New owner may be wrong fit to save iconic Rolling Stone
When Rolling Stone went up for sale, I was curious to see who would land the storied magazine. Though characterized as the baby boomer bible, Rolling Stone is also important to me — a millennial. As a business student, I found Matt Taibbi’s work on the financial crisis gripping. As someone who grew up in Quincy, Mass., I appreciated the opportunity to understand the killer behind the Boston Marathon bombing. And who doesn’t love Hunter Thompson?
The problem is that in the digital age, Rolling Stone still makes most of its money from print. Jann Wenner, despite his achievements forging a cultural touchstone, is bad at the Internet. The New York Times reported in 2015 that Wenner felt some of his counterparts embraced the web “too quickly.” Consequently, the most important characteristics in a Rolling Stone acquirer are pockets deep enough, patience strong enough and digital skills sharp enough to drag the iconic magazine into the 21st century.
The initial list of bidders included a host of media companies and billionaires, but was eventually whittled down to three parties. In December, Jann and Gus Wenner sold their 51 percent controlling stake to digital media magnate Jay Penske for $50 million, though both will stay on in editorial and managerial capacities. I don’t think Jay Penske is the answer. Penske Media Corporation owns an odd lot of Hollywood-focused trade publications and websites that collectively draw 170 million visitors per month.
It’s unclear what kind of a financial commitment Penske is willing to make to Rolling Stone, but it needs to be significant. On its current course, Rolling Stone’s revenue is expected to be a meager $17 million in 2020; its profits alone used to be twice that, according to Vanity Fair. Wenner recommended slashing the editorial staff as a way to rein in costs — along with focusing on video and going monthly — in his pitch to suitors. For an organization getting battered for its misreporting on the University of Virginia gang rape scandal, perhaps fewer pairs of eyeballs in the newsroom is a mistake.
It’s worth noting that one of Jeff Bezos’ first moves following his acquisition of The Washington Post was to bolster the newsroom staff, not cut. Regardless, it’s likely Penske would need to operate Rolling Stone at a loss for a few years while he gets the publication up to speed on digital and waits for top line growth. Additionally, the $50 million sale price is 40 percent to 60 percent higher than the valuation assigned by competing bidders, and there has been no mention of debt financing. How much more cash can Penske throw into Rolling Stone?
So how behind is Rolling Stone on digital, really? I’ll put it this way; I’m 25 and don’t know anyone who visits the Rolling Stone website. Its monthly traffic is around 17 million, while Complex Media, a modern day Rolling Stone of sorts focusing on youth culture, draws 50 million visitors per month. Rolling Stone’s mobile app on the Google Play Store has been downloaded 10,000 times, better than New York Magazine’s 1,000 downloads but lightyears behind purely digital players Vice and Buzzfeed, which have been downloaded 500,000 and 5 million times respectively.
It’s been said web traffic should be viewed as a barbell. On one side are the website and mobile app, on the other social media. Rolling Stone isn’t faring well on the latter side of the barbell, either. There’s no trace of Rolling Stone on Snapchat, where outlets like ESPN, Complex and GQ feature content. On YouTube, Rolling Stone has just 230,000 subscribers, versus 1.7 million for Complex and 8.6 million for Vice. Intentions aside, Penske and the Wenners do not have experience guiding a publication of such staggering influence through such steep digital challenges.
Rolling Stone is among the most important magazines in American history. Unfortunately, the publication is trapped in a dead business model. Jay Penske sees a viable future, and has put his money where his mouth is. To get back to success, Rolling Stone will need a financial runway and strong dose of digital savvy, perhaps beyond the capabilities of its newest investor.
Here’s to hoping, albeit doubting, a brighter future awaits Rolling Stone.
Matthew Doyle is a financial analyst at General Dynamics Electric Boat and graduate of the University of Rhode Island. He does freelance writing on business and the economy. The views expressed are his own. He can be reached on Twitter @MatthewJDoyle_.
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