In the morass of new and old media, a big media story has been breaking — or, rather, a story that would have once been a big media story. It’s not as big as it once would have been — and isn’t being played up the way it would have been even 5 years ago — because the subject of this story has gone from being a powerful media giant to more of a weakening relic from bygone big media glory days.
Readers’ Digest, an institution that carved a unique and venerable niche for itself for decades by offering painstakingly “condensed” versions of articles mostly from other publications, some solid original reporting, plus an array of family-friendly humor sections, jokes and blurbs, has filed for Chapter 11 bankruptcy protection. It underscores how the economic crisis pulled the rug from under an established media already reeling from a new media mix that offered fasters — and often cheaper or free – -content. All of this combined to make Readers’ Digest and its format increasingly irrelevant to many Americans, or at least seemingly under the high-profile media radar.
A Personal Note: My father the late Richard Gandelman was a printer who had a passion for his craft. And one of his biggest clients in his high quality color printing was Readers Digest. On two occasions he took me with him to the corporation’s sprawling offices in the appropriately named Pleasantville, NY. And Readers’ Digest was then everywhere — in doctors waiting rooms, homes, read by people on subways, popular on airplanes. It still has an impressive circulation, but its way down from its glory days — and its format has been outmoded by sites such as this: blogs.
The Washington Post catches this part of the Readers’ Digest story perfectly:
Reader’s Digest — the publication that grandmas everywhere used to love — was the original aggregator, the first blog, the pioneer of short-attention-span reading. How ironic, then, that it has been gnawed nearly to death, like everything else in the old media, by a new media that is doing what the fusty, family-friendly Digest started 87 years ago.
In one of those periodic shocks to nostalgists that seem to come all too often during this recession, Reader’s Digest’s owner announced Monday that it plans to file for bankruptcy protection within the next 30 days for its U.S. operations. The Digest will continue publication, but as a wounded bird.
Chief executive Mary Berner said she didn’t anticipate new layoffs, after a round of job cuts earlier this year. The financial reorganization is primarily designed to reduce the company’s debt by about 75 percent.
The proximate cause of trouble was a buyout launched by an outfit with a homey, Reader’s Digest-y name (Ripplewood Holdings) in 2007. Ripplewood borrowed the better part of $2.8 billion to cash out the Digest’s old shareholders. And you know what happens when you’re still carrying $2.2 billion of that debt in 2009, the era of ad-starved, circulation-shrunken periodicals.
Right. You end up as the subject of an article the Digest might have called “I Am Joe’s Chapter 11 Reorganization Plan.” Bottom line: Ripplewood will be moved aside and the banks will own the Digest.
Bloomberg puts the news into a media context, noting that Readers Digest isn’t the only one-time-media giant to be operating on the edge:
The company will use a 30-day grace period to delay a $27 million interest payment due today on its 9 percent notes maturing in 2017 to negotiate the final terms of the restructuring with its lenders.
Reader’s Digest will join publishers including Tribune Co. and the owner of the Philadelphia Inquirer in bankruptcy. Journal Register Co., the owner of 20 daily newspapers, emerged from bankruptcy protection last week, five months after seeking protection from creditors.
Reader’s Digest announced in January a plan to cut 8 percent of its 3,500 jobs, require U.S. workers to take five days of unpaid leave and suspend matching contributions to 401(k) retirement plans.
The company’s sales fell 1.4 percent to $2.2 billion in the fiscal year ended June 30, Chief Financial Officer Tom Williams said in an interview. The publisher has reduced annual operating expenses by $100 million over the last two years, he said.
U.S. circulation at Reader’s Digest plunged 14 percent last year to 8.31 million from 9.68 million, compared with a drop of less than 1 percent for the top 10 magazines, according to Magazine Publishers of America data.
And there are other significant aspects to this story, the Financial Times points out:
This week’s Chapter 11 filing by Reader’s Digest Association could hardly have come at a worse time for Ripplewood Holdings’ founder and chief executive Timothy Collins.
The collapse of the venerable magazine publisher , taken private for $2.8bn at the peak of the debt bubble in March 2007 by a consortium of heavyweight investors led by Ripplewood, comes just as Mr Collins faces an uphill struggle to raise his next fund. It also comes as RHJ International, the Belgian-listed holding company in which Mr Collins is the biggest shareholder and board member, nears a decisive stage of a politically sensitive auction to buy General Motors’ European arms Opel and Vauxhall. General Motors
Ripplewood declined to comment. But a person close to the New York-based firm described the bankruptcy filing of Reader’s Digest as “one of the most painful things I’ve ever been through”.
Mr Collins, who founded Ripplewood in 1995, invested $600m in Reader’s Digest with a group of equity investors including the J Rothschild Group, GoldenTree Asset Management, CV Star, GSO Capital Partners (a Blackstone fund), Merrill Lynch Capital and Magnetar Capital. All of that investment will now be wiped out as lenders take over.
The person close to Ripplewood pointed out that the deal – which had left Reader’s Digest with an untenable $2.2bn debt burden – accounted for as much as a fifth of Ripplewood’s $1.056bn second fund, Ripplewood Partners II, that it raised in 2001
The sad part about the Digest is that it served a large audience well and long. That may be why magazine publishers facing the shrinking subscribers that they have left cannot bring themselves to believe that many of the publications will die and die very soon. The Digest won’t make it much longer because its audience is too old. The content that it digests or runs is too easily available elsewhere on the internet—“the dos and don’ts of corporate culture”, “six healthy fish recipes”, and “8 medical myths”. The Digest was always quaint. It never had much of an edge. That was comforting to millions of people. It is not comforting enough for them to pay for the Digest in great numbers. Due to their age, they are also dying off.
The Digest is a precious part of the media founded in the first half of the 20th century that will not make it through the first decade of this one.
And indeed, that seems to be the case. Here in San Diego, my old alma mater employer, the San Diego Union Tribune, has cut ANOTHER 121 jobs…after laying off some 170 immediately after the paper changed ownership. The most common comment now heard when people talk about the paper now is: “It seems to be shrinking,” and it will as the staff decreases and the product…the content…decrease.
Reader’s Digest’s circulation is still nothing to sneeze at. But if you ask today’s high schooler “What is Readers’ Digest?” they say they don’t know since the number of homes that get is increasingly smaller, its reader demographic is increasingly older, and some of the readers are just, plain dying off. And with so much content on the internet and increasingly cheaper laptops a lot of it is old before it even reaches its readers’ hands.
It is indeed part of a major shake up — and 20 or even 5 years from now some publications will be history.
Joe Gandelman is a former fulltime journalist who freelanced in India, Spain, Bangladesh and Cypress writing for publications such as the Christian Science Monitor and Newsweek. He also did radio reports from Madrid for NPR’s All Things Considered. He has worked on two U.S. newspapers and quit the news biz in 1990 to go into entertainment. He also has written for The Week and several online publications, did a column for Cagle Cartoons Syndicate and has appeared on CNN.