Will He Still Love Magazines?

Morningstar's founder, an avid reader, just snagged Fast Company and Inc.

Serendipity smiled on Joseph D. Mansueto May 24th. And he wasn't even in the room to know it. The 48-year-old founder and head of Chicago investment research firm Morningstar Inc. has been a magazine aficionado ever since he discovered comic books as a kid. That's why Mansueto was the first person Paul Sturm, a Morningstar board member and former BusinessWeek editor, thought of during a hushed conversation with the editor of Fast Company, John Byrne (also a former BusinessWeek journalist), at a farewell dinner in Manhattan for, yes, BusinessWeek's outgoing editor-in-chief, Stephen B. Shepard. Fast Company and Inc., both owned by Gruner + Jahr USA Publishing, were up for sale, and Byrne was worried that potential bidders, including McGraw-Hill (MHP ) (which owns BusinessWeek), would keep Inc. but close Fast Company. G+J USA didn't care either way: It was eager to get rid of the magazines and willing to sell them for a sliver of the $550 million it paid for both in 2000. To Mansueto it seemed like just the opportunity he had been looking for. (see BW Online, 6/20/05, "A Buyer for Fast Company and Inc.?")

Over Memorial Day weekend he spent hours reading through deal papers while supposedly vacationing with his family in their Three Oaks (Mich.) summer home. On May 31 he submitted a bid. And on June 27, he walked away with both titles for $35 million, sources close to the deal say. "They are two powerful brands," Mansueto says. "I want to make them even stronger."


Well, sure. But Mansueto has joined the media business at a time when many magazines are having to make do with less and less advertising money as they search for other sources of revenue. During the first five months of this year, Inc.'s ad pages were down 7.2%, to 314.7, and Fast Company's fell 15.4%, to 188.2, according to Publishers Information Bureau. During their heyday in the late 1990s, "you needed two hands to carry them," says Samir Husni, chairman of the journalism department at the University of Mississippi. Now, "you can fold them and put them in your back pocket." As for circulation, last year, G+J admitted that in 2003 it had misstated those figures for all its magazines. And insiders say Fast Company is languishing in the red while Inc. is only slightly profitable.

Guess that's why Mansueto calls this a contrarian investment. He believes the industry will eventually turn around; in the meantime, he says, his new magazines just need a little nurturing. He's convinced Fast Company and Inc. simply fell on hard times amid corporate turmoil that left them with four different publishers in two years. By letting the editors concentrate on putting out the magazines they want to, Mansueto is confident they can generate the buzz they did a few years ago -- despite the tech bust and all. He does want both magazines to build up their presence on the Web, though he won't estimate how much that might cost him. Cleaning up their circulation for advertisers might require several million more, industry experts estimate.

By Roger O. Crockett in Chicago

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