PlanetOut to Buy Advocate, Out Magazines

SAN FRANCISCO (03/23/2000) - PlanetOut has beaten out rival Online Partners.com Inc.'s Gay.com in a multimillion-dollar bid to acquire Liberation Publications, the company that publishes the Advocate and that announced plans just last month to acquire Out magazine.

"It's the coming together of the three strongest, most trusted brands in this space," says Megan J. Smith, CEO of San Francisco-based PlanetOut. "It will definitely rock the gay world that we've done this." PlanetOut and Liberation did not disclose terms of their deal, but Smith says PlanetOut would give Liberation stock and "some cash, in the eight figures." The new company would retain the PlanetOut name.

The move would enable the companies to combine their content teams, increase subscriptions online and offline, and increase revenues by offering packaged deals for advertisers who want to spread their ads across the Web and the magazines, according to Smith. The merger also would give PlanetOut a print-media component to round out its existing radio, TV and film offerings.

For Los Angeles-based Liberation, PlanetOut's strategy and vision would be a nice fit, says James Franklin, CEO of Liberation. "We think our skill set, our marketing talents and particularly our content complement what PlanetOut is doing extremely well," he says. "It was the best home for our publications and our employees." Gay.com's losses do not stop with Liberation -- it's also about to lose the source for much of its news and other information. Gay.com's agreement to use content from the Advocate expires in the next few weeks, and Franklin says it will not be renewed. But a Gay.com executive showed no signs of distress.

Last week, the company announced an alliance with the New York Times to take an equity position in Gay.com's parent company, Online Partners, and to exchange content. Gay.com has deals in the works with other gay and lesbian media companies, too, according to Lowell Selvin, CEO of San Francisco-based Gay.com.

Among the possible contenders are Hero and Girlfriends. Selvin says both have eaten into Out's subscription base. "I think the Advocate is a wonderful brand. Unfortunately, Out is a distressed property in this merger, and [the deal] makes PlanetOut essentially an offline publishing company," Selvin says.

"But [Liberation] fits their culture and their strategy better."

The two companies began their talks about two or three months ago, according to Smith. "We were talking and then the AOL-Time Warner merger happened, and then it got easier to explain to people what we were doing," Smith says.

PlanetOut will continue to focus on its Internet operations, which include its portal as well as content distribution agreements with Web sites such as AOL, Yahoo, Lycos, MSN and NBCi's Snap.com, she says. Lise Buyer, an analyst at Credit Suisse First Boston, gives the merger a thumbs-up. "It's a great benefit to have both an online and offline presence. It's great leverage for the customer base, content and advertisers," she says. The Advocate, which comes out biweekly and is based in San Francisco, has been published for 33 years and has a circulation of 88,000. The New York City-based Out magazine, a monthly that was launched in 1992, has a circulation of 115,000.

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