Why Variety’s street value has plummeted in 4 years

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.”