Publishing/Writing: Insights, News, Intrigue

02/20/2013

Inside Intrigue Re Readers Digest’s 2nd Bankruptcy Filing


Did you realize that Readers Digest reaches more $100,000 + income households than Fortune, The Wall Street Journal, Business Week and Inc. COMBINED ? Well, it does — according to Mediamark Research and Intelligence (also known as Growth from Knowledge – Mediamark Research and Intelligence [GfK MRI]).

RD is a veritable empire — albeit, one in stormy straits.

I grew up devouring Readers Digest and dearly love(d) it for the enlightening, timely and clearly written articles/stories AND the superb humor. Apparently, this venerable piece of consumer literature, enjoyed around the world in numerous languages, has encountered some rough waters — due, most probably, to bad management decisions in what had become an unwieldy, global empire during an explosively changing publishing landscape (in this writer’s humble opinion).

Let’s get into some key numbers and behind-the-scenes happenings with Michael Rondon writing for FOLIO magazine:

Behind RDA’s Chapter 11 Filing

RDA considered a sale, major creditors include several former employees.

RDA Holding has filed for Chapter 11 bankruptcy protection for the second time in four years.

The move to convert $465 million in debt to equity comes after the company considered a “wide range of alternatives” however, according to a statement from Robert Guth, president and CEO of RDA.

Guth was unavailable for comment in the lead-up to first-day motions with the U.S. Bankruptcy Court for the Southern District of New York, but some in the industry believe a sale of at least part of the company had been one of the “alternatives” explored.

“I do believe that RDA was approached by buyers and in conversations,” says Reed Phillips, CEO and managing partner of DeSilva + Phillips, an M&A advisory firm specializing in media properties.

Selling off titles wouldn’t be a first for the company, who parted with Every Day with Rachel Ray in October of 2011 and AllRecipies.com in January of 2012–both purchased by Meredith. Those are among the more publicized changes since Guth took over about a month before the Rachel Ray deal, but they’re part of an on-going evolution, he says.

“The complex transformation that we began 18 months ago under the leadership of a new senior management team has resulted in a more streamlined, more focused, and more profitable business,” Guth says in the statement.

Since then, business has been mixed though. Year-over-year operating losses decreased in first three quarters of 2012, while revenues took big hits. Yearly ad pages were up on two of its three biggest titles, Reader’s Digest and Family Handyman, but down on another staple, Taste of Home, according to the Publishers Information Bureau. Circulation has remained relatively steady over that time for each, per Alliance for Audited Media numbers.

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