Diamandis Unfazed by Market Upheaval : No Anonymity for Owner of CBS Magazines

“There’s a lot to be said for anonymity,” said Peter Diamandis, chairman of the newly named Diamandis Communications Inc.

But Diamandis, who led the recent $650-million management buyout of CBS’ magazine group, is now anything but anonymous. Apart from operating the country’s largest specialty magazine publisher, his bid to make a success of the buyout that created DCI is sure to be closely watched.

That is even more the case now that the turmoil of the financial markets has caused other big buyout deals to unravel and cast doubt on the outlook for consumer spending.

“I’m not daunted in any shape or form. We’ll accomplish exactly what we set out to do,” Diamandis said in an interview.

Major Work Ahead

The 55-year-old publisher has already accomplished one notable thing--the rescue of CBS Magazines from its own relative anonymity within the broadcasting giant. Diamandis, who took over as the unit’s president in 1985, spent much of his time trying to convince CBS to take it more seriously and was instrumental in the acquisition of 12 titles from Ziff-Davis Publishing.

They became part of a 21-magazine stable that included Woman’s Day, Car and Driver, Popular Photography and Stereo Review.

When Laurence A. Tisch took over as chief executive last year, it became clear that the magazine group “was going to be sold by CBS at some point in time,” Diamandis said. Backed by the investment firm of Prudential-Bache, he and his management team made the winning bid in July--the largest U.S. magazine company acquisition ever.

Diamandis is enthusiastic about coming out from under the CBS umbrella. “We don’t have to report to anybody,” he said. “We can make decisions in five minutes. Many big companies miss opportunities because they can’t move fast enough.”

Large Buyout Debt

James Kobak, a magazine consultant based in Darien, Conn., said DCI should also benefit on the bottom line. “There’s a lot of tightening up to be done because they won’t need to carry corporate overhead,” he said.

Some industry analysts have said DCI faces a very delicate balancing act on the bottom line as it attempts to cope with the large debt from the buyout. In July, analysts estimated annual debt service at about $70 million, while the company forecast 1988 cash flow at $65 million.

Diamandis took a big chunk out of the debt load in October when he agreed to sell four titles to Los Angeles-based Times Mirror for $167.5 million. He said he also plans other divestments which will raise $80 million to $100 million within the next month.

The restructuring will leave DCI with debt service of $42 million, Diamandis said, and cash flow of about $55 million.

Of course, a severe economic downturn could make a mess of such arithmetic. But Diamandis is confident in his financial backers. “Prudential-Bache is in for the long haul. If we get into a serious recession, we can weather the storm,” he said.

Knows His Readers

There may be some more financial backing on the way. Diamandis said several foreign publishers had approached him with a view to making an equity investment in DCI. His own career has included a stint with West German publishing giant Gruner and Jahr.

Diamandis also is confident that DCI’s focus on special interest publications is the right one for growth in the magazine business.

“It’s not cost per thousand, but cost per thousand boat buyers,” he said, referring to the traditional advertising benchmark. “Advertisers want to rifle their message to qualified buyers. Specialty magazines identify those buyers.”

John Gray, director of media planning at the J. Walter Thompson advertising agency, agrees. “Clearly the trend has been toward growth of special interest publications and it should continue for the foreseeable future,” he said.

Diamandis intends to back up his strategy with a policy of “contained circulation,” whereby cover prices are raised to eliminate “peripheral readers.” “We only want the reader who is genuinely interested.”

He added that DCI also should be shielded from an economic slump because many of its titles, such as Flying and Stereo Review, are leaders in their fields. “Advertisers always go for quality and the No. 1 audience,” he said.

“He has some really superior titles,” said consultant Kobak, although he noted that Woman’s Day--DCI’s largest title which faces fierce competition in its niche--remained a money-losing problem.

Despite his optimistic outlook, Diamandis admitted that the past few months had not been easy. “I’ll be very happy when the restructuring is over. It’s been another trauma for the troops,” he said.

But, he added, “I’m a relaxed human being.”

Diamandis’ big test may be whether he can stay that way now that he is no longer anonymous.