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Twice failed; dim prospects for revival of a South-oriented magazine with demise of Southern, Southpoint.

Twice Failed Dim Prospects For Revival Of A South-Oriented Magazine With Demise of Southern, Southpoint

Stephens Inc. is exploring remote possibilities for reviving a Southern regional magazine, after disappointments as a financial backer to publishing groups at Little Rock and Birmingham, a spokesman says.

Southpoint, the latest Stephens-backed magazine venture, ceases publication with its June issue, following a decision by the Alabama-based Southern Progress Corp., the magazine's majority owner and a wholly owned subsidiary of Time Warner Inc.

(Early in March 1989, when control of Southern magazine changed hands, Time Inc. owned Southern Progress. Later that month Time merged with Warner Communications Inc. forming Time Warner Inc.)

Stephens, which had been a majority partner of Southern, Southpoint's predecessor, sought the financial backing of Southern Progress, instead of allowing the Arkansas Writers' Project to maintain its role as the publication's managing general partner. (See Arkansas Business, March 27-April 9, 1989.)

"Stephens and John Huey, the editor of Southpoint, are both pursuing a couple of possibilities to keep the magazine going, but the chances of doing so are remote," says Doug Martin, a VP and investment adviser at Stephens, a Little Rock investment banking firm.

Double Disappointment

"We were disappointed in the performance of both our publishing partners, Arkansas Writers' Project and Southern Progress Corp.," Martin says.

Under the Arkansas Writers' Project, Stephens' ownership ratio was within a range of 25 percent to 80 percent, depending on several factors, says Martin. Under Southern Progress, Stephens' share ranged from 30 percent to 35 percent.

Stephens Inc. officials generally hesitate to talk about their business, but Martin was especially reluctant in view of his company's losses. He issued a written statement and then listened to a reporter's questions, replying to only a few and choosing his words carefully.

"Stephens stands to lose a considerable amount of money on the Southern/Southpoint venture, but it's less than the $7 million figure being bandied about," Martin says.

"That's the nature of venture capital or any kind of investing: You win some. You lose some," he says. "Contrary to popular belief, we do make investments that don't work out."

Southern Progress promised to spend $4 million on Southpoint, but Martin says Time Warner actually invested about $7 million.

Southpoint's first issue was published in October 1989. Southern's lifespan was 32 issues, premiering in October 1986.

Both magazines never met projections, but Southern showed signs of profitability and Southpoint was improving its advertising revenue before being shut down, sources say.

Southern had one profitable month in 1988 and its first profitable quarter through the end of March 1989.

Despite the emergence of black ink, sources say the costs of increasing or maintaining circulation and advertising made sustaining profitability difficult.

Don Logan, president/CEO of Southern Progress, says "According to all indicators, the magazine [Southpoint] wasn't measuring up to expectations." Time Warner folded the magazine after disappointing circulation and advertising sales, a higher cost to acquire new subscribers, and gloomy prospects or long-range capital requirements.


"I was just quoted a week before, saying we didn't have any problems," Huey says.

The Atlanta Constitution speculated the magazine had problems because it was going to 10 times a year from once a month. January and August issues were to be combined with other months because advertising revenue is slow during the periods. "I had participated in that decision, and it wasn't made out of any panic or weakness," Huey says.

"I believed we had a long-term commitment," he says. "There was no duplicity in statements I was making."

Three days before he learned officially, Huey got an inkling that Time Warner's support for Southpoint had wavered. An article quoting a top corporate official about regional magazine strategies did not mention Southpoint.

His feelings are similar to that of a baseball manager fired by team owners. "They always get up and say they're one thousand percent behind their manager, and then they get up and fire him the next week," Huey says.

His first reaction: "Shock. Fait accompli. It was not a debate. It was a done deal."

Time Warner gave up trying to make Southpoint profitable, but is focusing on another magazine acquisition, which appears to fit in better with its publishing goals. Huey says the media conglomerate is devoting its resources to meshing its highly successful Southern Living (2.3 million circulation), a popular magazine focusing on the Far West. Time Warner announced in March plans to acquire Sunset, but a final agreement has not been signed.

Southern's Demise

Early in 1989, Alan Leveritt, publisher of Southern who with Linton Weeks, its editor, conceived the magazine, sought $2 million more in working capital to replace and add 15,000 subscribers.

Stephens, who reportedly invested $5.5 million of its own money and secured $1.5 million more from several investors to start the magazine, balked at Leveritt's plea.

While Stephens listened to a proposal by Time, Leveritt scrambled on hiw own. He found additional financial backers, but his alternatives still required sizeable contributions by Stephens.

Stephens went with Southern Progress for two reasons: Southern Progress had a solid publishing track record, and Time Inc., not Stephens, would make any additional investments required to keep the magazine alive.

As a result, the investment house would share in any profits under a partnership with Time, but would not see its risk increase.

"Southern Progress [Time Warner Inc.] never matched our advertising sales. They never matched the response we received from direct mail subscription solicitations, and despite the fact that our subscription renewals were running 38-42 percent instead of the 45-50 percent as projected, Time could never even come close to those figures," Leveritt says.

At the time that Stephens decided to substitute publishers, Leveritt says he had worked out an agreement with the Merredith Corp. of Des Moines, Iowa, to invest $500,000 in cash and provide fulfillment, printing and other publishing services. Stephens would have been required to invest at least another $1.5 million, Leveritt says.

Martin says it would have taken considerably more than $2 million for the magazine to break even under the Arkansas Writers' Project.

"We enjoyed working with Doug Martin and Stephens," Leveritt says. "We regret that they were disappointed and felt the need to go with Southern Progress."

Leveritt says, "They [Stephens] were enamored with a relationship with Time Inc. and Time Inc. destroyed the magazine."

PHOTO : FINAL ISSUE: The Southpoint now at newsstands is the final issue of a magazine born under a partnership of the Arkansas Writers' Project and Stephen Inc.
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Author:Kern, David F.
Publication:Arkansas Business
Date:Jun 4, 1990
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