Bad luck made worse
Lots of people lost their shirts by jumping into the market with both feet at the height of the New Economy bubble. They weren't all buying overpriced stocks.
Exhibit A: Daniel Brewster, the man once in charge of Gruner + Jahr USA and its plan to expand the company's formidable global magazine empire into America. He came to Boston to make two key acquisitions to fulfill the corporate mandate at the height of the bubble era. Financial disaster ensued.
Brewster bought Inc. magazine, a well-regarded publication with a booming business, for about $200 million in 2000. He followed up in January the next year with an even bigger deal by purchasing Fast Company, the upstart magazine that quickly became a New Economy darling chock-full of ads, for an estimated $360 million.
Fast forward to the present: Brewster is long gone and G+Y is desperate to get out of town (that town would be New York, where Inc. and Fast Company have since relocated). The offering book for the sale of both magazines, expected to attract fire-sale offers, should be circulating this week.
G+Y struck a deal last week to sell four consumer-oriented US magazines for $350 million to Meredith Corp. Once Fast Company and Inc. are sold or auctioned, G+Y will close the book on its American financial bonfire.
''They bought into the hype when everyone was throwing money around like there was no tomorrow," says Samir Husni, a University of Mississippi professor and magazine specialist.
Of course, bad timing is a big part of the story. No one could earn a reasonable return on the money G+Y spent with a flood of business magazines competing in an advertising market that went south. But the German publishing giant stepped into a bad situation and managed it into a disaster.
''This story is not a simple math problem: Buy high, sell low, oops got it wrong," says Alan Webber, who founded Fast Company with William Taylor in 1995. ''It's, bought at the top, mismanaged the asset, and mismanaged the exit." Inc. and Fast Company, he says, ''are like abused children. They've been starved and treated badly."
Webber and Taylor haven't been in the Fast Company picture for a while. But Webber insists a difficult situation was made much worse by big corporate owners who rotated publishers, cut hard into marketing budgets, and merged ad sales staffs.
''There's a difference between destiny and outcome," he says. ''There's nothing that says this is how it has to come out. It's just the way big companies tend to behave."
You might imagine the founder of a magazine would say something like that about his baby. But others inside and outside the company echo those sentiments.
''I blame G+Y for taking a good patient in Inc. and a great patient in Fast Company and, rather than helping them, killing their identity," says Husni. G+Y ''has disinvested in the properties every single year," says an executive inside the company.
A spokeswoman for G+J declined to comment on criticism of the magazines' management over the past five years.
New owners will likely be other big media companies. Here's the kind of numbers they're looking at: Inc.'s advertising revenues are down 9.2 percent and ad pages have fallen 14.7 percent through the first four months of this year, according to the Publishers Information Bureau. Ad revenues at Fast Company over the same period have slumped 14.2 percent and ad pages have sunk by 17.2 per-cent.
G+Y wasn't the first foreign buyer to make a big mistake purchasing overpriced American properties. It certainly wasn't the only investor that lost its shirt in the New Economy bubble. But it can only blame bad luck for a slice of the humble pie it's eating today.
Steven Syre is a Globe columnist. He can be reached at syre@globe.com. 
