Blog Post

Why Variety’s street value has plummeted in 4 years

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

Four years ago, Dutch-Anglo publisher Reed Elsevier (NYSE: RUK) put its 107-year-old showbiz trade paper, Variety, on the auction block. It ultimately failed to find a buyer willing in the middle of a global recession to pay in the neighborhood of $2 billion  for Variety and a handful of Reed’s other ad-supported U.S. publications.  Now, with the ad market recovered, Reed has put Variety back up for sale, with some analysts projecting a sale price of as little as $20 million.

So how did the price drop so much in just four years for the  crown-jewel of the Reed Business Information empire?

Variety is hardly the only once-thriving print brand to struggle to make the digital curve. But perhaps more so than many other print publications, Variety has been hit from several sides. It faces competition not just from one or two upstarts but from a handful, a number of them online only. At the same time, the market for so-called vanity ads, long a goldmine for Variety, has changed dramatically and not to Variety’s benefit.

“The need to be in Variety 10 years ago was much, much more of a priority,” said a marketing executive for an independent distributor, who aggressively buys trade ads every year to promote his studio’s movies during the run-up to the Golden Globes and Oscars, aka vanity ads. Marketers, he said, used to have to enter a lottery-like system for the right to purchase an $85,000 Variety cover ad during awards season. Last year, he said that ad could be purchased at a third of that cost, no lottery needed. “With the rise of all these online places, there are just more options to spend your money,” he said.

Indeed, the sheer number of competitors that have entered Variety’s air space since it first went up for sale is striking. From its resurgent traditional rival, The Hollywood Reporter, to newspapers like the Los Angeles Times and New York Times (NYSE: NYT), which have doubled down on getting entertainment industry ads in recent years, to blogs like Deadline Hollywood, TheWrap, and SnagFilms-owned IndieWire, Variety now has more than half a dozen competitors, each of them focused on the same pool of ad dollars.

While a start-up competitor like TheWrap — which has only a small fraction of Variety’s revenue — may have not succeeded in biting into a huge chunk of Variety’s ad share yet, it has helped to lower the average CPM of Hollywood business-to-business advertising significantly. (Disclosure: I worked at TheWrap before joining paidContent.)

These days, said the marketer from the independent distributor, if Variety’s price is too high, his firm can simply buy two full-page color ads in one of TheWrap’s awards-season print specials for a quarter of what Variety used to charge, or about $20,000. Now forced into a position of flexibility, Variety will often lower its price to get the business. Deadline also publishes print issues, planning 13 specials in all for the run-ups to the Oscars and Emmys.

Variety not too long ago was still enjoying annual revenue north of $90 million and profit margins greater than 40 percent. Movie studios, TV networks, production companies, agencies and management groups used the publication to promote their talent and programs. But various estimates published just in the last week have Variety’s annual revenues now at between $30 million and $45 million. The publication didn’t return calls seeking comment for this story.

The trade publication, which had about 630,000 unique vistiors to its website in February, has also vacillated in its digital strategy over the past decade, first putting up a paywall, then dropping it, and then putting it up again. There have been several rounds of deep staff cuts over the last four years, which claimed my job and those of higher-profile writers like film critic Todd McCarthy, and hurt Variety’s reputation. At the same time, Hollywood marketers say they’ve gotten more thrifty.

“If you’re mounting a serious campaign, you now have to be in a lot of places to go, and Variety is not the end all be all it was,” said another studio marketing executive.

With so many options, studio marketers have seen their marketing costs fall significantly in recent years. For example, in 2004, the independent film American Splendor was able to secure an Oscar nomination for best adapted screenplay on the strength of a $1.2 million campaign spend. In 2010, Winter’s Bone — an indie with similar critical acclaim and profile — garnered four nominations on a spend of only $500,000.

“I know what I used to spend 10 years ago and I know what I spend now, and it’s significantly less,” said the second studio marketer.

“It’s a buyer’s market,” said the first executive. “If I don’t like the price of an ad in Variety now, I’ll just go somewhere else.”

7 Responses to “Why Variety’s street value has plummeted in 4 years”

    • In early 2008, Variety was part of a group sale that also included sibling pubs like Broadcasting & Cable as well as various construction trades. Reed Elsevier was looking for bids in the range of $2 billion. The bid was never successfully rendered, so many of those other books were sold off piecemeal. The crown jewel of the offering, Variety, was kept around until the market recovered. Now, some analysts are projecting a low-end sale price of $20 million for the stand-alone property. Taken too literally, it is indeed an apples-and-oranges comparison. But we are talking about the prime asset in that original group offering. I think it’s safe to assume that, valued on its own, Variety didn’t comprise just 1% of Reed Business Information’s worth when it was put up for sale in 2008 (i.e. $20 million of a $2 billion price tag). Call it an inelegant comparison (others have!) — but the value range being bantered around by analysts — $20 million – $75 million is what I have seen — would have been considered inconceivably low in 2008.

  1. what a great analysis! as long as Danny waits until the NINTH paragraph to disclose that he got laid off by the same company he coincidentally happens to be trashing in this “article,” that’s totally ethical. So are the anonymous “quotes.”

    One can only hope GigaOm buys Variety too given the wisdom of keeping Paidcontent under the oversight of the same editors who have steered this towering achievement in journalism so brilliantly in the past and hired an impartial genius like Danny. Surely Reed Elsevier would never even consider selling Variety were he still there…as opposed to ax-grinding here about getting shitcanned.

  2. George

    This is bad journalism from the first sentence to the last. Your article starts with the misleading statement that Reed attempted to put Variety on “the auction block” then couldn’t find a buyer willing to pay $2 billion for Variety and “a handful” of Reed’s other ad-supported U.S. publications. You then state “some analysts” project a $20 million price and ask how the price could drop so much in four years.
    The facts are that Reed Elsevier put the entire Reed Business Information U.S. B2B publishing business up for sale- an immense business at the time with hundreds of millions of revenue -and decided NOT to include Variety in the process. The $2 billion it sought was for the company-sized RBI U.S. business unit, not Variety. So, even if the $20 million price projection of your unnamed analysts is close to being right, your attempt to compare that price for the sale of a single title to a $2 billion price for an entire company is simply ridiculous. This shows a lack of honest, intelligent journalism on your part.

    Instead of doing your homework and reporting honestly on this potential sale, you then take us through a narration on your view of the competitive scenario laced with a few gratuitous quotes from two (or maybe three) unidentified executives. You quote a marketer from “an independent distributor”, then “another studio marketing executive”, then “the second studio marketer” (without having identified the first) and then in your last sentence you quote the “first executive”, leaving us to wonder whether that’s the independent distributor or the first studio executive that you actually never quoted anywhere else in the article. So in addition to dishonest and unintelligent business reporting, you couldn’t find a single person in Hollywood who was willing to be quoted about Variety? So, maybe lazy journalism should be added to the list.

    I think the key words in the entire article are about the staff cuts at Variety which you state “claimed my job”, because, while this article reads at times like a takedown piece from a competitor, in the end it just sounds like a screed from a disgruntled former employee. This piece is so bad I had to re-read the date because I thought it was an April Fool’s joke I was laughing so hard. No such luck. If this is indicative of what you wrote for Variety (and the Wrap) it’s no wonder there isn’t a place for you there any longer.

    • This is not so much a criticism of Variety as it is an analysis of too much competition emerging in one sector emerging too fast and driving down prices. Among sources, I talked to five studio marketing executives who make trade-ad purchasing decisions (two are quoted, and no one wanted their name in the story, as is typical in Hollywood). I disclosed fully that I worked in the Hollywood trades. Given your emotional reaction to this post, I am curious as to your affiliations, however.

    • I agree with you, this piece is pretty much pure gar-baj. Mr. Frankel’s defense below, in which he does nothing to refute your dead-on criticism of his $2 billion vs. $20 fiasco of a comparison, and then lamely questions your motives, is even worse.