The old joke asks, “How do you make a small fortune in publishing?” The answer is: “Start with a large one.”
These days, JPMorgan Chase and its CEO, Jamie Dimon, may be feeling a bit like the punchline. The New York Post, among others, reports that JPM Chase now controls publishing companies with over $5 billion in total annual revenues – more than the magazine revenues at TimeWarner, Hearst or Conde Nast.
After a number of debt-backed acquisitions defaulted, the bank has found itself “accidentally” in the publishing business. JPMorgan Chase leapfrogged TimeWarner as the largest U.S. publisher when Ripplewood Holdings had to give up ownership of Readers Digest as part of a pre-packaged bankruptcy filing.
JPM Chase also holds controlling interests in Source Interlink and American Media, and it may find itself with a piece of the Tribune Company once Sam Zell is done with it. In the Post article, media investment banker Reed Phillips predicts a focus on cost containment, not investment or growth.
That’s probably not good news for any of the companies JPM Chase now controls. Ours is a market that demands innovation to sustain and hopefully expand revenues. Structuring Readers Digest to maximize near-term cash flow will likely diminish its overall value for its stakeholders, including JPM Chase.
Edited September 15 to add: In doing some research on another topic, I can across Matt Kinsman’s prescient blog post, which later appeared in the February 2009 issue of Folio: Matt might be a reporter to follow before investing in media properties.