F+W Media Inc., the parent of my beloved Popular Woodworking Magazine, filed for bankruptcy protection under Chapter 11 on Sunday, reporting it has more than $100 million in debt and a host of problems with its e-commerce business.
You can download the entire filing here.
It will be easy for people to shrug their shoulders at the bleeding out of another mid-level media business. After all, who subscribes to magazines anymore? Or reads physical books?
I, however, would like to paint a different picture for you. Imagine the rest of this blog entry in the voice of Bob Ross.
It wasn’t the changing economy that (perhaps) mortally wounded this once-magnificent company. It was debt and venture capital, plain and simple.
When I started at F&W Publications Inc. in 1996, it was owned by the Rosenthal family, which started the company in 1913 around two magazines: Writer’s Digest and Farm (writing and farming were the “F” and the “W” in the name). The company owned its building outright. It had no debt. It had a fully functional warehouse. Its biggest weakness was it was a technological backwater. (When I left seven years ago it was, ahem, still a technological backwater.)
In 1999, we were told that the third generation of Rosenthals didn’t want to run the business, so we were being sold to a group of investors.
First order of business for the investors: Sell the building, grab the cash for the investors and sign a lease on a building in the suburbs. Borrow money to buy up other companies. Sell their assets (buildings, cars, coins). Reduce the workforce to pay the loan that you took out to buy the company. Pay the bankers.
With what money is left, try to improve the business.
When that doesn’t work, sell it to a new group of bankers. These specialize in cutting costs. Fire the experienced managers. Reorganize the way the company works. Borrow more money to buy even more magazines and websites. Cut their costs. Fire their people. Then sell the limping company to another group of venture capitalists.
And repeat until you end up in the United States Bankruptcy Court for the District of Delaware.
As a publisher who sells old-fashioned books, I can tell you there is still a healthy appetite among people young and old for physical products. But they have to be products that are worth buying. That are made with great effort (and, at times, expense). And you have to protect your business by avoiding debt. When the bankers start running a publishing business, it’s game over. The only thing they are interested in printing is money.
My heart breaks for the poor SOBs who have been keeping the lights on at Popular Woodworking Magazine and all the other magazines under the F+W umbrella. Unlike me, perhaps, they stayed on out of loyalty (or desperation, perhaps) to make it work. The deck was always stacked against them because most of the revenue they brought in went right to the banks to pay the debt service.
My hope is that Popular Woodworking and the other magazines will end up with new owners – perhaps ones who love publishing more than they love insane margins.
Crazier things have happened.
— Christopher Schwarz
P.S. I know someone will ask, but we are not buying Popular Woodworking. I think the future is in scrolls of some sort. Or painting animals on rocks. Maybe gourds.