in September. We’re seeing it build up weekly.

WWD: Star has consistently taken a more aggressive and sometimes negative approach to covering celebrities than Us Weekly or People. Does that make the magazine less attractive to advertisers?

D.P.: I think the advertisers will feel comfortable as they see what newsstand sales turn out to be. Unfortunately, the skeletons that the tabloids have had over the years come along with it [Star]. Every time it has a little bit more of an aggressive article, people are going to say, ‘Oh, it’s going back to being a tabloid.’ It’s going to take time. Bonnie’s staff has done a wonderful job building up relationships with p.r. representatives. The magazine never before had credentials to the Academy Awards, to the Emmys, to the Golden Globes. All of this is starting now.
But one thing the magazine stands for is we’re not going to just take what the publicist says. We would be shortchanging our constituency if we did that. For instance, when Mary-Kate Olsen went into the hospital, Us Weekly said it was anorexia; we said it was drugs. Obviously, to go out and say something like this, we wouldn’t do it unless we had our reporting sourced, polygraphed and buttoned up.

WWD: Polygraphed?

D.P.: Let’s put it this way: The Olsens have a billion-dollar business. If we go out and say it’s drugs, the last thing we want is to be sued.

WWD: Moving on from Star, Men’s Fitness has gone through two redesigns as part of your plan to position it as a direct competitor to Men’s Health. Have you been able to work out the problems there?

D.P.: We went from a newsstand of 90,000 in April, which was the last issue before the relaunch, to a newsstand of 145,000 in May and 150,000 for the June/July issue. From January to June of 2004 versus the prior year, the magazine is up in ad pages 22 percent, and we’re taking the rate base up from 600,000 to 650,000. I’m hoping that Men’s Fitness will be in the men’s market what Shape is in the women’s market.

WWD: You’ve also encountered setbacks in your efforts to launch a shelter title called Happy Home, including the poaching of its editor in chief, Sara Ruffin. What’s the status of that project?

D.P.: When Condé Nast hired basically the majority of the staff, I thought it would be foolish to go on and publish Happy Home, even though the first issue was done. With a new editor coming in, usually they have their own ideas. So I thought it would be best to postpone it until the first quarter of 2005 to give Bonnie a chance to look for a new editor. Also, now we’ll have a chance to see what Condé Nast is doing with their shelter magazine [Domino].

WWD: You’ve talked about taking American Media public. When will that happen, and what are the prerequisites?

D.P.: There’s no sunset, no exact time frame we have to go public by. I think we’re probably a couple years away. My investors, both Evercore and [Thomas H.] Lee, have told me I have a slush fund. If I want to do a billion-dollar acquisition of magazines, they will support me to do that. But if you have a currency of stock, it makes it a lot easier to do acquisitions. If you can pay in stock versus cash, there are tax benefits, there’s immediate accreted earnings, and I don’t want to put more debt on the balance sheet.

WWD: Speaking of acquisitions, what are your criteria for your next target?

D.P.: It will be a consumer magazine company. I will be looking for a market that is growing, which is unusual in the magazine industry. Take a look at the Weider titles. The health and fitness category has been averaging a compounded growth of anywhere between 10 and 12 percent a year over the last five years. I also want to make sure if we acquire a magazine that it’s either the number one or number two in its category. That’s important if we go through a recession — because I believe personally that there’s going to be a change in who’s president, and every time there’s a change, taxes are going to go up and interest rates are going to go up. And then I want to buy magazines with clean circulation.
But an acquisition is not a precondition for us to go public. Basically, it’s opportunistic. If we see that there’s an acquisition there, the partners will give the approval for up to a billion-dollar acquisition. We have plenty of cash. It’s just that right now there’s nothing out there.