BOMBS away!
Scott Crystal, the TV Guide CEO who resigned over the weekend after weeks of mounting tension with the magazine’s new owners, has fired off an e-mail to his former colleagues claiming the current owners are engaged in a “self-enrichment” scheme that will siphon away millions from the money-losing magazine.
And he’s threatening to carry his dispute into court.
The e-mail, which one insider described as “a nuclear bomb,” provides his version of the events that led to his sudden departure and accuses investment firm Open Gate of paying itself advisory fees that could amount to millions of dollars a year.
Crystal, who had been with the magazine for six years through three different owners, resigned late Friday. Open Gate Capital Managing Partner Andy Nikou alerted employees over the weekend in a three-paragraph e-mail that also announced that Executive Vice President Michael Clayton was named interim president and that the search for a successor to Crystal had begun.
Open Gate acquired the magazine late last year for $1 from Macrovision. As part of that deal, Macrovision, which inherited TV Guide as part of the purchase of Gemstar TV Guide International, kept Gemstar’s technology business and agreed to lend Open Gate $9.5 million to finance the magazine purchase.
The magazine is believed to have posted a loss of about $12 million last year after losing about $20 million in 2007 and $40 million in 2006. The company claims it managed to make a profit in the first quarter of this year, but insiders say the rapidly deteriorating ad market pushed it into the red again in the second quarter.
Said Open Gate in a statement: “Open Gate TV Guide Magazine, and its parent company, Open Publishing LLC, feel that the accusations made by Mr. Crystal are both inaccurate and unfortunate. Open Publishing has acted and continues to act appropriately as it manages the business and affairs of TV Guide Magazine . . . Mr. Crystal chose to resign rather than work with new management.”
To the Source
Publishing and magazine-distribution company Source Interlink Cos. late last week completed its sprint through a pre-packaged bankruptcy that lasted 31 days — and avoided a potentially messy battle with the Internal Revenue Service.
The IRS, which had filed objections to the bankruptcy proceedings on the grounds that the company owed it back taxes, appears to have withdrawn its claims after corporate officers convinced agency officials that the checks for the taxes were in the mail and that the whole mess was nothing more than a bookkeeping snafu.
Yet while Source’s Chapter 11 nightmare is over, it may not be quickly forgotten by supermarket magnate Ron Burkle, who had engineered the merger of Allied Entertainment Corp. with Source a few years ago.
Through a series of interconnected companies, the Burkle-controlled Alliance at one time could lay claim to Source stock valued at $234 million, and eventually came to control about 48 percent of Source. After the completion of the bankruptcy, however, Alliance has no equity stake in the company.
Under the terms of the deal, lenders agreed to forgive about $850 million in debt from the company’s $1.4 billion debt load and the lenders extended Source a $100 million line of credit. In exchange, Citigroup now controls about 48 percent of the new privately held company, while Golden Tree Asset Management owns 23 percent and JPMorgan Chase owns 18.5 percent. The smaller lenders split the remaining 10.5 percent.
News weak
The returns aren’t in yet, but the early indications are that Newsweek is doing a great job of shedding readers.
The first issue of the redesigned newsweekly, with a super close-up shot of President Barack Obama on the cover, sold about 2,550 copies at Barnes & Noble stores nationwide — which makes it the third-worst selling cover of the year.
By comparison, an issue earlier this year that featured Obama on the cover for Inau guration Day sold 14,000 copies at Barnes & Noble. And to prove that even issues featuring cover shots of those at the opposite end of the political spectrum also did better: A recent issue with Rush Limbaugh sold 5,200 copies at the retailer.