Patricia Nell Warren

PlanetOut and the Pink Peril

Filed By Patricia Nell Warren | January 16, 2008 2:20 PM | comments

Filed in: Living, Media
Tags: LGBT business, PlanetOut

It's a sad end for a big corporate dream. According to BMO Capital Markets, "Struggling gay and lesbian media and entertainment company PlanetOut Inc. [LGBT] late Monday said it has retained Allen & Company LLC to assist it in evaluating strategic alternatives, including a possible sale of the company." Yet just a few years ago, PlanetOut Inc. was buying up publishing, entertainment and leisure interests right and left, then launching itself on Wall Street as the first publicly traded LGBT-owned mega-corporation.

It was a proud rosy-ink moment in the business world. The CEO made heady statements about all the great things that PNO was going to do, and how it would benefit all of us. With the support of gilt-edge institutional investors including Wells Fargo, PlanetOut's stock soared on the NASDAQ. The corporation continued diversifying, including a partnership for TV access. There didn't seem to be any limit to PNO's pink reach.

Some commentators, myself included, did express concern at seeing so much major LGBT media tied up in one monopoly -- no different than the opinion monopolies that we complain about in the mainstream world.

Last July, however, PlanetOut admitted to a huge shortfall, and was veering into shocking pink peril. The stock plummeted -- at one point, it closed at $1.67, a hair from dropping into the penny stock category. In his BMO report, David Shabelman continues, "For the first nine months of 2007, PlanetOut reported a loss of $33.1 million on revenues of $39.8 million. The company last July raised $26.2 million in equity financing from a group of investors that included Special Situations Funds, Cascade Investment LLC, SF Capital Partners, PAR Investment Partners LP and Allen & Co." Cascade is Bill Gates' investment arm.

After the bailout, the stock did recover somewhat. But by October, problems were ongoing, with PlanetOut booting their CFO, and more executive firings and hirings that reached from CEO clear down to The Advocate and Alyson staffs. PNO did recoup somewhat by lay-offs, closing international offices, and selling RSVP Vacations. But it wasn't enough.

Today BMO comments drily, "PlanetOut has a market capitalization of $25.4 million. With such a cheap price and obvious appeal as a provider of information to a niche market, PlanetOut should be able to find a buyer, unless its finances scare everyone off."

How did this debacle happen? As Eric Savitz commented at Tech Trade Daily, "PlanetOut has some 'splaining to do."

Was it a case of pink hubris...taking on too much, too soon? Do some of these top business people of ours not know how to run a big pink railroad? How much of the problem was mismanagement and egos clashing? How much of it (as PlanetOut claimed) was a drop in ad revenue? And/or the larger national and global market woes that have sunk so many mainstream corporations in the last year? How much was the failure of GLBT consumers to spend as anticipated on PNO products? Or was it all of the above?

In recent years we've all become familiar with the glowing market studies that go breathless about the big pink bucks that some of us can spend, especially those gay men with their median $80,000 income. Personally, as a businesswoman involved in the desperate struggle for survival by rank-and-file media enterprise in our "community," I've been one of those who wonder how much pink consumer money is really out there. And if a lot of those pink dollars are flowing to products sold by big mainstream corporations, like cars and real estate and vodka and Rolex watches, probably not many of those dollars are flowing back into the "community economy," including smaller business and needy nonprofits. What, in the long run, is going to be the grassroots effect of this pink dollar drain? It won't be good, is my guess.

Are there $25 million pink dollars anywhere in the U.S. -- or even in the international gay community -- to buy PlanetOut and rescue it? And what happens to Alyson, The Advocate, Gay.com, etc. , if PNO is swallowed by a non-gay corporation who will make it part of a huge mainstream media monopoly? Would its new content reflect the real needs and aspirations of LGBT people, even as it continues to try milking us through advertising?

I don't even want to think about the possibility of an unfriendly buy-out. Hopefully, somewhere in that murky pink cloud around PlanetOut, there will be a silver lining
.


Copyright (c) 2008 by Patricia Nell Warren. All rights reserved.


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I really like your in depth analysis of PlanetOut, Patricia.

I focused mostly on their end product in my post while you covered the actual business as a corporation. I think the 2 posts go together well.

I also appreciate the background info you've provided. I wasn't aware they also owned Alyson Press. Weren't they one of the first big time independent queer press?

Bil --

Thanks for your comment. Yes, Alyson Books was originally one of the first gay-owned independent presses, founded by Sasha Alyson. It was bought out by LPI, who also bought The Advocate and Out Magazine, along with HIV and some skin magazines. PlanetOut then bought LPI. The bigger fish kept eating the smaller fish. The process made Alyson one of the very few LGBT publishers that was a corporate subsidiary.

Judy Weider, formerly editor of Advocate, moved up to a higher position within LPI, and PlanetOut put her in charge of reorganizing Alyson. She moved the Alyson office to New York and made noises that that Alyson would aim to publish some big mainstream titles and get on the NY Times Bestseller list. Then PlanetOut booted Weider.

I feel for the Alyson authors right now, as they wonder what will happen to them and their book projects. And also for the editors who work there...any who are left, at this point, with all the hirings and firings that have happened.

Buyouts are a tough thing for authors to go through. Witness the recent situation when Haworth was bought out by a British academic publisher, who announced that Haworth would no longer publisher their gay fiction line. It left a bunch of gay fiction authors adrift.