Merchandising, Not Magazines

To find the business logic behind Barry Diller’s IAC buying Meredith Corp., follow the e-commerce trail

Not too long ago, it looked like the sun would set on one of America’s great magazine empires, Henry Luce’s Time Inc., in the cornfields of Iowa. But less than four years after Des Moines-based Meredith Corp. purchased the portfolio of titles including PeopleInStyleEntertainment Weekly (and sold off others, including TimeFortune, and Sports Illustrated) for $2.8 billion, it looks like ownership is set to return to Manhattan, although this time to a Frank Gehry-designed tower in Chelsea.

Last Thursday, The Wall Street Journal reported that Barry Diller’s internet and media conglomerate IAC is in talks to buy Meredith’s magazine and digital business for $2.5 billion.

To some, the deal may look like an exercise in the enduring nostalgia aging billionaires have for fabled print brands. Diller has played collector of 20th-century modern media relics before: He bankrolled Tina Brown’s vision for The Daily Beast and briefly owned Newsweek after The Washington Post sold it for $1.

But if the deal goes through — both IAC and Meredith’s press team offered Off the Record their universal dismissal that they do not “comment on rumors or speculation” — it would say more about where the media is heading today than it where it was last century.

After tech giants hoovered up advertising revenues, publishers’ bottom lines increasingly depend on hawking consumer goods through affiliate marketing programs, and this is where an IAC-Meredith marriage makes sense: It’s not about magazines, it’s about commerce.

Meredith claims to reach an audience of 190 million American consumers, including “95 percent of all women and 90 percent of Millennial women in the U.S.” on one platform or another.

“Meredith’s brands are a good fit for IAC’s e-commerce engine,” said Andrew Perlmutter, a former executive at IAC who oversaw the Newsweek operations. “Dotdash, Angi, and Care.com are all sites that drive high-value consumers to purchase goods and services. Meredith has a wide array of brands that tie nicely into that ecosystem: AllRecipes, Better Homes & GardensParentsHealth, etc.”

A research report shared with Off the Record by financial services company Cowen pointed out that, with Meredith’s estimated $700 million in annual digital revenue, “The deal would add significant scale to IAC’s already strong digital media biz.”

Meredith itself has had a rocky few years since acquiring Time Inc. in 2018, an ultimately disappointing deal that spurred investors to file a class-action lawsuit. (The case was dismissed by a federal judge last October.) Still, their magazine segment pulled in $1.3 billion in revenue in the last year. In June, it sold its TV division to Gray Television for $2.7 billion in a separate deal.

Meredith took second place on License Global’s Top Global Licensors report for 2020, second only to The Walt Disney Co. The company reported $30.1 billion in licensed retail sales in 2020. Today, you can live in a Southern Living-branded residential community, prepare an EatingWell frozen dinner in AllRecipes cookware, and pick up a range of Better Homes & Gardens home goods at Walmart.

If anything, a tie-up between Meredith and IAC would be a throwback to Diller’s career in shop-at-home television. Starting in the 1970s, Diller was a high-powered studio chief in Hollywood, running Paramount Pictures and 20th Century Fox. In 1992, he pivoted to the then-hot media startup QVC which was pioneering a genre of retail entertainment that’s been rediscovered by digital players like Amazon Live and BuzzFeed.

Though Diller has contributed significant funding to novel city landmarks like the High Line and Little Island, the purchase of Meredith would carry on his direct-to-heartland America-marketing legacy.

After the sale rumors appeared last Thursday, Meredith’s share price shot up as much as 31.1% to over $58 per share, settling to around $56 today.

“IAC is known for savvy dealmaking, so even though $2.5 billion is a large number, I’d be surprised if this wound up being an overpay,” Perlmutter said.