Essence of the deal: what does Time Inc.'s takeover mean for the popular black women's magazine?

For 35 years, Essence magazine has been a household name, projecting the image and voice of a proud and independent black woman. And that powerful brand is more than just the flagship of one of the nation's largest black-owned businesses. It's one of black America's enduring institutions.

But on Jan. 4, Time Inc., the magazine publishing arm of media giant Time Warner, announced it will acquire the remaining 51% of Essence Communications Partners. When the sale is approved by federal regulators, ECP (No. 30 on the BE INDUSTRIAL/SERVICE 100 list with $136.2 million in sales) will leave the ranks of the BE 100S for good. Financial terms of the deal were not disclosed by ECP or Time Warner but it has been reported that the transaction is valued at roughly $170 million.

The acquisition, announced as Essence d approaches its 35th anniversary in May 2005, ends five years of speculation. In 2000, when the media giant acquired 49% of the company, industry observers projected it would buy the rest. To some, the 2000 transaction was viewed as the takeover of yet another black institution--especially since it was completed on the heels of Viacom's $3.9 billion acquisition of Black Entertainment Television and after a decade of mergers and acquisitions that virtually wiped out African American ownership within the black haircare industry. The deal also decimates the number of major black-owned media companies: ECP was one of a triumvirate of national black publishing companies that includes Chicago-based Johnson Publishing Co. (No. 4 on the 2004 BE INDUSTRIAL/SERVICE 100 list with $488.45 million in gross sales), publishers of Ebony and Jet, and Earl G. Graves Ltd., parent of this publication.

The story of how Essence became part of Time Inc. is one of high ambitions to forge an international empire and an internal fight for the soul of an institution. The overriding question is whether black women will lose a strong voice that spoke to their aspirations and has faithfully served as the bully pulpit in the fight against racism, sexism, and other barriers to their ascension.

THE LOSS OF A FRIEND

When the acquisition was announced, Chairman and CEO Ed Lewis, who will turn 65 this year, said in a statement: "Time Inc. has distinguished itself by recognizing the impact of African Americans on a global scale and their influence within the cultural landscape. Thanks to our partnership with Time Inc., Essence Communications is a stronger, more competitive publisher."

For Time Inc., the transaction enables it to expand its portfolio of publications and make inroads into the lucrative black consumer market. "[Essence and Suede, both targeted to African American women], are an incredible group of magazines," says Time Inc. Executive Vice President Nora McAniff, who oversees all of the company's women's magazines. "The one thing that's very unique about our Time Inc. brand is that we have not only huge titles but we also have diversity. So it's a great fit and a great complement to our brand."

But many did not view the transaction in such rosy terms. The announcement of the acquisition ripped through quarters of the African American community like a shockwave. In fact, a number of black women were crushed, responding to the news as if they had lost a dear friend. A blackenterprise.com poll found that 34% of respondents felt that ECP had "sold out" vs. 14% who felt the transaction made good business sense. Another 46% of those who replied were concerned with how the new ownership structure would affect the magazine and other events. For instance, Leslie Mays, president of the National Coalition of 100 Black Women and an Essence subscriber, found it "extremely disappointing on a personal level" to learn ECP surrendered control and ownership of the publication. "It enables Time to reach an influential market segment--black women--directing our dollars away from reinvestment in our community and businesses and into the deep pockets of another multinational corporation," she asserts. "I also have a worry that such a deal almost certainly I guarantees loss of editorial control and content on I subjects of interest and concern to black women as a primary audience. Time Inc.'s purchase of Essence seems to be somewhat incongruent with the stated aspirations and goals of its parent company's commitment."

Ken Smikle, of Chicago-based Target Market News, a market research firm that tracks consumer trends, approved of the deal but explained that the Essence sale hit a raw nerve because it represented the loss of one of "our cultural guideposts" like Motown, BET, and black haircare companies. "These are institutions that we share a common experience with. They are woven into our everyday life," Smikle. "We feel that lost something because these institutions and their ownership by extension represent a part of us."

Adds Marcia Gillespie, who served as editor-in-chief of Essence from 1971 to 1980: "As a people in the 1970s, we were searching to own and control our own businesses. It was about black entrepreneurship and all that implies so [the sale] is counter to that. I have mixed feelings about the sale because it signals that we are headed in a different direction than what our dream was about. We lost a piece of our history."

Others like BET CEO and founder Robert L. Johnson size up the deal as part of an evolutionary model of the black media business--a paradigm shift that includes deep-pocketed corporate partners and, in some cases, acquirers. "The only reason Time Warner would want to buy [Essence] is because of the strength and power of Essence's voice that has been built up over 30-plus years that Ed ran the business," he says. "It's just a sheer economic fact of life that over time, as black companies become very valuable for their brand and market penetration, it's going to be very difficult for African American [potential buyers] to offer the kind of financial transaction that's going to maximize shareholder value for the seller."

Smikle, too, believes the deal is part of Essence's evolution as a company. "Essence is not Johnson Publishing or BLACK ENTERPRISE," he says. "It's not family-owned and there wasn't an heir apparent. The comparisons are inaccurate at best and unfair at worse."

However, the founder of one BE 100s company with a major multinational corporate partner managed to keep the institution in black hands. When Thomas J. Burrell decided to step down from his post as chairman and CEO of his Chicago-based firm, Burrell Communications Group (No. 3 on the BE ADVERTISING list with $190 million in billings), he carefully crafted a succession plan that gave his three top managers an even share of the 51% majority ownership the firm retained after its merger with Publicis Groupe. The French global advertising and communications agency still retains its 49% minority stake.

Says Rev. Al Sharpton, president of the National Action Network, a New York-based activist group, "in this era of megamergers, we must be careful as we expand our resources that we do not eradicate black institutions with an independent voice. If we are not cautious, we will become a community with no independent institutions to combat racism and discrimination as well as interpret our culture and tell our story."

The former presidential candidate says he met with Lewis shortly after the announcement of the sale. Sharpton said Lewis told him that he sold Essence to Time Inc., in part, "to do what Bob Johnson did"--use the proceeds, clout, and connections from his corporate dealings to build other black institutions. But Sharpton counters that there are a number of African Americans in the financial community with the ability to raise the capital to purchase Essence and, at the same time, maintain black ownership. He argues that black entrepreneurs and financiers should have at least been given the option to make a bid. "Although blacks may have not been able to amass the $3.9 billion it took to buy BET, they could have put together the funds needed to purchase Essence," Sharpton asserts. "I told them that we should bring these opportunities to the dinner table [before bringing them to] the neighbors first, so we can keep things in the family."

Sharpton says that the preservation of black institutions is such a pressing issue that he intends to call an emergency summit to assemble black entrepreneurs and financiers to develop strategies and create funds that would have the available capital to acquire black-owned businesses.

Since its inception, the Essence that was co-founded by Lewis and his partner, Clarence O. Smith (along with Cecil Hollingsworth and Johnathan Blount), was rooted in the same basic editorial and business philosophy as the other two top African American publishing companies--one of black independence and empowerment. In fact, when Essence forged the alliance with Time in 2000, Lewis asserted the company would maintain its commitment to black ownership. As the partnership with Time was set in motion, however, it became clear that Essence would eventually surrender control.

INTERNAL STRUGGLES

When ECP and Time became partners five years ago, the merger was considered an example of a workable partnership between a black entrepreneurial-based firm and a corporate giant. In fact, Lewis had said that Essence would benefit from a reduction in production costs, increased exposure, and access to myriad divisions under the Time Warner umbrella, which includes titles such as Money, Fortune, People, and InStyle.

But within two years, the alliance created internal strife within the corridors of ECP. A number of Essence employees, in areas such as sales, marketing and research, were replaced with Time Inc. employees in what had been characterized as housecleaning after the 2001 Essence Music Festival. Clearly, the most damaging rift, inside sources told BE, was the one between the two founders on strategic and management issues. Smith, who had served as a CEO of Essence Entertainment and oversaw the music festival, awards show and Website, had become increasingly resistant to the influence of Time Warner. In 2002, Smith resigned, but sources said that he was removed as part of "the slow takeover of Essence" that would take place within three years. Smith's departure brought to a close one of the longest-running entrepreneurial partnerships in black business. (See "Essence of a Breakup" in the blackenterprise.com archives.) Smith declined to comment for this article.

A CHANGE IN MANAGEMENT

Under the new structure, Lewis will serve as nonexecutive chairman. Group Publisher Michelle Ebanks, a Time Inc. veteran, will take the helm of ECP as its president. Editorial Director Susan Taylor, the face of Essence, will continue in her role as chief visionary for the magazine. While both Lewis and Ebanks declined to comment for this article, an Essence spokesperson told BE that "African American women should maintain their confidence that Essence will remain true to them because there will be no change in the editorial voice of the magazine. Essence will remain focused on our mission to inspire and empower African American women."

Despite the top management changes at Essence, Time Inc.'s McAniff says all parties will basically continue to perform the same duties. "[Ebanks, who came to Essence from Time Warner in 2001], really was running the day-to-day as it was," she maintains. "So we're just making it more official. [Lewis] couldn't have the title of executive CEO anymore because Time Inc. has a CEO. But he's very much going to be a presence at the [Essence Music Festival]." In his capacity, McAniff, says Lewis will continue to promote the Essence brand to advertisers and professional organizations at industry and marketing events.

While concerns abound about the shift in the editorial vision, McAniff assures that Essence and Suede magazine readers as well as participants of Essence events won't notice any differences, insisting that "all of our magazines have to maintain [their] staffs to do their own thing."

Some longtime readers of Essence, however, remain skeptical. "I think it matters in the sense that Essence is no longer black-owned, which is one of the appeals of it," says Angela Polk, a 32-year-old attorney from Bowie, Maryland, and Essence subscriber. "I won't know until new issues come out whether the direction of the magazine has changed."

One area where the synergy between Time Inc.'s various titles will be evident is in the advertising arena. McAniff says Time often sells ads as packages in multiple magazines and plans to continue that practice with Essence and Suede. For example, a company could purchase advertisements in both Suede and InStyle and, as a result, increase the new division's revenue stream.

Even if the deal brings no immediate changes, it signals the end of another African American-controlled institution. Says Richard Prince, a media columnist for the Robert C. Maynard Institute for Journalism Education: "Now anytime Essence does something that people are suspicious of, they'll probably consider blaming it on its ownership by Time."

But BET's Johnson believes the thrust of Essence will stay intact. "[You] don't buy a strong brand, trash it, and then try to convince customers to come back," he says. "[You] say, 'Here's a strong brand. Let's do everything we can to make it better.'"

Maintains Gillespie: "When we start talking about media, we are talking about the power of information. Those who control the messaging have enormous clout. I would hope that the central mission of the magazine would not be tampered with. I certainly know that as long as Susan Taylor is there, that will be so."

For now, the readers of Essence are waiting to see if the sale of their magazine is tantamount to the loss of their voice.

--Additional reporting by Tamara Holmes and Sakina Spruell

Better In Time?

                     TIME INC.

Books          Time Warner Trade Publishing
Publications   Titles include:
               Time, People, Fortune, Money, InStyle,
               Business 2.0
Entertainment  Warner Bros., New Line Cinema
               HBO, TNT, TBS
Cable,
 Interactive   Time Warner Cable,
               AOL

               ESSENCE COMMUNICATIONS PARTNERS

Events         Essence Music Festival
               Essence, Suede
               Essence Award Show
Interactive    Essence.com

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