BrandArena: Foreign Buyers Eyeing Forbes Magazine, a Chronicler of the World’s Wealthiest

Tuesday 4 March 2014

Foreign Buyers Eyeing Forbes Magazine, a Chronicler of the World’s Wealthiest

Growing up in the Midwest, my idea of rich was my dentist, who lived a few blocks away and had a split-level that was bigger than the rest of ours and a Cadillac in the driveway. Then I saw a copy of Forbes in his office and realized there was a different sort of wealth, a gossamer existence beyond my wildest imaginings.

Fast-forward a few decades and I ended up covering publishing in New York during the unwinding of the dot-com boom in 2001. Forbes was still chronicling the new titans, putting out a magazine every other week stuffed with heroic stories and lucrative advertising. 

Although I was taught to suspect the rich as a young man, I was not immune to the blandishments of wealth. So when I was invited to a party on the Highlander, the Forbes yacht, I practically skipped past the hired bagpipers at Chelsea Piers in Manhattan and hopped aboard. Steve and Timothy Forbes, the sons of Malcolm who were charged with running Forbes, hosted a floating crowd of journalists, advertisers and executives as we feasted on lush hors d’oeuvres and remarkable bottles of Scotch. 

Midtown glimmered in the dusk as we motored up the Hudson River and word came that I, along with Keith Kelly of The New York Post, were about to get a ride on a helicopter. Did I mention the yacht had a helicopter? Soaring over the Statue of Liberty, Midtown and most remarkably, the twin towers, it was, undoubtedly, one of the greatest nights of my life.

It was Sept. 10, 2001.

All good things come to an end, even for the rich, and sometime this month, Forbes will probably pass out of family control and into the hands of a foreign owner. There were reports that Fosun International, a Chinese conglomerate, would buy the magazine at a price of about $250 million, but people close to the deal, who spoke on the condition that they not be named during active negotiations, said that Fosun was not the likely buyer and that the stated price was low. Other foreign buyers are in the mix: Singapore’s Spice Global Investments has been among those mentioned, as has Germany’s Axel Springer S.E. Still, regardless of the specifics, sometime this month a magazine that was a once-lustrous emblem of American greatness, of capitalism in full cry, will most likely be sold for small money to a foreign buyer.
The Forbes family had hoped to receive as much as $400 million to $500 million for the magazine and website, and it is not hard to see why. In 2006, it sold a minority stake to the private equity firm Elevation Partners for $264 million, and Elevation, even after significant write-downs, has a preferred position, which means that at the low end of the sales range, not much would be left for the family. (That may be why some of the deals floated in the news media suggest that the family will maintain a minority stake after a sale.)

According to Ken Doctor, a news media analyst who has seen the sale-offering document, the high price was based on unrealistically rosy assumptions about costs and advertising revenue. And Forbes’s determination to operate a free website while competitors are increasingly relying on digital subscription revenue seems risky. The lack of a clear way forward may be partly why Time Inc. and other American news media businesses passed on the company after reviewing its books last year. (It’s worth recalling that Businessweek, which was hemorrhaging money, sold for about $5 million in 2009.)

Forbes has always been a robust international brand, but who would have predicted that a magazine led by Steve Forbes, a man who ran for president on a platform based on the magical power of American capitalism, would be sold to a foreign company? It is less ironic than it is telling, a reminder that the America celebrated by Forbes is best seen in the rearview. How did we get here?

To start, Forbes was conceived and built by the first generation — B. C. Forbes — but fully realized by the second. Malcolm Forbes was a media mogul in full, including a lifestyle replete with islands, palaces, ranches and private jets that embodied the brand. Under his reign, the Forbes formula of how to get/be/stay rich struck an aspirational note perfectly in tune with the times. 

After Mr. Forbes’s death in 1990, the magazine and family prospered for over a decade. Forbes had a strong stable of reporters, and in the early ’90s, it played a leading role in exposing Jordan Belfort, the crooked Long Island stockbroker depicted by Leonardo DiCaprio in “The Wolf of Wall Street.”

In the wake of the dot-com bust, the pressures of operating as a stand-alone magazine created enormous difficulties. During the first tech boom, companies like AOL and Yahoo spent money on full-page ads in Forbes in a bid for credibility and traction. A decade later, those companies are not clients but are vying instead for advertising dollars. Increased competition, along with readers fleeing print, has forced layoffs, constant changes in strategy and a partnership with Elevation that failed to alter the fundamental math

After Mr. Forbes died, the family sold his cherished collection of FabergĂ© eggs, mothballed the yacht, peddled the jet and offloaded the company’s historic headquarters on lower Fifth Avenue. Now it has come down to selling the magazine itself, which, beginning next year, will be based in an office tower in Jersey City. There will be no more soaring helicopter rides over Manhattan. 

Like so many other media dynasties — the Bancrofts, the Chandlers, et al. — the passage of time has been accompanied by operational challenges and falling profits that have tested family ties. The Forbeses are no exception. Steve Forbes spent close to $70 million running for president — twice — with little discernible impact beyond the resentments it created with family members. 

The entire category of business magazines has been punished, but Businessweek and Fortune have the benefit of being part of larger, more diversified enterprises, while Forbes has had to go it alone. The magazine doubled down hard on a digital advertising strategy with a lot of click-bait headlines and opened its platform to thousands of contributors, improving traffic but diluting its brand. In the context of the current sale, some saw that strategy as more like lipstick on a pig, a bold effort that fails to hide the fundamental ugliness of the situation. 

If the Forbes brand has been dented, it has hardly been destroyed. The name has always resonated globally, partly because the Forbes 400 “rich list” is fetishized by the wealthy, many of whom will be on the list of the world’s billionaires that comes out Monday. And the Forbes Asia summit remains a popular, profitable event.
In that context, a buyer from a nascent economy on the rise make sense. The Far East is a place that is not only making much of the world’s goods, the countries there are also manufacturing wealth at an astounding rate. Forbes might be a nice trophy for a foreign buyer as a way of signaling its arrival. It would not be the first time a publication was bought as a multiple of ego rather than earnings.

But in America, there is a growing disconnect in the narrative of business magazines. The world of titans that Malcolm Forbes once so vividly inhabited has become a lot less sexy. The mix of buffoonery and greed that created the financial meltdown in 2008 dispelled the image of businesspeople as heroes. Forbes’s worldview — “Business was originated to produce happiness,” B. C. Forbes asserted — has been overtaken by the grimness of a new economy, one that still produces billionaires that end up on the Forbes list, but few jobs to go with them.

Culled from The New York Times (Written by David Carr)

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