Bertelsmann acquires ownership of Krause Publications

F+W Media’s debtors will suffer as the result of the auction is only a drop in the ocean compared with the enormous debts. Image by Arek Socha at Pixabay.
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Only two serious bidders are said to have competed for the book publishing assets of F+W Media’s bankruptcy estate. The bid was won by Penguin Random House, the world’s largest publishing group whose members are responsible for the publication of approx. 15,000 printed books and more than 100,000 eBooks per year.

$5,6 million for the rights to more than 2,000 books

The German media group Bertelsmann owns 85% of the publishing group Penguin Random House, that was established in 2012 and paid $5,6 million for F+W Books, F+W Media’s book division. The division is responsible for the publication of about 120 book releases each year. In addition, the deal comprises a portfolio of rights to more than 2,000 richly illustrated catalogues, including the well-known Standard Catalogue of World Coins. Penguin Publishing Group exploits the newly acquired rights.

Prior to the bankruptcy, the entire division is said to have had an annual turnover of $22 million, 20% of which was generated in the United Kingdom and the rest in the United States. A major part of it is likely to be the merit of the popular guides to creative writing commercialised under the label “Writers Digest”.

$350,000 for six collectors’ magazines

While F+W Books was sold en bloc, the different magazines were divided into thematic groups. Regarding the collectors’ magazines, there were two serious competitors. Cruz Bay Publishing Inc. outbid the International Gem Society LLC with a winning bid of $350,000. In return, it receives the F+W Collectibles Group comprising six magazines, including Numismatic News and the Bank Note Reporter. Cruz Bay Publishing is part of Active Interest Media, a group specialised in magazines reaching less than 100,000 readers per issue. During the auction, Cruz Bay Publishing did non only purchase numismatic magazines. It placed (unsuccessful) bids for magazines on handicrafts and bought magazines dealing with the subjects of woodworking, gardening and genealogy.

In total, the magazine section generated $7.75 million.

The different communities founded by F+W Media will be sold in a third auction.

Doubts remain

An article in The Digital Reader sums up the problem of these auctions quite appropriately: “Do you know that story in the Bible where Solomon orders a baby cut in half in order to settle a dispute about who was the mother? One point of that story was that cutting the baby in half wasn’t a satisfactory solution, but apparently whoever is managing the F+W Media bankruptcy sale wasn’t paying attention.”

Although The Digital Reader is mostly concerned about Writers Digest – for which a single editorial office published books and magazines, conducted online workshops and organised a successful conference –, regarding the numismatic sector, those concerns are just as valid. An experienced team of experts cooperating on a continuous basis produced a range of products: books, magazines, the popular COTY Award, coin fairs and much more. It will be interesting to see how the publications’ level of expertise will change, once the divisions are separated.

The Digital Reader calls the sale of F+W Media an organ harvest that leaves the rest of F+W Media hoping that someone comes along and buys the rest of the carcass before it gets thrown down the slaughterhouses waste chute.

A drop in the ocean

Let us put the totals in context: in 2017, F+W Media invested $15 million in restructuring measures. Within six months, the money was used up. In the spring of 2018, the company made nearly $7 million with the sale of branch publications. The total debt amounted to $105.2 million.

In comparison, the amount of approx. $13.5 million that came in for the sale of F+W Media’ crown jewels appears to be a joke. The debtors will be the ones suffering. Nobody knows exactly how many of them there are. Estimates rank from 1,000 to 5,000. The list is more than 500 pages long.

It is a blessing, that the founder Chet Krause – who died almost exactly three years ago – does not have to see this. In 1988, he formed an ESOP. Therefore, Krause Publications became a stock company whose shares were owned by the employees. In 2002, however, a number of the most important shareholders decided to sell Krause Publications to a group of investors.

For more information on the bankruptcy of F+W Media, please read our article from 21 March 2019.