Parenting Magazine Case Fit Analysis

Parenting Magazine

30 March, 2012

I. Fit analysis:

i. Opportunity:

• Customers: (a) affluent, well-educated working women looking for a magazine with superior writing and editorial work; (b) advertisers such as those manufacturing children and consumer products, among others; a successful magazine would result in a circulation of about 500,000

• Costs: estimated investment requirement of $5 million; the production cost per magazine is expected to increase 91% from the period of 1987 to 1991 (production costs increase almost 2.25x the increase in circulation); the lack of economies of scale is concerning

• Competition: other parenthood magazines are too lowbrow to attract a well-educated readership, however, Parents has a well-established circulation and will be willing to fight to keep it, perhaps by further widening the gap between the two magazine’s CPMs; additionally, there is a competitor within the target market, Working Mother, which could threaten Parenting’s niche market dominance

ii. People:

• Robin Wolaner: has extensive and award-winning experience not only in the industry, but running a magazine as publisher, but really has no established relationships with advertisers from past positions; teaches Harvard students how to launch magazines as an adjunct, making her estimates and business plan credible; does not have any children which may categorize her passion as questionable, but her dedication to raising the necessary funds shows her resolve; she may be easily influenced by those who give her advice, such as her lawyer telling her to sign the release form, as well as taking Gil Kaplan’s advice of doing a direct mail test despite her knowledge of the technique’s unreliability; from a consumer perspective, it would concern me that someone whose prior work experience includes Penthouse magazine, and whose seed investors included Playboy is now advising me on how to raise my children

• Arthur Dubow: financier from New York and angel investor to the magazine who believed in Wolaner and the idea; helped assemble the rest of the Original Limited Partner team; as a financier would probably be willing to take Time’s offer

• Dort Spurdle: senior executive in magazine development group at Time; initially thinks there would never be a deal between Wolaner and Time with favorable terms for her; insists on capping Time’s buyout rate for Wolaner’s share

iii. Deal:

• Given the acceptance of a buyout of the Original Limited Partners at 3x their investment, Time will invest $500,000 originally, $2.7 million after that, and another $1.8 million if certain benchmarks are met in exchange for a 49% stake in the venture

• If benchmarks