BLOWBACK from Condé Nast’s surprise move to replace the ad-sales team of Brides magazine with staffers from a just-shuttered pub is intensifying as insiders warn that the company appears to be juggling severance packages so it can make more meager payouts.
According to sources, the 16 people who made up Brides’ ad team are getting two weeks’ pay for every year of service. By contrast, the 180 people axed Monday when four mags were closed are getting paid for 90 days under the federal Worker Adjustment and Retraining Notification Act. After that, they’re due a week’s worth of pay for each year of service.
“People are really disillusioned by the way Brides’ staffers were treated,” said one insider.
Condé also has an unwritten rule that when publishers move from one title to another no more than five of their staffers from the previous magazine accompany them.
But new Brides Publisher Carolyn Kremins, who jumped the sinking Cookie ship, is bringing more than a dozen ad salespeople to Brides, bumping staffers from the bridal title.
“There were very senior-level discussions [about] how they were going to roll out the layoffs so they could avoid the WARN Act payouts,” said one person.
“They were playing out all kinds of scenarios,” which “shows the company has no regard for their employees — or the law to protect employees.”
The resentment is also getting personal — and creating a sense of dread in the Times Square headquarters — as more cuts are forecast. There have been four consecutive days of bad news at the glitzy publisher.
Said one ex-Brides staffer of Chief Executive Chuck Townsend: “Who can trust the guy? He never once looked any of us in the eye when he was explaining his reason for replacing [ousted Brides publisher] Alison Matz.”
Matz was axed Monday. Cookie, Gourmet, Elegant Bride and Modern Bride were shuttered this week.
A Condé Nast spokeswoman declined to comment on the turmoil, which was first reported by the New York Observer.
Editors and publishers are expected to turn in cost-cutting plans within the next week or so, and reductions of at least 25 percent are expected. The trims are the result of a review by McKinsey & Co.
Expense savings that deep all but guarantee more layoffs, but how many remains an open question.
Sea of red
It’s clear that Condé Nast will lose money this year, but how much has become an industry guessing game.
Newsweek yesterday floated an analysis that Condé Nast would be down $1 billion in ad revenue this year. Several industry sources say the real number will likely be in the $400 million-to-$600 million range, reflecting the loss of more than 6,000 ad pages.
One flaw in Newsweek’s analysis is that the magazine used ad- revenue numbers from the Publishers Information Bu reau, which draw on a magazine’s one-time ad- page rate to figure out ad income.
Condé Nast has always boasted that it does not offer discounts off the rate card.
But built into the ad-rate card are frequency discounts. And since 85 percent of the company’s ad revenue now comes from corporate buys across many titles, it’s safe to assume that the vast majority of advertisers are getting frequency discounts that are better than the one-time page rate.
In addition to ad losses, there has been wide speculation on how bad Condé’s red ink will be this year.
One number that was floated was up to $200 million, but Townsend insisted the losses aren’t that steep.
“We are having a very painful year, but it is not that bad,” he said. “It’s way off. It’s an order of magnitude of 10 times off.”
Townsend’s estimate does not account for the one-time expenses associated with the six magazines that the company folded this year, nor for the huge severance payments doled out to existing editors and publishers.
One source said that in the past, the top executives were given a five-year severance package worth millions. Under that formula, Ruth Reichl, editor of the just-folded Gourmet, who pulled in $1 million a year, could walk away with a severance package of $5 million.
And then there are subscriptions and other liabilities that must be absorbed from the folded magazines. Those costs could total up to $10 million or more a year for four of the six titles shut down this year.
When those numbers are factored into the formula, net losses are easily north of $100 million and could approach $200 million in a worse case scenario.
A Condé Nast spokeswoman declined to discuss the company’s severance packages or financial health.
Defections
As the yet-to-be-sold BusinessWeek slowly twists in the wind, the brain drain of editorial talent has begun.
At the same time that Thomson Reuters is emerging as a contender to buy the struggling business mag, that very company is snagging a number of BusinessWeek editors and writers.
Ever since McGraw-Hill Cos. put the magazine on the block in July, the Reuters newswire service has hired Matthew Goldstein, Jason Bush and Aaron Pressman.
Meanwhile, others are leaving journalism altogether, including Detroit-based David Kiley, who is quitting to join a marketing firm.
But perhaps the most high-profile defection so far is that of Brian Grow, who was part of BusinessWeek’s investigative team. He’s jumping to the Center for Public Integrity in Washington.
“A lot of people have been interviewing,” said one source. “They are apprehensive. I think people realize no matter who takes over there will be layoffs.”
Even insiders who have suffered through three downsizings in the past three years concede BusinessWeek’s staff is “bloated” given the ad-page collapse.
Ten years ago, the magazine was making $100 million; this year, it is expected to lose more than $60 million.
Meanwhile, the bid for BusinessWeek by Strauss Zelnick of Zelnick Media was strengthened by a report that Thomson Reuters would team up with the Zelnick’s bidding team, which already counts former Dow Jones executive L.Gordon Crovitz as an adviser.
The news comes as TV Guide owner Open Gate and Daily News owner Mort Zuckerman are said to be out of the hunt.