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Condé Nast and Hearst Teaming Up Again

Friday, February 5, 2016

Condé Nast and Hearst Magazines Thursday announced the creation of a joint venture to combine circulation, procurement and production functions between the two companies. The new company, PubWorx LLC, will also seek to serve external clients.

The combined business is likely to employ more than 100 people, but layoffs or other forms of downsizing are almost certain, because initiatives to streamline back-office operations are generally taken to achieve economic efficiencies.

PubWorx officially launches in late February. Condé Nast has several thousand employees in New York alone, as does Hearst.

Representatives for both companies declined to provide detail on any staff redunancies that may arise as a result of the venture.

“We’ll be integrating over the next several weeks and ready to engage with external clients after that,” a Hearst spokesperson tells min's sister brand, Folio:, adding that it will be “comprised of staff of both companies.”

The new company, owned equally by the two publishers, is a dual bid to bring more efficiency to a host of back-office operations at the two companies and market those same services to other publishers grappling with how to do that economically.

“The industry can operate more efficiently with more properties connected in areas where scale is essential,” says the spokesperson. “The resulting savings will free up resources at both companies to invest in new growth initiatives.”

This is not the first time magazine-media companies have combined back-office functions to seek efficiencies. In 2009, American Media took over publishing operations, including production, circulation, sales and marketing, for Playboy. Before that, in 1993, Time Inc. took over back-office and sales operations for American Express Publishing in a deal that ultimately led to an outright acquisition in 2013.

The new Hearst-Condé Nast venture is projected to be a source of growth for the publishers. Condé Nast CEO Bob Sauerberg told the Wall Street Journal that PubWorx is expected to become a profit center. And while the venture is expected to deliver savings, Hearst Magazines president David Carey told the Journal that the “primary focus is not outright job reduction,” but rather the chance to leverage the scale of both companies.

In a joint press release, the companies said that PubWorx would be offering a range of services to third-party companies, including “procurement, production, and full-service, end-to-end circulation management operations.” The publishers envision those services helping customers to “concentrate on innovation, content creation and advertising revenue.”

This isn’t the first time Hearst and Condé Nast have joined forces. They jointly created CDS Global, which manages subscription fulfillment functions for nearly 100 publishers, and developed Comag, a marketing and retail distribution company. PubWorx was created in the same spirit of “building a business and sharing best practices, with each other and the industry as a whole.”

The spokesperson added that Hearst Publishing Services, launched in 2015, will be rolled into PubWorx.

The new company will be headed by Al Perruzza, a back-office operations expert who will leave Reader’s Digest to take the PubWorx helm. He’ll report to a board comprised of Condé Nast and Hearst executives. In the press release, he was quoted as saying he was looking forward to working with “colleagues across the industry to build tailored, impactful programs that position their organizations for increased efficiency and growth.”

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