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UPDATED: Licensing Deal Struck With AMI, Source Interlink Companies

AMI will now be in charge of all publishing functions for Soap Opera Weekly and Soap Opera Digest.


This article was updated April 20 after Audience Development magazine corresponded with both David J. Pecker, Chairman, President and CEO of American Media, Inc. and Stephanie Justice, Executive Vice President and Chief Administrative Officer for Source Interlink Companies.

American Media, Inc. [AMI] and Source Interlink Companies announced a joint partnership Thursday that will change operations for Soap Opera Weekly and Soap Opera Digest.
 
Effective immediately AMI will assume control of supportive services for both magazine titles as well as the editorial content, production, circulation, advertising sales and marketing plans as well as distribution and Web site maintenance. The agreement is expected to last for four to five years. AMI will also gain control over Pixie and the puzzle books Source Interlink Companies have produced.

Executive Vice President and Chief Administrative Officer for Source Interlink Companies, Stephanie Justice, says her company will still own the titles under the licensing agreement.

“It was going to be difficult for [AMI] to purchase [the brands] so to structure the deal we license it and they take over the production support of it,” she says. “I like to frame it as an outsourced services type of agreement.”

Justice declined to talk about the financial terms of the licensing agreement but says the two companies will share in the profits.

When asked about the financial terms, Chairman, President and CEO of AMI, David J. Pecker, says, “Scalable fees are the basis of our Publishing Services business unit. We charge for our services as we perform them.”

According to AMI’s Web site, “AMI’s new Publishing Services business unit provides a menu of services, from production and circulation to sales and marketing, for small and mid-sized publishers and is a new revenue stream for the company. This unit incorporates AMI’s wholly owned subsidiary, Distribution Services Inc. (DSI), the largest sales and merchandising in-store marketing company in the U.S.”

DSI will now handle newsstand operations for the soap opera titles.
 
Justice says the partnership was hatched because the majority of Source Interlink titles target a different audience from Soap Opera Weekly and Soap Opera Digest, while AMI publishes similar celebrity journalism content including The National Enquirer, Star, Country Weekly and TV Guide – these audiences reach an average of almost 40 million readers.

“It didn’t fit as a strategic goal long term to stay with the soaps and support them,” Justice says. “It just kind of made sense based on the advertisers that are in their core brands, they were the right partner given that there are similar type advertisers that deal with weekly products and have those production schedules down to a tee. There’s a lot of synergies in the backroom that could be garnered by them representing [the brands], it’s very different from our core brand portfolios where we’re monthly automotive titles, action and sports -- our core demographic group is males from 18 to 34.”

Source Interlink has over 70 titles that are mainly monthly publications and focus on sport and automotive type content, making the two soap opera titles stand out among their vast portfolio.

“This agreement is ideal for American Media as both soap opera titles fit strategically into our entertainment group,” Pecker, said in a news release. “Advertising clients will benefit immensely as we will now deliver the most efficient ad buy in the celebrity category for consumers.”
 
Under the partnership, AMI assumes all publishing functions. Pecker says that it’s “highly unlikely” that the titles will be returned, though Justice did say if AMI decided to shutdown the titles Source Interlink “would be apart of that decision.”

When asked if Source Interlink could at some point completely sell both titles to AMI Justice said, “Yeah, obviously at the end of the agreement we’ll see where these soap titles are. The other thing related to the category as a whole is the soap opera consumer group is slowly diminishing, it’s not something that’s being passed on generation to generation.”
 
President and CEO of Source Interlink Companies, Michael Sullivan, said in a news release that the transaction will allow the company “to focus on the continued growth and investment in our core enthusiast brands, while positioning our sales and services company, to focus on its long-term vision of fully capitalizing on the vertical integration of our wholesale magazine distribution assets.”
 
In 2009 AMI acquired similar duties for Playboy magazine, though that publication maintained editorial control, as initially reported by Audience Development’s sister publication, FOLIO:Magazine.
 
About 25 individuals were working on both soap opera titles at Source Interlink and had the opportunity to interview for continued employment at AMI, according to Justice.

“Obviously they’re not taking all 25 but they were all interviewed and AMI is in the process of looking through what the needs are going to be and then we’ll present some offers. They’re scheduled to do that this week, I haven’t heard who they’re going to take, but they are schedule to put some offers out,” she says.

As of right now, AMI will be in the drivers seat.

“We’ll have to see exactly where the category goes,” Justice says. “It’s a license and at the end we can decide, ‘Do we want it back? Do we want to extend the license? Do we want to purchase it?’ We’ll see where it goes.”


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