Why Is AMI's Pecker So Optimistic?

Tabloid publisher American Media Inc., struggling to pay its crushing debt, has announced it would seek bankruptcy protection. So why does David Pecker, known to some in the industry as “the Teflon David” for his ability to shake off business troubles, sound so optimistic?Pecker, who remains intact as the company’s chairman, president and CEO, rosily predicted that the company’s restructuring would leave it stronger and healthier, with no impact on its operations. As for that, AMI, like all publishers, has been socked by the ad recession. But its cash cows, the supermarket tabloids, have exposed it to the weak newsstand market, too. Star shed 18 percent of its circulation in the first half of this year (having already cut its circulation to 925,000, below the 1 million level seen as critical to many advertising buys, from 1.5 million over three years). The Enquirer, meanwhile, was down 15 percent in the first half. While Star has burnished its image, attracting more blue-chip advertisers, it still carries baggage from the past. “The celebrity rags, they were always second-tier,” said an analyst who has covered AMI. “Demographically, they’re on the short end of a long-term stick.” Pushing newsstand prices up would be risky, as both are already at the high end. Meanwhile, AMI has been late to the digital game; it’s just now testing the iPad waters, launching a digital version of Star via digital publisher Zinio’s network. It’s also tried to grow revenue outside its print magazines by pitching itself as a management service provider to other publishers, as it did with Playboy, but with modest success. As Hal Diamond, analyst at Standard & Poor’s (which rated AMI a “D” following numerous interest payment defaults) put it, “We’re concerned about the secular declining circulation and the competitive nature of advertising. Their digital strategy has been slow. In the past they were able to increase cover price, but they’re pushing a level where it’s getting fairly expensive.” And while the Playboy deal delivered some benefits, he said, “they need a lot more of them.”As for AMI’s Teflon boss, time will tell how long he can shake off AMI’s troubles.

Performance Marketing

Why Is AMI's Pecker So Optimistic?

Lucia Moses

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Lucia Moses