As he sat wedged next to Powerful Media co-chairman Kurt Andersen at a table two sizes too small for a press conference at the Palace Hotel on Monday, April 2, one could hardly fault Steven Brill for exuding a certain air of glee.
Mr. Brill had been the first to embrace big-time media on media three years ago with his glossy Brill’s Content . But other than a brief flurry of attention for a debut cover story on Kenneth Starr (remember that ?), his magazine was never sexy, never made Mr. Brill a media darling–unlike Mr. Andersen, who had been air-kissed by Howard Kurtz and pop-quizzed in The New York Times Magazine and famously bragged that raising money for Powerful Media was “easier than getting laid in 1969.”
So here in the Palace Hotel, seated beside Mr. Andersen and his colleague, Inside editor in chief Michael Hirschorn, Mr. Brill basked in redemption. The poster boys of media hip were now his subordinates, and it was now his turn to put on the (tattered) mantle of Internet Revolutionary. “Today marks a second evolution of media on the Internet,” Mr. Brill declared.
It was a complex acquisition: Mr. Brill’s company, Brill Media Holdings, the owners of Brill’s Content and Contentville.com, had acquired Powerful Media, the makers of Inside.com and Inside magazine. On top of that, Brill Media had made a deal last January with Primedia Corp.–the publishers of New York and Dog World , among others–in which Primedia took a 49 percent stake in Brill Media and Mr. Brill became chief executive of “Media Central,” Primedia’s media trade group. So Primedia became, in effect, a distant rich uncle in the Brill’s-Inside venture.
Mr. Andersen tried to be diplomatic and dutiful at the announcement, but he displayed all the joie de vivre of a damsel married off to the older, uglier son of the powerful king. By way of mustering enthusiasm for going to work for Mr. Brill, he said: “He is a compelling suitor and tells a great story. Try as I might to convince myself otherwise, I was unable to.”
Michael Hirschorn gave it a try, too: “Steve was the first person to do it with American Lawyer –to focus on a very narrow area of interest and do it with great journalism.” He added: “To vouchsafe this in his hands is very comforting.”
It must have sucked to sit there at the Palace that morning, but the deal wasn’t a total loss for Powerful Media. In fact, considering the grim alternatives, it looked pretty good. Inside magazine was kaput, but the company’s most prized asset, Inside.com, would survive as a Web site. And secondly–and perhaps most importantly–there was also the prospect of a decent return on Powerful Media’s original investment.
Pay attention here, because it gets a little tricky. According to an executive close to the deal, under Mr. Brill’s deal with Primedia, Brill Media stands to receive a big payment in cash and-or stock if Mr. Brill can improve the profitability of the Media Central properties–titles such as Folio , American Demographics , Cable World , Simba , and Circulation Management . Because of the merger, Inside.com can now be deployed as a Web hub to promote the Media Central properties.
Therefore, Powerful Media’s investors–which include firms such as Flatiron Partners, Chase Capital and Goldman Sachs, as well as the stockholders, including all the founders and the employees who have stock options–all stand to benefit from the Media Central-Primedia-Brill Media arrangement. The exact timing of any bonus payment is unclear–one source said it’s at least three years off–but if it works, a source close to the deal said that the Powerful Media investors stand to reap a significant return on the roughly $30 million they invested in the company. And that’s just the potential payoff of a side deal.
“We are pretty pleased with it, all in all,” said Flatiron managing partner Fred Wilson. “It’s been a pretty difficult environment, and in this deal we can participate in the upside.”
Mr. Wilson confirmed The Wall Street Journal ‘s valuation of the deal as being in the $25 million to $35 million range, adding that since it was an all-stock deal, an exact figure was impossible.
But it’s clear that this merger isn’t about cash. Neither Brill Media nor Powerful Media is currently profitable. The biggest asset Mr. Brill brings is largely his relationship with Primedia. Inside, which has gone through at least $20 million in the last year, brings three assets: a fairly popular Web site (373,000 unique visitors this past February, according to Jupiter Media Metrix), $10 million in the bank and a solid editorial staff.
That staff will be dispatched to produce a new monthly magazine, Inside Content , a hybrid of Brill’s Content and Inside’s now-vanquished print magazine that is supposed to blend Brill’s sermonic take on the news media and Inside’s smart and quick-off-the-blocks reporting.
But staffing in general will continue to be a major concern at Brill’s/Inside. After all the talk about branding and stock and cash valuations, the greatest difficulty of this new partnership may be keeping together the talent that Mr. Andersen and Mr. Hirschorn put together.
Mr. Brill tried to downplay the number of layoffs that were going to be involved in the merger. “There will be some, probably,” he said at the news conference. But as soon as the gathering had broken up, it was obvious that both Brill Media and Inside were going to be trimmed substantially.
Minutes after the press conference ended at noon, Mr. Brill went back to his Rockefeller Center offices and brought eight staffers into the conference room to tell them they would be laid off. All in all, 14 employees at the magazine were fired that Monday, including four staff writers, two contract writers and all of the top editors aside from David Kuhn, Brill’s editor in chief, and editor Eric Effron. A staff meeting was scheduled to brief the remaining employees about the changes–but it was put off until 5 p.m., one source said, so that Mr. Brill could take in the Yankees season opener in the Bronx.
“It’s making people increasingly resentful,” said one Brill’s staffer who’s staying on at the magazine. Staffers felt Inside’s editorial group had been largely spared, while Brill’s had been shafted. “Look, their company was bought–it’s not like this was a straight merger,” the staffer said.
At the post-Yankees-game staff meeting, Mr. Brill and Mr. Kuhn assembled the lucky survivors and described plans for the new Inside Content . “The big emphasis was explaining the ways it was going to be oriented to the business of media,” said a staffer at the meeting. The watch-dog element–already significantly toned down since Mr. Kuhn started editing Brill’s last summer–will recede even further, the source said, and coverage of movies, TV and music will be added. (Another Brill venture, a Web-based “All-Star Newspaper,” will be vaporized in May.)
“Steve has always been big about ‘We only do non-fiction stuff,’ and that’s been dropped,” the staffer said.
By 6 p.m., most of the Brill’s Content staff had fled to gather at the West Village bar WXOU to sort out what had happened. One staffer cracked that Inside Content sounded like “the new ‘media-business magazine’ … that wants to be Fortune but will read like Folio . Or Simba .”
Some sounded happy to be jettisoned rather than face that prospect. “I wouldn’t want to be any of the survivors at this point,” a departed Brill’s staffer said the following day. “And judging from the conversations last night, they don’t want to be, either.”
Despite the grumbling over at Brill’s , Inside’s staff hadn’t gotten off easy. Over in media company’s airy Chelsea offices, half of the 100-person staff was in the process of being laid off. Almost all of the staff that had been working on Inside magazine–many of whom were hired just last fall–were fired. Richard Siklos, who edited Inside, will be offered a job at the new Brill venture, but it is not clear in what capacity that job will be.
Also hit hard was the business, marketing and production departments. Mr. Hirschorn flew out to Los Angeles right after the Monday press conference to brief the L.A. bureau. Once he got there, Mr. Hirschorn fired about two-thirds of the 15-person office, including film editor Chris Petrikin and senior correspondent Kim Masters. All in all, a source at Inside estimated that about a quarter of the editorial staff will lose their jobs in the merger.
Mr. Andersen declined to discuss specific figures, but he said his goal was to keep the editorial staff intact. “There’s no point in doing this just to let it die or be smothered or distorted,” Mr. Andersen said. “The incentive is to try to keep this team together.”
The Inside staff had been bracing for an earthquake for some time, as news accounts fluttered for weeks about potential sales. When the word came down on Friday, March 30, that Brill and Inside were close, the staff bailed en masse to do some drinking at a local Chelsea bar. Company sources said that at the time, Mr. Andersen sounded very conflicted about the merger, and expressed doubt as to whether he would remain with the new venture.
Over the weekend, speculation was rampant that Mr. Andersen and Mr. Hirschorn wouldn’t continue on with Mr. Brill. Now that the deal is done–and Mr. Andersen and Mr. Hirschorn have signed two-year employment agreements as vice chairmen of Brill Media–it is evident that the deal probably wouldn’t have gone through if they weren’t on board.
Asked by Off the Record if he would have merged with Powerful Media without the editorial duo, Mr. Brill said: “I honestly don’t know. It would have changed the whole chemistry for me.”
Among those who were not laid off at Inside, however, there was little enthusiasm for working for Mr. Brill.
“This is not what I signed on for,” said an Inside staffer. “I think if I wanted to work at Brill’s Content , I would have tried to get a job there. Nobody’s been sitting here saying, ‘God, if we just worked as part of the Brill organization, we’d be smokin’!’ I don’t think he’s accomplished any more as a company, commercially.”
Reached in L.A., Ms. Masters said she “wasn’t invited” to work for Mr. Brill, but would not have stayed on even if she had been asked. She had worked for Mr. Brill at American Lawyer in the 1980′s, and then quit and went to work for the Legal Times. When Mr. Brill then bought the Legal Times , Ms. Masters said she “literally quit that day.”
Mr. Brill means the end of Inside, Ms. Masters believes.
“For people at Inside, it’s been a great journalistic experience,” she said, “but Steve brings a huge personality into the mix, and it’s not the same free-flow, excited people exchanging ideas. He overhangs his newsrooms.
“Inside is just like Brigadoon : It’s just gone into the mist.”
Mr. Siklos, who admitted he’s disappointed to see the magazine he was editing fold after just a few months, sounded a bit more pragmatic about Mr. Brill. Then again, he still had a job.
“I’ve got to tip my hat to him,” he said. “His brilliance is that he’s just an aggressive businessman, and he keeps on packaging things together and rolling them up.”
But elsewhere, there was wariness. Though none of the remaining Inside editorial staff told Off the Record that they wouldn’t work for Mr. Brill, there is belief that the Kool-Aid served many months ago by Mr. Andersen and Mr. Hirschorn may be wearing off.
“Michael and Kurt had kind of hypnotized us that we weren’t involved in trade reporting,” said one Inside staffer who’s staying.
” Trade ,” echoed another remaining staffer, “was the one word that we weren’t supposed to use from the beginning.”
And thus it became pretty clear that things were different in this toppled little media empire when Mr. Brill stopped by the Inside offices at noon on Tuesday, April 3. It was mainly a get-to-know-you meeting, with few operational details. Some writers, fearful about losing exposure, were worried that Mr. Brill wanted to give less Inside content away for free. “Everything has to be paid for,” according to a person at the meeting.
And there was one other worrisome item. “He [Mr. Brill] did use the word trade a lot,” said an Inside staffer. “I guess he’s not simpatico with the lingo yet.”