Well, the early reports are true. After seven months of negotiations, Penske Media Corp., backed by hedge fund Third Point, has won 107-year-old trade paper Variety for $25 million. Just months ago Variety was thought to be worth $50 mlllion, which was still substantially lower than its pre-recession peak value. Jay Penske, 33, outbid New York Hedge Fund Avenue Capitol and supermarket mogul Ron Burkle.
For much of its recent history the venerable daily and weekly Variety raked in millions at the top of the trade media heap. Today, Janice Min's The Hollywood Reporter, which also prints a weekly, and Deadline, launched by blogger Nikki Finke six years ago before Penske Media acquired it in 2009, dominate what is now an online niche. Variety used to look down its nose at both.
Jay Penske, 33, told the LA Times that he intended to turn Variety, which has a staff of about 120, back into a must-read that is "absolutely fundamental and indispensable." He did not detail what he wanted to do with the paper, but said that for now Variety and Finke's Deadline will proceed to operate separately with some possible overlap in writers. "Before we make any substantial changes, we need to spend more time with the current team," he emailed the LAT. "We need more data…We see an incredible opportunity for future collaboration while remaining editorially independent."
Finke is on vacation and not available for comment. "What Nikki has architected at Deadline is simply amazing," Penske told the LAT. "To alter or change the chemistry of Deadline would be in our opinion a huge mistake."
He added that he planned to build Variety and reduce its dependence on print revenues. That's easier said than done.
At least Variety President Neil Stiles, who designed Variety's current economic model, will leave the scene. Under former editor-in-chief Peter Bart and Stiles, Variety became a hidebound institution that kept its distance from the traffic-chasing economics that Penske lives by. He is well-versed in online media (he also owns Bonnie Fuller's HollywoodLife, Michael Ausiello's TVLine and Movieline). He is not a print animal.
Variety is a print trade with an online site that is behind a pay wall. That is what the people who work there fundamentally believe in. They see themselves as newspaper men and women. They live and breathe in a universe of copy editors and proofreaders and paper stock and print deadlines–and chasing print ads which have been declining at a rapid rate.
Variety has never taken much stock–aside from a few younger news hounds–in the outside online world. They don't understand it or study it or think that it's important. They practice insider-industry-friendly trade journalism. Everything the hard-charging Finke stands for is loathesome to them.
To stay afloat as recession ad revenues plummeted, Variety slashed its most expensive name columnists and critics (including me) in favor of cheaper less-known writers and print support staff as it went behind an unforgiving pay wall and continued to churn out five print dailies plus one weekly edition. Compared to Variety, Deadline's operation is lean. The economies of scale that Finke lives by are one reason she is so successful. Variety has no clue how to function the way she does.
Will Penske eventually put both brands under one bigger roof? I still see an advantage to dividing the two entities so that Finke's Deadline is an online breaking news operation while Variety functions as a softer print trade revenue producer, complete with Pete Hammond's awards mongering. Edited nuggets from the online content could add value to a weekly print edition.
UPDATE: Variety assets that Penske is buying include a massive ad sales operation and international news and reviewers around the world. What he will presuambly let go is the print daily, which would cause layoffs, although many would stay on board to manage a weekly edition. Steve Gaydos on the special features side –which is the source of Variety's millions–could be a pivotal player in the new order.