American Media Inc.'s impending purchase of OK! has been a long time coming. Since the magazine launched in the U.S. five years ago, AMI chairman, CEO, and president David Pecker has watched it from the sidelines, first as a potential joint venture partner of OK! founder Richard Desmond and later as a bidder for its distribution. But Desmond always wanted to go it alone.
"Every year I’d try to bid on his distribution business," Pecker says. "He always spoke about independently growing the magazine.” Now, Pecker has finally gotten his chance to fully own the weekly magazine, which Desmond recently began shopping after sustaining heavy losses on it.
Pecker wouldn't discuss what he paid for OK!, but a banking source told Adweek that, based on what another bidder had offered, it was probably between $10 million and $15 million.
OK! has struggled to gain a foothold in a crowded celeb weekly market ever since Desmond imported it from the U.K. It reportedly lost its parent company Northern & Shell $25 million in 2010—close to a staggering $500,000 a week. Time Warner was rumored to be close to a deal to buy OK!, but when that reported deal fell apart, Desmond called up Pecker. With Pecker's longstanding knowledge of the newsstand and celebrity weekly markets and OK! itself, the acquisition came together quickly.
The British OK! is said to be highly profitable, but as a standalone title, its U.S. counterpart had trouble carving out an identity in a market already served by newsstand giant People, plus Wenner Media’s Us Weekly and Bauer’s In Touch and Life & Style, not to mention AMI’s titles. A revolving door of editors and publishers hasn't helped.
OK! also is challenged by a newsstand market that has been soft because of the recession and shifting shopping patterns that have resulted in fewer impulse purchases. OK! and other celeb weeklies have responded by trying to increase reliance on subscription sales, which provide a more reliable source of revenue.
But Pecker says that with its young audience, OK! will complement AMI's Star and National Enquirer. OK!’s median reader age is 29, the youngest in the category. With OK!, AMI’s share of celeb weekly unit sales will rise to 36 percent from 30 percent, he says. AMI also will be able to shed costs by combining OK!'s business functions with AMI's existing titles.
"When you take a look at the marketplace today, there’s $4 billion in newsstand magazines," Pecker says. "One out of every four magazines is a celebrity book. [OK!] is selling 800,000 [copies] a week. This is an audience we don’t have. You might say it’s a contrarian view, but to get bigger in a market that’s shrinking is a good thing.”
Pecker says AMI would operate OK! separately from his other celeb weeklies and keep its celebrity-friendly voice, which, along with its younger audience, differentiates it from AMI's other celeb weeklies that are better known for news and hard-hitting reporting. "It's absolutely critical," he said. "This is not a late-breaking celebrity magazine."
It wasn't long ago that Pecker was denying rumors that AMI itself was on the block. Since AMI emerged from bankruptcy this year, Pecker had positioned AMI as a company on the move and has made no secret of his interest in adding to its portfolio. He’s had his eye on Car and Driver and Road & Track, which just became part of Hearst, as well as Maxim, which would have fit with AMI’s Men’s Fitness and Playboy, for which AMI handles the business functions. But sale rumors have swirled in recent weeks.
The sale is something of a concession for Desmond, who got his start in the porn media business and who is said to have been relentlessly focused on establishing a foothold in the U.S., regardless of cost. He's said the rest of his holdings, which include a TV network and British newspapers and magazines, aren’t for sale.
As for Pecker, he says he's got other deals and activities in the works, including a forthcoming magazine.
“We have three big publishing service opportunities out that we’re talking to, and we’re planning on launching an entertainment magazine by the end of the year," he says. "I’m out in the field now doing research. It won’t be a celebrity weekly magazine—I’m not going to compete with myself—but it’ll be in that genre.”