American Media, Inc. History

Company History:

American Media, Inc. is a leading U.S. publisher best known for the periodicals National Enquirer, Star, Weekly World News, Soap Opera Magazine, Country Weekly, and Soap Opera News, with a current aggregate weekly circulation of over five million copies. National Enquirer and Star have the second and third largest single copy circulation, respectively, of any weekly periodical. American Media Operations, Inc., a wholly owned subsidiary of American Media, conducts all of the company's business operations and owns substantially all of the company's assets including the capital stock of its subsidiaries. American Media derives more than 85 percent of its revenues from circulation, predominantly single copy sales in supermarkets and other retail outlets, with the remainder from advertising and other sources. Another subsidiary, Distribution Services, Inc. (DSI), markets American Media's periodicals, as well as those of its client publishers, in approximately 175,000 locations in the United States and Canada. In addition, DSI provides merchandising and information gathering services for nonpublisher third parties.

Pope Acquires the New York Evening Enquirer: 1952

In 1952 the 25-year-old Generoso Pope, Jr., acquired the New York Evening Enquirer, a weekly that focused on horse racing news and crime stories, for $75,000. He modified the paper to a tabloid format and altered it to include unique and unusual news items. He also gave the paper more of a national focus and in 1957 renamed the paper National Enquirer. By the mid-1960s weekly circulation reached one million copies. Anticipating that urban newsstands would become less numerous, he had the paper distributed through supermarket chains. To make the paper more acceptable to shoppers and the general public, he reduced coverage of crime stories and increased coverage of celebrity and human interest stories.

Pope moved the National Enquirer to Lantana, Florida, in 1971. Circulation of the National Enquirer peaked in the late 1970s at about six million copies a week. Pope began publishing Weekly World News in 1979. It was a black and white tabloid devoted to entertaining and unusual news and feature stories. Most of its content was derived from stories and purchased photographs from agencies and periodicals around the world.

1989 Sale of the Company

Pope died in 1988, and in June 1989 GP Group Acquisition Limited Partnership acquired the National Enquirer and Weekly World News from Pope's estate for $413 million in cash. The general partners of the GP Group Acquisition were Boston Ventures Limited Partnerships III and IIIA and Mcfadden Holdings L.P. Management of the company consisted of several key executives associated with Mcfadden and Boston Ventures. Mcfadden was known as the publisher of True Confessions, True Stories, and other magazines.

Following the acquisition, a program of revenue enhancements and cost reduction measures began. The cover price of the National Enquirer was raised from $.75 to $.85 in the United States and from C $.75 to C $.89 in Canada. The subscription price also was increased, as were mail order and classified ad rates. These actions resulted in an additional $15 million in annual revenues.

Cost reductions included renegotiating major supplier contracts and new printing contracts. An outmoded printing facility in Pompano Beach, Florida, was closed, and the page count of the National Enquirer was reduced. Television advertising was discontinued because it was ineffective. Editorial staff was reduced, and free-lancers were paid less for articles and photographs. These measures resulted in an estimated annual savings of more than $20 million.

Enquirer/Star Group, Inc. Forms in 1990

In June 1990 the Enquirer/Star Group, Inc. was organized as a holding company for the purpose of acquiring the Star from News America Publishing Inc. and one of its affiliates for $200 million in cash and $200 million in convertible preferred stock. Enquirer/Star, Inc. was a wholly owned subsidiary, originally incorporated in 1981 under a different name, of the Enquirer/Star Group that conducted substantially all of the company's operations and represented substantially all of the Group's assets.

The Star was launched in 1974 by Murdoch Magazines, a division of News America Publishing Inc. It was a weekly periodical focusing on celebrity news and feature stories and was distributed through the same outlets as the National Enquirer. The Star's editorial staff worked from offices located in Tarrytown, New York, and operated independently of the editorial staffs of the National Enquirer and Weekly World News, whose offices were located in Lantana, Florida.

Cost reduction measures were introduced following the acquisition of the Star. Production of the Star was changed from heatset offset to the more cost efficient rotogravure printing. The change also improved reproduction quality and allowed for the use of lower-cost newsprint. Certain distribution, print, and pre-press operations were combined to achieve additional cost savings, as were advertising sales staffs, accounting, and other support functions. These measures resulted in annual savings of more than $20 million.

Enquirer/Star Group Goes Public: 1991

In July 1991 13.5 million shares of Class A common stock were offered to the public at $14 per share, and the stock of the Enquirer/Star Group began trading on the New York Stock Exchange. Just prior to the initial public offering (IPO), the National Enquirer began distribution in the United Kingdom. The tabloid was so well accepted that the company began printing a separate U.K. edition in Switzerland and was exploring the possibility of selling Weekly World News in the United Kingdom as well.

Soap Opera Magazine was launched in October 1991 as a weekly publication, with editorial offices in Tarrytown, New York. Within three months of its launch it was being sold at 70,000 checkout counters across the country, and after nine months it had reached the break-even point in sales. The 48-page weekly provided in-depth coverage of 11 network daytime soap opera programs, with circulation consisting primarily of single copy sales. Its content included summaries of current story lines, exclusive interviews, and extensive photo coverage of soap opera stars.

During fiscal year 1991 (ending March 31) the company began publishing special issues of the National Enquirer and the Star. Each issue was topic-specific, had 72 color pages, and stayed in circulation for six to eight weeks. They were priced at $1.95 in the United States and C $2.25 in Canada. During fiscal year 1992 six special National Enquirer issues and five Star special issues were published.

For fiscal year 1992 (ending March 30) the company reported excellent financial results, with increases in operating cash flow, operating income, and net income. It realized net income of $5.7 million on sales of $283.7 million. Newsstand circulation and advertising sales continued a downward trend, due in part to a continuing recession and competition from other media who were devoting more space to personality journalism. The company planned to launch a brief television ad campaign to boost circulation and improve ad sales. Cover prices for the National Enquirer and the Star were raised to $.99 from $.95 to cover promotion costs. The company planned to grow its business by launching new magazines, expanding distribution to Europe, and exploring the possibility of television production. DSI, the company's distribution and merchandising subsidiary, was expanding its operations by increasing its client base. During fiscal year 1992 it added US and Rolling Stone magazines.

In May 1992 the cover prices of the National Enquirer and the Star were raised to $1.25. At the same time a substantial television ad campaign was launched. For fiscal year 1993 the company reported net income of $19.4 million on sales of $275.4 million. During the year a new distribution agreement for the United Kingdom was completed. The company also formed a joint venture in Australia with Australian Consolidated Press to publish an Australian version of the National Enquirer, which went on sale June 9, 1992. It suspended publication in December 1993 after 29 issues, because of lower than anticipated single copy sales. With no plans to resume publication of the Australian version, the company resumed distribution of the U.K. version in Australia.

In June 1993 the GP Group Acquisition Limited Partnership was dissolved and its assets, consisting primarily of 21.5 million shares of common stock, were distributed to its general partners and two limited partners. These general partners, The Boston Group and Mcfadden Holdings L.P. submitted a proposal on April 28, 1994, to acquire all of the outstanding shares of Class A Stock not owned by them for $17.50 per share in cash. At the time the majority stockholders controlled about 76 percent of the company's voting stock. The proposal involved taking the company private, with all stock being converted into cash and no longer being traded on the NYSE.

In May 1994 the board established a committee to consider the proposal. In April and May a total of seven lawsuits were filed by the company's shareholders. These lawsuits all claimed the same thing, namely, that the proposal was "a scheme to eliminate the public shareholders of the [company] at a grossly unfair or inadequate price in violation of Delaware law and that the defendants, in either pursuing or acting on this scheme, have breached their fiduciary duties of good faith, loyalty, fair dealing, due care and candor to the minority public shareholders.' The plaintiffs generally alleged that the proposal was made at a time when the company's stock price was severely depressed and that the offer price of $17.50 per share did not adequately reflect the company's prospects for earnings growth. The proposal to take the company private was rejected because of the opposition of the minority shareholders.

American Media, Inc. is Created in 1994

The company's fifth periodical, Country Weekly, was launched in April 1994. It was devoted to all aspects of country music, lifestyles, events, and personalities. In its first full year of publication Country Weekly had average weekly sales of 290,000 copies, of which 225,000 were single copy sales.

The company changed its name to American Media, Inc. on November 21, 1994, to reflect its broader publishing base of five major periodicals. The name American Media became available when the former American Media, an owner of several radio stations, was acquired and merged into another company.

For fiscal year 1995 the company reported net income of $11.8 million on sales of $315.3 million, compared with net income of $27.8 million on sales of $300 million the previous year. Sales of the National Enquirer were down about ten percent from 3.3 million copies per week in fiscal year 1994 to 3.0 million in fiscal year 1995. The Star's average weekly copy sales fell from 2.8 million in fiscal year 1994 to 2.7 million in fiscal year 1995, and Weekly World News fell from 558,000 copies per week in fiscal year 1994 to 510,000 copies in fiscal year 1995. In addition to declining sales, which could be offset by higher cover prices, the company's financial results continued to be affected by higher paper costs, declining advertising revenue, and higher interest expense due to increased debt.

Sales of four of the five major periodicals declined even more during fiscal year 1996, while the recently introduced Country Weekly gained about 15 percent in sales. Average weekly sales of the National Enquirer dipped to 2.6 million copies, and sales of the Star dropped more than ten percent to 2.4 million copies. Weekly World News also declined about ten percent to 459,000 copies, and Soap Opera Magazine fell below the 300,000 mark to 284,000 copies for the first time since it was introduced.

Television coverage of the O.J. Simpson trial was having a big effect on sales of the company's periodicals. Not only were people buying fewer tabloids, they also were watching daytime soap operas less faithfully. As a result, American Media reported a net loss of $1 million for fiscal 1996 on declining sales of $295.1 million.

For fiscal year 1997 (ending March 31) American Media reported higher sales of $316.0 million and net income of $12.0 million. Average weekly sales of Soap Opera Magazine and Country Weekly both increased by approximately 15 percent, and the declining sales of the National Enquirer, the Star, and Weekly World News leveled off at less than ten percent.

Steve Coz, a Harvard University graduate, was named editor of the National Enquirer in 1996. Coz pledged that the tabloid would feature more stories on celebrities and contain less sensationalism. Reviewing his first year as editor, he noted that the National Enquirer refused to publish such sensational items as the autopsy photographs of Ron Goldman and Nicole Simpson or the murder pictures of six-year-old JonBenet Ramsey, even though its main competitor the Globe did. Publishing those photographs helped the Globe reach the one million mark in circulation.

Time magazine named Coz one of the most influential people of 1997, and under Coz's editorship the National Enquirer won praise for its coverage of the O.J. Simpson case, the JonBenet Ramsey murder case, and the murder of Bill Cosby's son. The National Enquirer also broke the story of President Clinton's advisor, Dick Morris, leaking presidential secrets to a female "acquaintance.'

Nonetheless, in Coz's first year as editor, the National Enquirer had six lawsuits brought against it by celebrities, including Don Johnson, Dabney Coleman, Lisa Marie Presley, and Tammy Wynette. Eddie Murphy's lawsuit was dismissed, but Clint Eastwood won a $150,000 judgment when the National Enquirer was found guilty of misrepresenting a syndicated interview as an exclusive. Then in 1997 Martha Stewart brought a $10 million lawsuit against the National Enquirer for an article entitled, "Martha Stewart Is Mentally Ill.'

Entering Television Entertainment in 1997

Production of a one-hour National Enquirer special, "25 Years of Scandals,' marked American Media's entry into television entertainment. The program aired in June 1997. The company had been exploring television shows based on its tabloids since the early 1990s. In 1993 television executive Brandon Tartikoff announced he would produce a show based on stories from Weekly World News. In 1994 Celebrity Entertainment, Inc. produced a one-hour television pilot based on stories from the National Enquirer. Other television projects that never aired included an "Enquiring Minds' game show, which was considered by a major network for the 1992-93 season, and an infotainment show based on Soap Opera Magazine. A third project being explored was a series of one-hour specials tentatively titled, "From the Secret Files of the National Enquirer.'

American Media launched its sixth periodical, Soap Opera News, in March 1997, with editorial offices in Tarrytown, New York. Circulation for the weekly digest-sized publication was 163,000 for its first year, of which 146,000 were single copy sales. It covered all aspects of daytime television's soap opera programming, including news, features, and behind-the-scenes stories about the shows and their stars.

For fiscal year 1998 American Media reported net income of $5.5 million on sales of $307.7 million. In its annual report it noted that adverse publicity resulting from the August 1997 death of Princess Diana affected single copy circulation of the National Enquirer and the Star. Greater coverage of celebrity news in other forms of media also was having a negative impact on the company's revenues. The company continued to raise cover prices in an effort to offset declining sales. Of the company's six periodicals, only Country Weekly showed circulation gains, as its average weekly sales rose from 389,000 copies in fiscal year 1997 to 416,000 copies in fiscal year 1998.

Following nearly a decade of declining sales since it was incorporated in 1990 as the Enquirer/Star Group, American Media will continue to build on its strong trademarks such as the National Enquirer, the Star, and Weekly World News. Interest in celebrity news remains high, and the company will face significant competition as other forms of media devote more time and effort to covering celebrities and personalities in the news.

Principal Subsidiaries: American Media Operations, Inc.; National Enquirer, Inc.; Star Editorial, Inc.; SOM Publishing, Inc.; Weekly World News, Inc.; Country Weekly, Inc.; Distribution Services, Inc.

Further Reading:

• Altaner, David, "Trail and Error: Tabloid Firm Jumps O.J. Simpson Bandwagon, Hits Bump in Road,' Sun-Sentinel, August 16, 1995, p. 1D.
• "American Media Cleans Up by Digging Dirt,' Sun-Sentinel, April 30, 1995, p. 3F.
• "American Media Inc. Announces Acquisition of MediaOne Inc.,' Business Wire, October 3, 1996.
• Antilla, Susan, "A Tabloid Publisher's Unsensational Performance,' New York Times, May 1, 1994, p. F11.
• Cohen, Adam, "With a Tip from a Tab,' Time, March 24, 1997, p. 54.
• "Enquirer/Star May Change Name,' Palm Beach Post, August 4, 1994, p. 6B.
• "Enquirer/Star Shareholders Sue,' Palm Beach Post, April 30, 1994, p. 5B.
• "Entertainment Makes Announcement,' Business Wire, February 22, 1994.
• "Feud of the Week,' Time, December 1, 1997, p. 105.
• Gleick, Elizabeth, "Leader of the Pack,' Time, January 9, 1995, p. 62.
• Herubin, Danielle, "Media Inc.: Shareholders Don't Count,' Palm Beach Post, August 14, 1996, p. 5B.
• Peterson, Iver, "The National Enquirer Cuts Back on Sensationalism, But Is Still Haunted by Its Past,' New York Times, September 9, 1997, p. D11.
• Pogrebin, Robin, "The National Enquirer Turns to a Consultant To Improve Its Sales at Supermarkets,' New York Times, October 20, 1997, p. D11.
• Pounds, Stephen, "Owners to Buy Up Enquirer/Star Shares,' Palm Beach Post, April 29, 1994, p. 5B.
• "Tabloids' Shocker: Big Debt, Big Returns,' Palm Beach Post, May 22, 1995, p. 48.
• Vorman, Julie, "Enquirer Plans Magazine, TV Shows,' Reuter Business Report, December 28, 1993.
• "Weekly World News, Tartikoff in TV Special,' Reuter Business Report, September 28, 1993.

Source: International Directory of Company Histories, Vol. 27. St. James Press, 1999.

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