Source Interlink Bankruptcy Clouds Future for Motor Trend, Automobile

Source Interlink is set to emerge from bankruptcy thanks to a $1B lender haircut and $100M lifeline.

On April 28 Source Interlink filed for bankruptcy protection to seek haven as a private entity. The filing listed debts of $1.9B and assets of $2.4B. According to the Dead Tree Edition blog:

Except for the bank that is acting as trustee for Source’s note holders, the company’s four largest unsecured creditors are the Big Four national newsstand distributors — Time Warner Retail ($75.5 million), Comag ($53.2 million), Curtis Circulation ($42.7 million), and Kable Distribution Services ($22.9).

The bankruptcy came on the heels of debacle in the distribution chain including missing payments from distributors and shennanigans to disrupt SI’s retail presence.

SI publishes over 50 automotive- and truck-related titles including Automobile and Motor Trend, two legs of the vulnerable Fab Four, plus Hot Rod, a title that hit mailboxes when the USA was fresh out of WW II. Struggling Primedia shrewdly unloaded their white elephant to SI in 2007 to the tune of $1.2B on the pretext that SI’s grand plan would grow big fast.

Of the 15 automotive publications I’ve tracked consecutive-year USPS 3526s, Source lost a staggering 222K total circulation with 55% of that amount deriving from subs. Automobile and Motor Trend each dropped about 2% in total circ. These, and Hot Rod’s, ad pages and revenues second quarter 2009 and 2008 are shown in the table below. We’re talking a 25% drop in ad revenues and a 28.6% drop in ad pages:

A cruise through these once-hallowed pages reveal an obvious lack of advertising though impressive multi-page showings by advertisers Weatherteck and Tire Rack, an apparent recipient of Sale Day at the ad department. As Detroit and a number of the furrin makers put the brakes on ad spending, mainstream books are lookin’ thin.

Fab Four circulation meltdown.

Epic Decline in Ad $$.

After reading the various news accounts of SI’s financial meltdown, I wonder what’s all the hoopla is about. We have an organization staffed with print-focused tycoons and circ managers obsessed with newsstand draw. If nothing else, ineffective sub acquisition campaigns and overprinting to serve a declining newsstand audience is perhaps more the cause of SI’s undoing than its resistence to serving today’s web-enabled consumer. And the latter is a pretty big sin.

Then we have the editorial staffers somehow missing the principle concept of news: NEWS! Even episodic new car buyers deserve more than artsy photo shoots and glowing prose. One recent issue of Automobile had editor Jean Jennings waxing poetic over “the new eBay Motors” and what it’s like to buy and sell online. By God Bee Jesus, did she just figure this out? And did anyone at Automobile stop to consider that eBay Motors is a car magazine’s NUMBER ONE competitor? Stop the presses!

Oh, check out the sunshine by Linda Ruth at Audience Development blog. Everybody is a winner and we need SI to succeed. No we don’t. Just like we don’t need three unprofitable domestic automotive companies chasing too few consumers.

Previously I touched on the merits of niche titles that some have suggested will be the first to fall. I disagree. Tightly focused content to a rabid audience of active product buyers is one heck of a winning formula. A look at ad-rich publications such as Street Rodder are ample proof. Motor Trend, on the other hand, is akin to an increasing irrelevant nationally-distributed newspaper. Readily available information to a broad audience is not a winning formula in today’s new media world. And how do you make a good read when “Car of the Year” is a hybrid?

Hear this SI: It’s about the consumer stupid. If readers aren’t buying from advertisers, downsize to an essential chain in the link.

Oh, the best part about SI’s exit from bankruptcy? Current management stays put. Hmmm, sounds like GM under Rick Wagoner.

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  1. It’s worse than you think. I cannot convince our publisher to spend for hard-offer DM and weed out Bill Me’s. It’s all about circ volume.

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