The Hollywood trade paper Variety has been acquired by Penske Media Corp. and its financial backer, hedge fund Third Point, for about $25 million, in a power shift for the world of show business and a transformation of the industry’s most famous news brand.
Santa Monica-based Penske already owns Deadline.com, the website that has in just six years become a dominant news source for show business professionals and, together with online competitor Wrap and a resurgent Hollywood Reporter, stolen much of the thunder that belonged to Variety for its 107-year history.
The fact that Penske, a digital media company headed by Chief Executive Jay Penske, won a nearly seven-month long auction held by Variety’s British owner Reed Elsevier signifies how dominant a force the Internet has become in Hollywood. While Variety competes online, its five-day-a-week daily edition and weekly magazine are no longer the must-reads in Hollywood that they once were.
In an interview, Penske said he believed Variety had faltered due to complacency, and that he intended to make it “absolutely fundamental and indispensable” to its readers in Hollywood.
He has not yet determined, however, what key changes he will make, including whether he will stop publishing either or both print editions. “Before we make any substantial changes, we need to spend more time with the current team,” he wrote in an e-mail. “We need more data.”
But he says Deadline and Variety will continue as separate and distinct entities, though some staffers may contribute to both.
“We see an incredible opportunity for future collaboration while remaining editorially independent,” he explained.
Combining a famous print brand with a growing digital competitor could prove potent, but Penske faces a serious challenge in Variety. Despite several rounds of layoffs, its financial status has rapidly deteriorated in the face of shrinking ad sales. The organization has a staff of about 120.
As recently as 2006, Variety earned a profit of about $33 million on $92 million of revenue, according to a knowledgeable person who requested anonymity because they were not authorized to disclose financial information. This year, it is on track to eke out a profit of about $6 million on $45 million in revenue.
“We wouldn’t be buying this business if we didn’t have a plan to correct the recent deterioration of both revenues and profit,” Penske said. “We are not buying Variety to gut the newsroom. We are buying the business to build it. Are there going to be changes? Yes. Do we want to reduce our dependency on print revenues? Yes. How quickly that can happen, we’ll know more in the coming months.”
The only immediate staffing change expected is the departure of Variety President Neil Stiles, who has overseen the sale.
Though Third Point, which is headed by Yahoo board member Daniel Loeb, funded the acquisition, Penske Media will oversee Variety and fold it into a portfolio it has built over the last several years that also includes consumer-focused entertainment sites TVLine and Movieline, celebrity news and fashion site HollywoodLife, and mobile gadget site BGR.
(Penske was previously working with private equity firm Shamrock Capital. While he praised Shamrock, he said Third Point’s long-term horizon and approach to the media business better matches his own.)
The approximately 120 employees in Variety’s mid-Wilshire office have been anxious about the future of their publication and their jobs during a drawn-out bidding process that included potential buyers such as billionaire Ron Burkle and National Enquirer owner Avenue Capital, according to several who were not authorized to speak publicly. Penske emerged as the leading contender only two weeks ago.
Deadline’s founder and editor-in-chief Nikki Finke will not be involved in running Variety. Penske acquired Deadine in 2009 and hired several reporters and editors to work with Finke.
“What Nikki has architected at Deadline is simply amazing,” Penske said. “To alter or change the chemistry of Deadline would be in our opinion a huge mistake.”
During its century-plus run, Variety has become the rare trade publication that, despite being read primarily by movie and television industry insiders, is well known to the general public. It’s perhaps most famous for clever rhyming headlines such as “Sticks Nix Hick Pix,” about people in rural areas rejecting movies about their own lives, and “Cybergeek Leaks Freak Pic Biz” for a story about piracy.
“Anyone who knows me knows I have a great reverence for things that stand the test of time,” Penske said. “Variety is a brand that the entire PMC organization respects and a publishing business that I have admired for most of my life.”
Daily Variety’s circulation as of March was nearly 28,000, while Variety’s was just over 30,000, according to research firm BPA Worldwide.
Variety.com had a little over 17,000 paying users (some of whom also subscribe to print editions). Because of its pay wall, the website’s traffic lags far behind its competitors. In August Variety.com had 320,000 unique visitors, according to ComScore, while HollywoodReporter.com and Deadline.com, which are both free to read, had 5.1 million and 2.4 million, respectively.