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What does a media giant do when it purchases a stake in a magazine for $40 million, the wisdom of which many in the industry question? Apparently, it sells it back to the original owner for a 650 percent profit.
That’s just what the Walt Disney Company is doing. It purchased a half stake in Us Weekly from Wenner Media in 2001 for $40 million and is turning around and selling it back for $300 million, according to The New York Times.
Jann Wenner, chairman of Wenner Media, had sought Disney as a partner to help the magazine pay for its transition from weekly to monthly, and the move was a pronounced success, doubling circulation to 1.75 million. Wenner says that Disney provided crucial financial, moral and public backing when “a lot of people questioned the whole thing.” Now, as celebrity magazine ad pages have been flat, some in the industry are again questioning the move, speculating that the celebrity magazine category may be starting to deflate.
However, Us Weekly’s advertising revenue jumped 29 percent in the first half of 2006, according to figures from the Publisher’s Information Bureau, writes the New York Daily News.
The Daily News’ owner, Mortimer B. Zuckerman, said that the growth of the magazine has been an extraordinary achievement for Wenner. “To generate this kind of value - all you can do is tip your chapeau,” he is quoted as saying.
As for whether Wenner paid too much for the magazine, Zuckerman pointed out that both buyer and seller were knowledgeable and one can’t assume the price was too high or too low.
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