Big changes at the Wine Advocate- Parker reportedly cashes out and gives up editorial control

[Ken_V]

@Eric LeVine

@GregT

This was surprisingly cold however, and makes me think he’s really relinquished pretty much all control:

__

Ms. Perrotti-Brown said the company is discussing terms with its correspondents, who include lead critic Antonio Galloni, as well as David Schildknecht, Mark Squires and Neal Martin, whom she and Mr. Parker hope will sign on as employees. If they decline? “There is a plethora of good wine writers out there. It’s a buyer’s market,” she said. >

Yes, that one shocked me too. Ouch.

Eric, have you already got her number on speed dial? Or is it no longer going to be worth the effort?

[Brady_Daniels]

@Ken V

Eric, have you already got her number on speed dial? Or is it no longer going to be worth the effort?

And how good is CT’s support for Mandarin?

[Ian_Fitzsimmons]

@Andrew Hall

@John Morris

…And they’d have to pay him for the business – say $4 million (1x revenue). They’ll want a return on that investment. A 20% projected return (quite plausible for this kind of expansion capital investment) would be $900,000, or almost all the rest of the profit. .

While typical for buying a business, not so for buying a brand. I suspect the purchasers are paying (and Parker would expect to be paid) on the value that can be gained from the brand. It sounds from the get-go they are looking at expansion in ways RP didn’t which would be consistent with this approach.

I think it is very smart. The potential market for the WA brand in the US is not growing and with all the specialist venues and free information, the markets segments are really just fighting over the same shrinking pie. Porting the brand in a significant way to a growing market could be extremely profitable.

A.

This is exactly right, imo: the buyers want the brand, planning to shift from a subscriber base still largely founded on loyalty to one mainly founded on prestige, in a young, more highly-populated market, where the influence of prestige is relatively great. The introduction of advertising will steer the WA in the direction of luxury life-style pubs, like the Spectator.

As John noted earlier, the WA substantially changed its character when it shifted from two writers to a full staff; after a little time, the new version will bear little resemblance to the original, imo. Unrelated, Salmon’s suggestion that scoring will fall by the wayside seems weak.

[brigcampbell]

Business or organizations built on this model struggle when the leader steps aside. Whatever the TWA transition, it will be significantly different in the future.

My first and last post regarding RP.

[Russell_Faulkner]

Any examples of ‘franchises’ surviving the main input of those contributing to the success. Is Halliwell’s movie book still going?

[L_e_o_F_r_o_k_i_c]

@Frank Drew

Chase,
Perotti-Brown is based in Singapore, right? TWA is being sold to three investors from Singapore. Is it out of the question to wonder if P-B had some hand in putting that deal together, perhaps with the proviso that she ends up in the catbird seat? A coup d’etat at TWA?

This is the most plausible explanation to what has happened. I think she got the investors before others could and boom, she’s in charge!

[Bill_Klapp_deactivated]

@Ken V

@Bill Klapp

Anybody who has access to the other board needs to check out the thread on this. After a couple of the clueless and perennial buttkissers offered congrats, it has turned REALLY nasty! …

Bill, have some of those comments been removed? It is hard for me to think the posts there now are “REALLY nasty” by your standards. And I don’t mean that as a dig.


BTW is there any truth to the rumor that you will be one of the new writers for the WA?

I will check, Ken. Maybe not nasty comments, but certainly with a seething, sold-out-by-Bob quality all. I cannot say whether I will be writing for the new WA or not, but I was in Singapore with Lisa P-BJ and Neal Martin. Richard Jennings was with us, too. And Gary Vaynerchuk. Also Hugh Johnson and Jancis. And Ron Washam, The HoseMaster of Wine. Ron is definitely part of the new WA dream team. There figures to be a whole lotta hosin’ going on! All that I can say for sure is that if Squires survives the purge, then no, I will not write for the Noveau Wine Advocate. They may not be much, but even I have my standards!

[Bill_Klapp_deactivated]

@Eric LeVine

@GregT

Well it does seem like Lisa has already stepped in as proofreader. In his note to subscribers, there aren’t a million misused ellipses!

And as far as John’s figures go - if there are 50,000 subscribers, how many of those are businesses vs individuals? My guess is that there are fewer individuals and more businesses. They’re not going to be receptive to advertisements for Piaget watches and such.

Don’t forget, print and online are separate. Lots of double dipping. If you add in 30,000 online subscribers and 50,000 print you end up at more like an $8mm annual business.

Eric, you cannot know, but if bitching by print subscribers on the Squires board is any indication, there are maybe 17 left!

[Robert_Dentice]

I think you guys are significantly underestimating the valuation. Just think of the $40 million that was paid for the Kosta Brown “brand”. The only way you announce a deal like this without all of the current writers locked up is if it is too good to pass up. My guess is this deal is valuated at around 10x current revenues with earn outs and equity.

[Ken_V]

@Russell Faulkner

Any examples of ‘franchises’ surviving the main input of those contributing to the success. Is Halliwell’s movie book still going?

KFC is still going strong decades after the death of Col. Sanders.

[ToddFrench]

@Ian Fitzsimmons

@Andrew Hall

@John Morris

…And they’d have to pay him for the business – say $4 million (1x revenue). They’ll want a return on that investment. A 20% projected return (quite plausible for this kind of expansion capital investment) would be $900,000, or almost all the rest of the profit. .

While typical for buying a business, not so for buying a brand. I suspect the purchasers are paying (and Parker would expect to be paid) on the value that can be gained from the brand. It sounds from the get-go they are looking at expansion in ways RP didn’t which would be consistent with this approach.

I think it is very smart. The potential market for the WA brand in the US is not growing and with all the specialist venues and free information, the markets segments are really just fighting over the same shrinking pie. Porting the brand in a significant way to a growing market could be extremely profitable.

A.

This is exactly right, imo: the buyers want the brand, planning to shift from a subscriber base still largely founded on loyalty to one mainly founded on prestige, in a young, more highly-populated market, where the influence of prestige is relatively great. The introduction of advertising will steer the WA in the direction of luxury life-style pubs, like the Spectator.

+1 on this - wickedly smart move on his part, as WA was not exactly growing in readership/membership lately. This will allow the brand to take on a whole new market share, if done correctly, and revive it in a way that the previous team was unable to do. I doubt they will focus too much on Asia, but certainly more than it has recently, and it will be quite difficult to remain neutral while accepting advertising contracts from those whose wines are reviewed…that one I just don’t get.

Still, RMP was able to cash out of a business that was in decline (based on subscription count estimates only) and likely for a sick amount of money, while still staying on board as a paid Chairman. Smart.

[Ken_V]

@Todd F r e n c h

… it will be quite difficult to remain neutral while accepting advertising contracts from those whose wines are reviewed…that one I just don’t get…

In the article in the WSJ it says

“We envisage eventually allowing some advertising, but only from sponsors where there is absolutely no conflict of interest,” said Ms. Perrotti-Brown. A luxury watch or a credit card would be an acceptable, for example, but no winery or wine-related business will be allowed to advertise.

The question will be “A luxury watch” like TAG Heuer (owned by LVMH)?

[Russell_Faulkner]

@Ken V

@Russell Faulkner

Any examples of ‘franchises’ surviving the main input of those contributing to the success. Is Halliwell’s movie book still going?

KFC is still going strong decades after the death of Col. Sanders.

Ah thats exactly the type of example I meant…

[Matt_Latuchie]

With LPB voicing her desire to control the reviews more, I wonder what that means for some of the less commercially viable wine regions of the world. I’d hate to see David’s commentary, which I’ve enjoyed over the years, diminish since he doesn’t write about Bordeaux, Burgundy, Rhone, Piedmont, California…

[Ken_V]

@Russell Faulkner

@Ken V

@Russell Faulkner

Any examples of ‘franchises’ surviving the main input of those contributing to the success. Is Halliwell’s movie book still going?

KFC is still going strong decades after the death of Col. Sanders.

Ah thats exactly the type of example I meant…

It may be the most relevant, Russell.

[Bill_Klapp_deactivated]

Ken, “nasty” should be replaced with “pissed off”. Squires seemed to indicate that he is staying on, although nobody actually asked. Martin’s post, along with his presence in Singapore recently, makes it clear that he is in. Everybody else is silent at the moment. Including Jay Miller, Pancho Campo, Rovani and Thomases. Not sure that they have offers from the Dragon Lady. Gil Lempert-Schwarz states that Goldman Sachs had a hand in this, which means that business is REALLY slow in Asia. This deal could not be worth much more to Goldman than the typical Goldman partner’s monthly wine, ho and blow budget! That I would believe. Also that P-BJ was the conduit, but did not put this deal together for herself. Is her husband a Goldmanite?

[ToddFrench]

@Ken V

@Todd F r e n c h

… it will be quite difficult to remain neutral while accepting advertising contracts from those whose wines are reviewed…that one I just don’t get…

In the article in the WSJ it says

“We envisage eventually allowing some advertising, but only from sponsors where there is absolutely no conflict of interest,” said Ms. Perrotti-Brown. A luxury watch or a credit card would be an acceptable, for example, but no winery or wine-related business will be allowed to advertise.

The question will be “A luxury watch” like TAG Heuer (owned by LVMH)?

That was my thought as well, as specifically ‘luxury’ was mentioned, and luxury conglomerates own many of the highest end wines, many of whom are reviewed well in WA, historically.

[k_s_h_i_n]

I wonder how Neal and Antonio feel about this, especially Antonio.

[Ken_V]

Todd, get any big time offers for Berserkers yet? Investors are all sheep. First they will try to buy the Spectator, then I bet they will come for Berserkers ahead of the Wine Enthusiast!

[Brad_Kane]

@Kevin Shin

I wonder how Neal and Antonio feel about this, especially Antonio.

There had been talk the past couple of years that Antonio had purchased an ownership stake and that the original “plan” was that he was eventually going to take over the Wine Advocate. Sounds like he may have been out maneuvered, or cashed out. One has to wonder at this point what future role, if any, he may have.