Advance Retreats From Entertainment

Advance, a corporation you may never have heard of but which owns or invests in properties you certainly know, made some major tactical retreats over the past couple weeks that may be significant indications of the decline of traditional media.

Advance was established in 1922 — the same year as Time Inc., which is a tissue of its former self, another indicator of the dwindling of media. In 1959, when S.I. Newhouse, whose family established Advance, bought Condé Nast, the publisher of properties including Vogue, The New Yorker, and Vanity Fair.

It was part of Advance’s investment in “promising growth sectors” and those titles gave rise to some of the most famous and influential editors in American journalism.

At The New Yorker there were Harold Ross, William Shawn and Robert Gottlieb. Vanity Fair had Tina Brown and Graydon Carter. And while Vogue was helmed by Diana Vreeland and Grace Mirabella, the quintessential editor of the magazine, Anna Wintour, started in 1988 and has made a deep cultural mark in her 40 years at its helm.

Last week Wintour — inspiration for many, including Meryl Streep’s Miranda Priestly in The Devil Wears Prada (2006) — announced she is vacating the post of editor-in-chief of the American edition of Vogue. While still drawing a paycheck from Condé Nast for positions including the global editorial director of Vogue and chief content officer for Condé Nast, Wintour’s roles will have far less visibility than she’s had during the past several decades.

So of Condé Nast’s notable triumvirate (though it owns more than just those three), The New Yorker’s David Remnick is arguably the last person with visibility that extends well beyond the pages he guides.
While it might seem an exaggeration to say that Wintour provides the main value for the Vogue franchise, it may well prove to be true.

She reportedly said to her staff when announcing her departure from the position, “Now, I find my greatest pleasure is helping the next generation of impassioned editors storm the field with their own ideas, supported by a new, exciting view of what a major media company can be.”

But what it “can be” is undoubtedly less than it has been.

Magazines are no longer “promising growth sectors” and editors are not the only ones shrinking: so is the Bugs Bunny support system. On July 1 Advance announced it was selling 100 million of its Warner Bros Discovery (WBD) shares, worth about $1.1billion.

Why did it sell? Well, according to the company’s filing with the Securities and Exchange Commission, Advance sold for “general corporate purposes.”

It will still own a little under 4% of WBD, so it is not completely walking away. But it seems as though there might not be a whole lot of support for WBD CEO and president David Zaslav’s plan — announced in early June — to split WBD into two units.

The split comes on the heels of the April 2022 merger of Warner Bros. with Discovery. While the merger of these different channels, platforms, and producers was to achieve “synergies,” it took just three years for the combined company to determined that things weren’t working out as anticipated.

One to focus on.

When announcing the division into a cable business called Global Networks (e.g., CNN, TBS, and TNT) and a streaming and studios business (film and TV), unimaginatively named Streaming & Studios, Zaslav, who will become the president and CEO of the latter, said, “By operating as two distinct and optimized companies in the future, we are empowering these iconic brands with the sharper focus and strategic flexibility they need to compete most effectively in today’s evolving media landscape.”

Which is essentially what the combined company was supposed to do.

WBD is not the first company of late to decide to divide. Late last year Comcast announced it was creating a new company, Versant, that includes USA Network, CNBC, MSNBC, E!, SYFY, and Rotten Tomatoes, among other properties. NBCUniversal will keep Universal Studios, NBC broadcast, Peacock, and other assets.

When the announcement was made, Mike Cavanagh, president of Comcast, said, “This transaction positions both SpinCo [now Versant] and NBCUniversal to play offense in a changing media landscape.”
Both Zaslav and Cavanagh use the same rhetoric. And in both cases they are hewing what are expected to be revenue-generators from the ones they perceive have less promise.

From the outside, it might seem that Universal Studios is a big driver of growth — after all, it produces big things like movies whose gross earning appear every weekend and are news for outlets ranging from E! to CNBC.

But that’s not entirely the case. In the division at Comcast, Studios is in the “Content & Experiences Business” with Theme Parks and Media (like NBC).

Turns out that when it comes to earnings — the actual and proverbial “bottom line” — Media is 42%, Theme Parks 39%, and Studios just 19%. Clearly, the studio business needs to be grouped with those other two categories because it isn’t a particularly compelling business otherwise.

Which brings us back to Advance. When Wintour started at Vogue, print advertising in the U.S. was growing. In September 2007 the magazine had its greatest number of ad pages, 727, something that will never be repeated.

For more than a decade there has been a consistent incremental decline in print advertising such that the number of pages now is a fraction of what they were — and during this time some 1,200 publications have been shut down, so not only are there fewer advertising pages but fewer magazine to carry them.

“A changing media landscape.”

Wintour’s world will not return.

Comcast is making better bank on Theme Parks than Studios. Advance also uses theme parks, Reddit and even Spectrum, its internet service provider, to make its portfolio more enticing. One of Advance’s acquisitions is The IRONMAN Group — yes, the outfit that puts on grueling races. Both of these are more experiential than passive, which is what sitting in theaters and reading magazines are.

So what of the selling off of the 100 million shares of WBD by Advance?

One would think that if Zaslav’s “sharper focus and strategic flexibility they need to compete most effectively” was considered to be the path to additional wealth, then Advance would have held on to those shares.

But consider this: on March 19, 2021 — pre WBD — Warner Bros. stock closed at $77.27 a share. On July 1, it closed at $10.94.

Smart money doesn’t hang around under those circumstances. And it seems as though spectator events and swooping rides may be where the real revenue resides.

This is not to say that Warner Bros. is going to stop making movies any more than Universal will (though one might argue that Universal’s reason for making movies is to generate characters to populate theme parks).

But it is to say that the film industry is undergoing a structural change, one that is occurring at a pace that will make the decline of magazines and other print outlets seem glacial. After all, you can only divide companies so many times before there’s nothing left for division.