Selling Off a Magazine Empire

By Janice Castro

CBS and Rupert Murdoch divide the Ziff-Davis publications

When William Ziff put 24 profitable periodicals on the block last month, there was no shortage of eager bidders. Ziff-Davis, a subsidiary of the Ziff Corp., was offering for sale twelve consumer magazines and twelve technical and travel publications, most of them leaders in their markets. Among those interested were the New York Times Co., Time Inc., Hearst, CBS and ABC. The massive sell-off was accomplished in just 24 hours last week, when CBS purchased the consumer group for $362.5 million, and Australian Press Lord Rupert Murdoch bought the trade publications for $350 million. Although the cash may have sounded middling by the standards of current Wall Street corporate transactions, the sales ranked as the biggest and second-biggest deals in magazine history. Said Smith, Barney Analyst Edward Atorino: "Ziff got much more for his magazines than anyone thought he would. In terms of getting the best price possible, Ziff is clearly the winner."

Many other industry observers felt, however, that the buyers were as fortunate as the seller. Since the Ziff magazines are among the most lucrative in publishing (each of the two groups had annual profits of some $32 million last year), the impact of the acquisitions will be dramatic for both purchasers.

For CBS, the Ziff publications (Backpacker, Boating, Car and Driver, Cycle, Flying, Modern Bride, Popular Photography, Skiing, Skiing Trade News, Stereo Review, The Runner and Yachting) are a windfall. In one stroke, CBS added a dozen established moneymakers with a combined circulation of an estimated 4.7 million to its publishing operation. The company already owned eleven titles, including the Sunday newspaper supplement Family Weekly (circ. 13 million), Woman's Day (circ. 6.9 million), Field & Stream (circ. 2 million) and Mechanix Illustrated (circ. 1.6 million). Ziff called CBS "a great new home" for his magazines. A delighted CBS Chairman Thomas Wyman, who helped engineer the deal, described it as "a rare opportunity to acquire a very successful, well-managed business."

One immediate advantage of the purchase is that CBS will be able to offer advertisers more enticing combinations of readers. A common practice in advertising is to buy space in a number of a publisher's magazines. The advertising rate is lower than it would be if space were bought in one publication at a time, the advertiser reaches a broader audience with similar interests, and the publisher is able to use the range of his titles to increase ad pages across the board. Some areas of overlap at CBS resulted from the acquisition. Ziffs Cycle and CBS's Cycle World, for instance, are the two leading motorcycle magazines; Ziffs Car and Driver appeals to many of the same readers as CBS's Road & Track; Ziffs Stereo Review and CBS's Audio are rivals, as are Popular Photography (Ziff) and American Photographer (CBS). Nevertheless, CBS said none of these publications would be dropped. The move to beef up the CBS publishing division follows the company's recent decision to shut down such video ventures as a cultural cable network, a videodisk operation and a direct satellite broadcast operation that suffered estimated aggregate losses of $100 million over three years.

Rupert Murdoch's purchase represents a great leap forward for his fledgling magazine interests. News Corp., Murdoch's $1.6 billion Australia-based publishing empire, is dominated by a string of newspapers that now extends across three continents and includes the Times of London, the Boston Herald, the New York Post and the Chicago Sun-Times, which was acquired last year for $100 million. With the exception of the Times, Murdoch's brand of journalism is frequently pugnacious, sensational and strident.

Until now, Murdoch's only nondailies in the U.S. were the trendy once-a-week New York (circ. 422,819), the monthly New Woman (1.3 million), and two weekly tabloids, the gossipy Star (3.8 million) and New York City's Village Voice (160,929). His new venture into the magazine business brings him narrow-focus journals such as Travel Weekly, The Official Hotel & Resort Guide, Aerospace Daily and Business and Commercial Aviation.

The move probably presages even more expansion for the acquisition-minded Murdoch. Last winter Murdoch tried to buy almost half of Warner Communications, the entertainment conglomerate. Though unsuccessful, he scored a hefty profit of $41 million when Warner bought back his shares at a premium.

"I was impressed with the publications' editorial excellence," said Murdoch about the latest entries in his fold. "This is a major strategic investment for our company." Said Ziff of Murdoch: "We are of one mind on how this business should be continued -- with the high publishing standards and the independence that have built the publications to their present pre-eminence."

Like CBS's Wyman, Murdoch emphasized his intention to make few changes in his new properties. But if he sticks to his word, that will be a departure for a controversial owner who has never hesitated in the past to override his editors or even write the headlines for some of his newspapers. As Murdoch was closing his deal last week, an editor at one of CBS's new magazines expressed relief that Murdoch had not bought the Ziff consumer division. Said she: "This is more of a merger than a take over. You assume that when a company like CBS makes this kind of commitment, it is buying the management techniques that have been so successful."

There was much speculation but no convincing answers as to why Ziff, 53, wanted to jettison the roster of magazines he had spent a lifetime building. Last year the publicity-shy former philosophy student sold off his six television stations for $100 million. As the owner of a privately held concern, Ziff is neither obliged nor inclined to explain his decision. Ziff still owns eleven computer magazines (PC, Creative Computing, Computers & Electronics), a computer business and some data services. Some industry insiders say that Ziff simply lost interest in his older publications. Other sources attribute the sales to what they call his failing health. Ziff would only say, "The reasons for this decision are personal ones."

Whatever his motives, Ziff tripled his net worth to an estimated $850 million last week. By spinning off the magazines as two complex groups instead of disposing of them one at a time, Ziff ensured that they would be transferred with their editors and staffs largely intact. This benign consideration is in character for the publisher, who once described himself as a "corporate socialist."

As Ziff explained his feelings about those who worked for him: "Even the dear old bottom line can normally best be served by having people who have other purposes than the bottom line. You have to enjoy what you are doing." In his case, an extra $712.5 million should make that considerably easier.

--By Janice Castro. Reported by Raji Samghabadi/New York

With reporting by Raji Samghabadi