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NEW YORK — It was a few minutes before 10 p.m. on Monday night and Hearst Magazines top executive David Carey had something to say about his company, a comment his rivals would try to deny but probably fear is true.
“The current environment favors the Hearst way of doing things,” he said.
While other magazine publishers in town are preaching to their colleagues the importance of practical management and sensible spending, Hearst wrote the book on such an approach years ago. By the time Hearst finishes acquiring Hachette from Lagardère, the company will have spent more than $1 billion in a little under a year while the rest of the magazine industry is still recovering from the Great Recession.
Hearst has long been derided as playing second fiddle to the Condé Nasts of the world for being the home of dull brands, slim staffs and a no-frills attitude — in other words, hardly the dream of any youngster aspiring to get into the glamorous, free-spending world of glossy magazines. Now its long-standing corporate ethos is looking more and more enviable in a topsy-turvy world.
The magazine division’s culture was set by Frank Bennack, the plump, mild-mannered Fezziwig-like ceo at parent Hearst Corp. who returned to that position in 2008 after ostensibly retiring from a 23-year run in the role. Bennack hired current New York City schools chief Cathie Black to run the magazine division in 1995, and in June, poached Carey from Condé Nast to replace Black as president of the magazine division.
It was the 77-year-old Bennack’s tight-fisted management style that allowed the company to withstand the brutality better than its rivals in the last two years (Condé Nast has shuttered six magazines; Hearst hasn’t closed any). And now that there appear to be some signs of life in the beleaguered publishing world, Bennack’s parsimony has positioned Hearst to make a blockbuster deal. The company is on the verge of spending $700 million to $800 million to pick up the Hachette International portfolio from Lagardère that includes Elle, Elle Decor, Woman’s Day and Car and Driver (Lagardère would keep the French titles). The deal will make Hearst the second-largest magazine company in the U.S. in terms of circulation, audience and advertising, surpassing Condé Nast. Adding those titles will boost the company’s market share among major publishers to 23 percent from 15 percent, which will be a smidgen behind Time Inc.’s 24 percent and well above Condé Nast’s 17 percent, according to data from the Publishers Information Bureau. They’ll get these titles after a year in which ad pages at Hearst’s monthlies grew by 9.5 percent, outpacing every other publisher in town (although it’s not clear how much Hearst titles discounted — and Hearst still trails total number of ad pages at Condé Nast and Time Inc.). And for a company that has bread-winning yet aggressively unsexy titles like Good Housekeeping, it will now gain a magazine — Elle — that can compete with other rivals’ marquee brand names (another caveat: One source said, however, that Hearst’s challenge with Elle will be to bring its average ad page rate up to that of Harper’s Bazaar, which itself charges less than Vogue).
Nor is this the only deal Hearst has been making lately. In its own quiet way, the publisher has been making small, Web-related acquisitions over the last few years. In June, Hearst bought iCrossing, a digital marketing service agency, for $325 million, and on Monday it revealed a $3 million investment into VillageVines.
Further proof that while other companies are contracting or changing their philosophies on the fly, Hearst is expanding.
“We had to course-correct far less than anyone else,” said Carey, describing his new home. “We’ve built our company in a very sensible way in both flush times and more challenged times. Take my experience with Smart Money way back when.” He was the founding publisher in 1992.
“This was a product that had eight employees at the very beginning and we shared one open bullpen with one open office. Whenever Norm Pearlstine, [who was at Dow Jones] when he was still involved, would come, [editor] Steve Swartz, who had the office, would have to leave so Norm could use it for a while. This is the mode the company has always operated in. It operated that way when I was at the company in ’95 and it operated like that, from what I understand, in 2006 and 2007.”
At that time, Carey was founding publisher of the high-gloss, high-spending Condé Nast Portfolio, which shuttered two years after launch.