NEW YORK — Publisher Primedia’s rapid advance from traditional publishing into the realm of new media received a big push forward Thursday as the company announced a pair of big-league backers.
Prominent Internet investor CMGI and Primedia plan to swap stock, cementing a strategic alliance aimed at developing and funding a series of new Web ventures. CMGI, a big investor in Lycos and other heavyweight ‘Net companies, will buy 5%, or 8 million Primedia shares, in exchange for 1.53 million shares of CMGI.
Liberty buys in
John Malone’s Liberty Media will also take a 5% stake in Primedia along with 1.5 million Primedia warrants. It will infuse $200 million in cash into the company. Liberty subsid Liberty Digital will receive an option to acquire a 12.5% stake in Primedia’s newly formed Primedia Broadband Video unit in exchange for cash or stock in Liberty Digital or Liberty Media. In addition, Primedia will purchase $25 million in Liberty Digital stock.
The idea behind both partnerships is to marry Primedia’s diverse content with streaming, interactive and broadband video and convince Wall Street that Primedia is more than a sleepy old magazine company.
Investors sure woke up, sending Primedia shares soaring by more than 16% to close at $31.50.
The CMGI and Liberty ventures, plus others announced in recent months, are the work of Tom Rogers, a former NBC exec who has been shaking things up since he joined Primedia last fall as chairman and CEO. “A company that wants to be the media company of the future must turn on a dime and move aggressively, as Primedia is doing,” Rogers said.
On the personnel front, he announced that John Loughlin, former magazine publisher and former president of Meredith Corp.’s broadcast group, has been named head of Primedia’s new magazine and Internet group.
Eileen Murphy, VP of communications at ABC, will become VP of corporate communications at Primedia.
The corporate structure of Primedia, whose stable includes New York and Seventeen magazines, has been streamlined and simplified into a consumer group and a business to business group. Rogers noted that the company is divesting nonstrategic assets and focusing on growth.
Goal is to see revenue from new media double to at least $50 million this year, and double again in 2001. That will require an investment to the tune of $100 million-$120 million in that area. Total losses from new media are expected to jump from $32 million last year to $80 million-$90 million this year.
Cost savings initiatives will shave up to $35 million from expenses in 2001.