It’s the first real day of spring in New York City, and David Carey, the 50-year-old president of Hearst Magazines, is in a perpetual state of motion. He has just returned from the company’s “leadership conference” in Washington, D.C., and is leaving tomorrow for a quarterly meeting with its subsidiary in London. Even in this brief moment of rest, he’s on the edge of his seat.
From Carey’s corner office at the top of Hearst Tower—a 46-story architectural gem on Manhattan’s west side—he has an immediate view of the Time Warner building, just one block away and a few stories higher. “But keep in mind those are condos,” Carey rushes to point out, leaping to the window. “They just have the lower level. You can actually see Jeff Bewkes’ offices down below.”
Bewkes is the chairman and CEO of Time Warner, which owns Time Inc., the largest magazine publisher in the United States. For years, Time Inc. didn’t need to worry about Hearst, which was long a distant third—behind Condé Nast—in what often feels like a three-company industry. But things have changed. Hearst weathered the recession better than its competitors, and now it has started to outpace them. In March, it finalized a deal to buy 101 titles from French media group Lagardère. The purchase will bring Hearst’s market share among major publishers up to 23 percent from 15 percent, just short of Time’s 24 percent—but well above Condé’s 17 percent.
Hearst is now poised to become a world-class magazine publishing company—even the world leader. Carey knows that. But he also knows that making it happen depends on his ability to move not just Hearst but the entire industry through a period of rapid and uncertain change. “People feel like we have a lot of momentum,” he says, knocking on the glass table in his office as though it were wood. “But we know that we’ve got to keep it going. You don’t stop here; you have to expect more.”
For all of his optimism, Carey spends a lot of time knocking on glass.
Hearst Tower, which opened in 2006, blossoms out of a six-story structure that company patriarch William Randolph Hearst commissioned 80 years before. But when Carey joined the corporation in 1986, in a “very junior business development role” with Esquire, it was stuck in its competitors’ shadows.
When Hearst’s founding father died in 1951, he left behind a behemoth of a company, albeit one that had fallen into dire financial straits. Postmortem, the man who’d inspired Citizen Kane made things more complicated. In his will, Hearst stipulated that until all family members who were alive at the time of his death passed away, his heirs had to occupy five of the 13 seats on the company’s board. Managing Hearst, a task left to others (the structure of the trust essentially precluded family members from running the company), thus became primarily about keeping the family happy by ensuring that they received high dividends and indulging their personal whims.
So management turned what had been a high-profile media company into a low-profile, low-risk business, one that could generate a steady, stable flow of ad revenue for the Hearst family, even as it stagnated. The money came in, the glamour went away, and, in the showy world that is New York City publishing, Hearst Magazines became a forgettable ghetto. (Helen Gurley Brown’s Cosmopolitan and John Mack Carter’s Good Housekeeping were the two notable exceptions.)
Meanwhile, starting in 1979, S.I. Newhouse was turning his late father’s Condé Nast into a prestigious home for high-end luxury brands. He bought GQ from Esquire, Inc., in his first year; brought back Vanity Fair, dead since the Great Depression, in 1983; acquired The New Yorker for Condé parent Advance Publications in 1985; and, in 1988, brought in Anna Wintour to edit Vogue. In 1999, when Condé moved into its flashy new building at 4 Times Square, the people at frugal Hearst Magazines, stuck in an increasingly depressing six-story relic, could only watch with envy.
In 1995, Carey—then publisher of SmartMoney, a Hearst joint venture with Dow Jones—made a smart move: He jumped ship, joining Condé to oversee the relaunch of House & Garden. (Ever the shrewd politician, he now insists, “at Condé Nast I operated largely as a Hearst executive, in that I focused on business operations.”) Three years later, Newhouse named Carey publisher of The New Yorker. With Carey at the helm, the magazine more than doubled ad revenues and, for the first time in 18 years, became profitable.
Carey was then drafted to be the publisher of Condé Nast Portfolio, a glossy new business magazine launched in 2007 at a cost of $100 million. A victim of the recession and a muddled editorial strategy, it shuttered two years later. “What seemed to be a very attractive market, business journalism, soon proved to be the worst place imaginable,” Carey now says. Carey was then appointed group president of Wired, Golf Digest, and Golf World.
Though that job was somewhat vague—Condé ended up eliminating it when Carey left—many speculated that Carey was being positioned as the heir apparent to Condé CEO Chuck Townsend. “It was a nice comment from the press,” Carey says, “but I can’t really comment on if that was real or not real.” Either way, Townsend, now in his late 60s, wasn’t showing any sign of leaving.
So instead of waiting, Carey made another smart—if unexpected—move. Last June, Hearst CEO Frank Bennack Jr. invited Carey to take the reigns from then-president Cathie Black. He seized the opportunity and made a triumphant return to the company that he now says is the true industry leader.
On the Hearst Magazines website, Carey declares, “[T]he future of magazines will happen here first.” That kind of optimism has filtered down throughout the entire company.
“To realize that before long the Hearst magazine division could be the largest publisher of magazines in the world is exciting,” says David Granger, who left GQ in 1997 to become editor of Esquire, a once-venerable title that has largely languished since Hearst acquired it in 1986. “We’re on the verge here. Hearst has always had this image as a more under-the-radar company, and it’s exciting to be in a position where one of our defining characteristics going forward is going to be to lead the magazine industry.”
On New Year’s Day, Carey wrote a letter to employees outlining Hearst’s successes and rallying optimism for the future. “In a time when we have seen competitors falter, you have been steady, energetic, and courageous,” he wrote. The day before, Hearst had entered into exclusive negotiations with Lagardère. This capped off a year in which the corporation had acquired the digital marketing agency iCrossing, strengthening the magazine division’s access to online ad revenue. And then there was Food Network Magazine.
Even with the recession, the Portfolio episode would never have happened at Hearst, which was all about minimizing risk. The year after Portfolio launched, Hearst entered into a joint venture with Scripps, owner of the Food Network, to start Food Network Magazine, which has been a stunning success over its three years in business. (It tops Adweek’s 2011 Hot List.) The two companies are now trying to accomplish the same feat with HGTV Magazine, which they will test this year. Meanwhile, O, the Oprah Magazine—a joint venture between Hearst and Oprah Winfrey’s Harpo—rivals even Cosmopolitan and Good Housekeeping as a leading revenue generator for Hearst.
“You don’t own it all, but you minimize risk and aggregate different skills, and it’s been a key part of Hearst’s growth strategy,” Carey says of the joint ventures. “You get out to the end of the diving board, but you don’t have to jump all the way in until you know for sure that you’re seeing the right sort of metrics.”
The magazine division has also benefitted from its demographic, which is more mass market, middle America than Condé Nast’s. Hearst Magazines didn’t have to worry as much about luxury advertising during the recession nor as much about appealing to digitally minded readers. Finally, there was the parent company’s financial security, which had been helped by some fortuitous moves into television. In 1984, Hearst became a founding partner in the A&E and Lifetime networks. In 1991, it acquired 20 percent of ESPN for $170 million. By 2007, financial services company UBS put ESPN’s total value at $28 billion.
Carey has now defined Hearst as the industry’s pioneer. “Here’s a challenge I’d like to propose to you for 2011,” he wrote in the New Year’s letter. “Let’s dramatically dial up our entrepreneurial thinking. Let’s put a final stake in the heart of ‘playing it safe.’” In March, he secured the Lagardère deal and put Hearst on the offensive.
That offensive has three major elements. First, a continued emphasis on the “partnership mind-set.” That mind-set also means extending content across platforms, and Carey has recently hired a “head of content extensions” to give magazine content a longer shelf life—in other words, bringing it outside of print and into apps, television, games, guidebooks, and more. (On April 14, Hearst announced that Cosmo was partnering with Mosaic, the production company, to develop programming for film and television.)
The second is digital. Carey takes great pride in the fact that Hearst led the way with various e-reading devices before its competitors. “We’re open to these things, where I think others might have held back a little bit,” he says. Nevertheless, the magazine industry has yet to prove a tested formula for digital success. Tablets “feel very much like a kindred spirit to the core ink-on-paper business,” Carey says, but he also acknowledges that they have yet to save the industry.
Finally, there’s international. Once the Lagardère acquisition is complete, half of Hearst Magazines’ revenue will come from its international titles, which will include all editions of Elle magazine outside of France. “The U.S. business for most magazines is a moderate growth business,” Carey says. “The international business—especially in China and Russia—is a faster growth business. There’s a really strong consumer world being created in these countries, and we’re going to have a tremendous platform in each.”
When he sat down for his interview with Adweek, Carey had many of the new Russian titles laid out in his office. “I sent Remnick all of our Russian publications because David speaks Russian,” Carey says, referring to The New Yorker editor Carey worked with at Condé Nast. “I sent David a bunch of our magazines; he was very happy with that.”
Though the competitors have brought on new management and are making their own digital and international investments, Condé Nast is playing catch-up and Time Inc. is in a holding pattern. Hearst, meanwhile, is staking everything on progress and leadership, much of which will take place outside of what is traditionally considered magazine publishing.
“The only real risk is overextending ourselves,” Granger says, adding that he never thought editing a magazine would include selling furniture, a reference to Esquire’s new cross-platform foray into online retail. “There’s a point at which we’re going to have to say, ‘We can start a department store, but we can’t start an online university.’”
The definition of the industry itself is uncertain. That may be part of what makes Carey valuable. “Big media companies can’t be like big battleships; they have to feel nimble,” he says. “What is going to happen two years from now? The things that are going to be the rage are on someone’s drawing board, in someone’s garage in Menlo Park, but we don’t know what they are. The iPad didn’t exist a year ago. Constant change is going to be with us forever. The question is, what are the values you have as you navigate through all this? I think we have a fantastic set of values that”—he knocks on the glass again—“gives us a real advantage relative to others.”