Disney Returns to Publishing With Stake in US

Walt Disney Co., which dumped the majority of its magazine business 17 months ago, has taken a step back into publishing by purchasing a half-stake in entertainment magazine US Weekly.

As part of the deal, the unprofitable title will be spun off from Wenner Media Inc., which also owns Rolling Stone and Men’s Journal. US Weekly will be folded into a new company co-owned by Disney.

Burbank-based Disney says it will promote the magazine’s content and its writers in US Weekly-branded segments on television shows on the ABC network, which it also owns.

Wenner will continue to control the magazine’s editorial content, and a spokesman said it will retain its independence and not display favoritism toward Disney films or programs.

Terms of the deal were not disclosed.

Analysts said US Weekly provides Disney a chance to control a media outlet catering to consumers hungry for news about celebrities and entertainment. It also opens

US Weekly’s subscriber list, allowing Disney to directly market to likely customers.

“Why did [Disney] come around to this? They finally realized this is an investment in a tactical marketing tool,” said Gene DeWitt, chairman of Optimedia, which places advertising for BMW and British Airways. “This doesn’t say they’re in the magazine business. This says they need every promotional tool they can find.”

Wenner Chairman Jann Wenner said he has poured about $25 million into US since announcing in late 1999 that he would transform it from a monthly to a weekly magazine. Started in 1977, US published every other week until 1991, when it went monthly.

Wenner had been searching for a financial partner to share the risk ever since, and said he had rejected offers from several companies that didn’t offer the promotional opportunities Disney did.

Disney itself, he said, had declined a chance to invest in the magazine because “they felt they weren’t in the magazine start-up business, and [were] not certain what their magazine strategy was.”

Disney sold the fashion magazine house Fairchild Publications to Advance Publications Inc. in 1999 for $650 million (after aborting plans to sell the unit two years earlier). It then sold Los Angeles magazine to Emmis Communications Corp. for a reported $25 million.

Disney kept some niche titles, including ESPN The Magazine and Discover, as well as Talk, the general-interest Hollywood glossy which it co-owns through the Miramax film studio.

Wenner and Talk editor Tina Brown said US wouldn’t eat away Talk’s readership because the two publications are targeted to different audiences.

Disney Chairman Michael Eisner said the company was drawn to US Weekly’s young audience and national reach. “This was the one [magazine] that combined Jann Wenner, availability for investment and potential for the future.”

But in purchasing a stake in US, Disney is agreeing to underwrite a steep uphill fight. US claims a circulation of 828,000 for the six months ended Dec. 31, down 17% from a year earlier. Newsstand sales alone were down 38%.

Its chief competitors, Entertainment Weekly (circulation 1.5 million) and People (3.6 million), both owned by Disney rival AOL Time Warner, saw slight circulation increases during the same period.