Inc.'s first major hurdle in its uphill climb toward
fiscal solvency is just days away. After posting a
$6.9 million loss the first quarter of this year, the
company's lender set June 30 as the date by
which it must raise at least $7 million--with another
$8 million to come by August 31.
To that end,
PlanetOut put SpecPub, its adult-entertainment division, up
for sale in early June. It has also retained investment
banking firm Allen and Company to review all aspects
of the business and assist in a turnaround--a
process company executives predict will take about 18-24
step is to get the company capitalized sufficiently,"
Dan Miller, PlanetOut's chief financial
officer, said. "That's part of the logic
in selling the adult business." But he declined to
say whether SpecPub already had suitors or if
PlanetOut was anywhere near meeting the June 30
company executives will talk "at length" about
its capital commitments at the next earnings call,
which will take place in early August, if not before
PlanetOut's last earnings call in May that set off
alarms in the financial community, even as a report
was released weeks later that showed ad spending in
gay media reached record highs in 2006.
In addition to
the $6.9 million loss, the San Francisco-based
company--owner of Planetout.com, Gay.com, The Advocate
, Out , and RSVP Vacations, among
others--projected a $7-9 million loss for the entire
year. That sent its stock price plummeting to an all-time
low on May 22 of 86 cents a share, a drop of 89% from
its 52-week high of $7.95.
has two outstanding loans: one for $7 million due over the
next six months; and a second loan of $10 million, most of
which is due over the next four years.
The company has
been hamstrung more than anything by the poor performance
of its travel and cruise subsidiary, RSVP Vacations, in
particular lackluster bookings on a trans-Atlantic
cruise aboard the Queen Mary that culminated earlier
this month. The low occupancy, plus related fines,
resulted in a $700,000 hit on first-quarter earnings.
But Miller noted
that customer satisfaction rates for RSVP cruises are in
the 90th percentile and said bookings for future trips
"are on track with our expectations, and our
expectation would be that they would be
to the company has been a decline in ad pages and
revenue at flagship titles such as The Advocate and Out ,
which have been below what was forecast to Wall
Street. Compared to first quarter 2006, ad pages are
down by 41% and 14.3% respectively, according to Publisher
Information Bureau figures.
However, LPI has
been investing in content and design improvements for
both publications, which Bob Cohen, president of the
division, expects to have a positive impact on the
bottom line. Out completely relaunched last year, and
this September, The Advocate will premiere an overall
redesign, led by Luke Hayman, who recently redesigned
Time magazine and, previously, New York. Cohen has
also beefed up the sales and marketing staff with a
series of new hires.
"A lot of
the things we're doing now are really designed to
have maximum impact during the second half of this
year, when a lot of media buying decisions are being
influenced and made," Cohen said. "The result
of that will play out in 2008 with more to come in
such as Lexus, have already started to return, but
Cohen added that there was no "internal
deadline" for reversing sliding sales.
"Ordinarily, that's a process that would take
12-18 months," he said.
As for selling
the SpecPub unit, Cohen said it was an obvious move for
several reasons: it's very profitable (though he
declined to provide exact numbers); it's mainly
a subscription-based business and PlanetOut is moving
toward an advertising-based revenue model; and adult
entertainment makes some investors uneasy.
PlanetOut's slump, the overall health of the LGBT
media market continues to improve, with ad spending in
gay and lesbian publications reaching a record $223.3
million in 2006, an increase of 5.2% over 2005 and an
increase of 205% since 1996, according to the latest edition
of the Gay Press Report, an annual survey produced by
Prime Access Inc. and Rivendell Media.
During the same
ten-year period, ad revenue for all consumer magazines
increased by only 47%, translating to a compound annual
growth rate of 4%, versus 11.8% for gay media.
"There's a lot of evidence that gay media is a
growing market," said Bob Witeck, CEO of
Witeck-Combs Communications, a Washington, D.C., firm that
specializes in LGBT marketing. "You see it in the
online social networks that are emerging, plus the
advertising base support of Viacom's
Logo--Logo now has over 100 advertisers in that
PlanetOut got squeezed for cash before it was able to
capitalize on the collective power of its media brands,
especially since the acquisition of LPI in 2005.
"I presumed that there was going to be a brand
integration in terms of building brand affinity across
properties," he said, "but I guess there
was not enough time to do that."
company's current financial state, Witeck thinks
LPI's major titles are still buoyed by their
legacy to the community. "The bedrock
properties--The Advocate , for example--I think
are solid," he said, noting that amid the
incessant flow of news, gay media brands highlight issues
of importance to gay people.
year elections matter more than the year before,"
said Witeck, using one example. "It's
gay media content that's going to clarify for
gay voters what's going on."