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Golden Books tarnishes

Children's publisher awash in red ink

Richard E. Snyder’s turnaround of Golden Books was supposed to have been as simple as “The Poky Little Puppy” or any other classic on the list of the dominant children’s publisher. But as the former Simon & Schuster chief closes in on his second year at Golden Books, the complete story, still awash in red ink, has taken a “Through the Looking Glass” turn.

Earnings once expected for 1997, after a $197.5 million loss for the 11 months ended Dec. 2, 1996, are no longer anticipated in this century. Meanwhile, as management gets used to its new Seventh Avenue aerie — six floors, described by a former executive as “opulent like you wouldn’t believe,” near the top of the 45-floor building on the southwest corner of 57th street — workers still fear the wholesale firings that, along with wholesale hirings, have characterized Snyder’s tenure.

Already in 1998, Golden Books Family Entertainment (GBFE), which was known as Western Publishing before Snyder and backers Barry Diller and E.M. Warburg Pincus Investment Group took over in May 1996, has announced two rounds of layoffs for a running total of 171. And that’s after slashing staff by an estimated 200 — or 16% — in 1997. Among those recently pink-slipped in New York were two VPs and an editorial director brought into the organization, not all that long ago, from equally prominent positions at other publishers. Although many of the departed are bound by confidentiality agreements, one did muster the courage to report: “There’s a lot of wheel-spinning … not much definition and no direction.”

Not even Golden’s foray into entertainment — key to Snyder’s strategy of transforming the children’s book publisher into a family entertainment conglomerate — has been universally well-received. Says Snyder predecessor Richard A. Bernstein, who gave up his CEO and chairman titles but still owns 15% of the company’s stock, “Before I left, we had intended on joint-venturing with an entertainment company to exploit the homevideo market.”

As for the approach taken by Snyder’s team, which in August 1996 bought Broadway Video Entertainment for $91 million as the cornerstone of its Entertainment Group Division, Bernstein claims the rationale for the buyout escapes him. Money-losing Broadway Video did bring such characters as “Lassie” and “The Lone Ranger” into Golden’s stable. Still, the man who led Golden for 15 years before Snyder’s arrival can’t resist asking, “Did they have to pay 10 times losses?”

These criticisms notwithstanding, the investment community stands solidly behind the 64-year-old Snyder, whose love-him-or-hate-him reputation followed him to Golden after being burnished for 33 years at Simon & Schuster. There, having risen to chairman while cultivating a list populated by such lions as Philip Roth, Larry McMurtry and Graham Greene, Snyder was unceremoniously dumped four months after Viacom Inc. took over S&S parent Paramount Communications in 1994. His return two years later promised not only to salvage his reputation as publisher nonpareil, but secure for Golden Books a future often described as Disneyesque.

To be sure, a honeymoon was in order at Golden, as even Bernstein admits that, during his reign, “a lot of terrific core characters were under-exploited.” Net sales had fallen from $649 million in 1993 to $254 million in 1996, as a $17.5 million profit turned into a $197.5 million loss. The share price fell too, from $23 in 1993 to under $8 in the first quarter of 1996.

Snyder seized the moment on his return by raiding, from his former company, Bob Asahina to run adult publishing and Willa Perlman to run children’s publishing. He also restored relationships with crucial licensers like Disney and Lucasfilm, and, according to insiders, not a moment too soon.

To outsiders, these and other outreaches were testament to Snyder’s ability to command loyalty. To at least some insiders, however, the rash of new top-level faces lacked coherence. “They were brought in as an ego massager — to let the industry know that Snyder was back in business,” recalls a mid-level manager whose reporting relationships changed several times during this period.

Snyder, who declined to be interviewed for this story, rounded out his team last July with the addition of Stephen Weitzen to oversee Golden’s “value” line of lower-priced products, and Richard Collins to head up the sales and retail marketing staff.

Although the appointment of Collins, a Unilever brand manager for most of his career, speaks to Snyder’s commitment to unlocking the value of Golden Books’ brands, tweedy publishing types considered it no less an affront than that inflicted on journalists by Times Mirror’s handing its newspapers over to Mark Willes, aka “the cereal killer” from General Mills. Sniffed one displaced executive, “What does selling books to kids have to do with Lipton Tea?”

Apparently a lot. Investors, who’ve been supportive of Willes, have been just as supportive of Snyder. While Golden Books’ restructuring wrought additional losses of $38.1 million for the three quarters ended Sept. 27, 1997, — full-year and fourth-quarter results won’t be released until March 25 — the stock has traded relatively narrowly around $11.

“The Street has been patient because there was a lot under the sheets of this company that no one knew about until (the new team) actually got into bed,” says Salomon Smith Barney analyst Brandt Sakakeeny, who goes on to cite surprises or problems in virtually every area of publishing that Snyder & Co. have had to address. “So I consider ’96 a year of assessing, ’97 a year of transition, and ’98 the critical year.”

That Sakakeeny ultimately expects Snyder to succeed is evident from his maintaining a “buy” recommendation on GBFE despite, just weeks ago, revising previously projected earnings for 1998 and 1999, into losses of $36.5 million and $2.5 million, respectively.

Even more the Snyder fan, George Papaionnou, entertainment analyst at Donaldson Lufkin & Jenrette, claims the Golden Book story is still in its “qualitative, not its quantitative, phase.” “Numbers aren’t yet meaningful,” he said, “but that’ll change once the turnaround is complete.”

Predecessor Bernstein seems both vexed and perplexed by the reaction, musing: “Maybe Snyder has convinced them that three years is reasonable. I know he spent a long time using me as a urinal.”

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