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Slouching Toward One World Trade

EBITDA positive or not, it’s estimated by some executives at the company that Condé Nast has lost significant sums during Lynch’s four and a half years at the helm, albeit for some decisions made before his time.
EBITDA positive or not, it’s estimated by some executives at the company that Condé Nast has lost significant sums during Lynch’s four and a half years at the helm, albeit for some decisions made before his time. Photo: Phillip Faraone/Getty Images
Lauren Sherman
December 7, 2023

Fresh off personal appearances at GQ’s Men of the Year events in Los Angeles and China, Condé Nast Global C.E.O Roger Lynch is headed to London next week, where members of his team have been embedded for several days in anticipation of a company-wide meeting on December 14. In theory, it’s going to be a cross-continental, live-streamed celebration of the company’s British employees harmoniously “coming together,” as those working in Vogue House relocate to the Adelphi, an also-historic building overlooking the Thames where ancillary divisions, like tech, have been posted up for years.

It’s logical that Lynch would want to be in London, in person, for this occasion. He is, after all, the global C.E.O. of Condé Nast, the first executive ever to hold that august title—itself an unintentional reference to the era when the Newhouses operated Condé Nast as two companies, one in the U.S. and the other in the rest of the world, just because. Now it’s all one entity, and Lynch has often reiterated the global nature of his remit. Last June, for instance, Lynch hosted a company-wide meeting from Beijing. Plus, given the past two weeks of layoffs in New York, not to mention the exit of top British executive Vanessa Kingori, who decamped to Google in November, the team in the U.K. needs to know their value to the future of the business.

Of course, skeptics see Lynch’s London trip as a way to avoid an in-person confrontation with the union back home. (Enraptured by the zeal of collective bargaining, employees have twice stormed his office at One World Trade, a very personal tactic.) Earlier this week, they filed a “charge of intimidation” against Condé Nast management through the National Labor Relations Board, citing their use of security guards during union protests. 

While nonunion staffers across departments are being let go, I hear that union members on the now-infamous layoff list still don’t know what’s going to happen. Management apparently wants to finish contract negotiations before anyone in the union is laid off, a generous omen that might lead to some concessions, but a drawn-out way to fire people—especially since so many names are already out there. The union members who’ve been marked for sacrifice were told that their last day would likely be January 1. For now, they wait. 

Roger That

Before Lynch faces his company next Thursday, however, he will first present to the Condé Nast board of directors on Monday. Presumably, Lynch is making the case that he is “on track to grow revenue for the third consecutive year,” as his head of communications, Danielle Carrig, told my Puck partner Dylan Byers just a few weeks ago. (She and Lynch have both told reporters that the company will be EBITDA positive, or at least break-even this year, meeting the targets set by the board.) 

But who knows what kinds of adjustments are being made to qualify that growth. Before he started at Condé Nast, I’m told that Lynch made sure certain company legacy costs—like mortgages and pensions and long-term payouts given to high-profile editors and executives—would not be included in his P&L, since they weren’t his decisions. Regardless, EBITDA positive or not, it’s estimated by some executives at the company that Condé Nast has lost significant sums during Lynch’s four and a half years at the helm, albeit for some decisions made before his time. One person close to the board and Newhouse family said that they could not confirm an exact number, but that it was a “colossal amount of money.” (In a statement, Carrig underscored that, “For the last three years, the company has been break-even to EBITDA positive.”)

Internally, senior leaders wonder how reaching even break-even on paper could be possible in 2023, given that the company simply does not have enough traffic to meet their advertising goals. Inventory is down by as much as 50 percent in parts of the business, I have heard. (Someone close to Lynch has disputed this in the past.)

One of Lynch’s early strategic decisions at Condé Nast was to institute a paywall at publications like Vogue and GQ. Ostensibly, it was a brazen and overdue decision by a proven executive and fiduciary with a global, outsider’s perspective, which is what the Newhouse family assumedly wanted in their chief executive. And yet… it also represented the sort of naïveté of a person unfamiliar with the company’s history and quirks. 

After a generation in which the digital business was largely ignored or undernourished under Chuck Townsend, former Condé Nast C.E.O. Bob Sauerberg and former chief digital officer Fred Santarpia followed the vision of BuzzFeed and Vice and tried to build a traffic-at-all-costs machinery—with a few exceptions—that began, inadvertently, diluting the value of cherished brands in the name of scale and site speed. It wasn’t all their fault: At the time, Condé Nast needed to catch up quickly with its peers (Hearst in particular was ahead on this), and almost every new idea seemed like a good one. But the work of growing upscale, niche brands, especially as many functions began to be centralized, soured quickly. By the time Lynch came along, many titles had been compromised: They’d traded their long-term audiences for next-gen viewers who liked slideshows and Game of Thrones recaps, and demonstrated little affinity. The Condé digital properties had become pure traffic plays, all while traffic declined. 

Lynch could have either re-accelerated the traffic growth (a bad idea) or rebuilt the properties for a subscription era—effectively figuring out how to express each brand through a germane digital strategy. Instead, he put paywalls on them, whether it made sense or not. It may have seemed like a good idea in the boardroom, but it was a tough sell to people both inside and outside the building.

These days, some executives argue that the rigid paywall has contributed not only to decreased traffic at some brands (not all), but to stalled subscription uptake. Others say that the issue is bigger than any paywall: Consumers are simply not going to URLs anymore, a trend that has been accelerating for a decade, since the height of Facebook and Twitter. Now they’re spending more and more of their time on TikTok, Instagram, and other social media. And while Condé does make money on some of those platforms, including TikTok, it still relies heavily on direct-sold campaigns—the company’s mother’s milk and the revenue that feeds the joint’s salesperson-first culture. Regardless, nothing will ever cover the loss of the six-figure magazine ad page.

According to the Alliance for Audited Media (AAM) subscription numbers, most subscriber bases are at least flat. The New Yorker, for instance, has around 1.2 million subscribers in total—including digital-only and print-and-digital combined—the same number it was touting six years ago. Condé Nast publications are no longer included in the AAM quarterly report that tracks publications across channels, but I was still able to pull stats on the publisher’s five marquee brands: The New Yorker, Vanity Fair, Vogue, GQ, and Bon Appétit

The Five

The New Yorker, as I mentioned, is essentially flat when it comes to print and digital combined, down slightly to 1.25 million in the first half of 2023 from 1.28 million in the first half of 2021. The decline comes from loss of print subscribers, though. In the first half of this year, digital subscribers reached nearly 460,000, from 325,000 two years earlier. The problem is that a significant number of people canceling their print subscriptions are not switching to a digital-only subscription, and that trend is pretty consistent across brands. 

The New Yorker marketing team also relies on heavy discounting, a common tactic, which minimizes the ARPU. Years ago, when he was leading the paywall charge, David Remnick rightly pointed out that a subscription to his beloved media entity shouldn’t cost the same as a cup of coffee. Alas, years later, despite all its success, Instagram has been littered with deals for The New Yorker, often bundled with another Condé brand and/or a tote, for the price of a Levain cookie. 

GQ lost the least amount of print subs over the time period (65,271) and Bon Appétit lost the most (a staggering 630,323). The Bon Appétit numbers in particular raise a red flag. While digital subscriptions were up significantly over the two-year period from a very small base—to more than 138,000, from 50,000—the print drop-off is massive, far more than any other title. Also, YouTube is no longer the revenue generator it once was for the business. Part of that is a macro issue: The Alphabet-owned platform is no longer prioritizing 5-15 minute videos on phones—the thing the Bon Appétit Test Kitchen does so well—but rather short, sub-2 minute videos. 

After several major and micro scandals, Bon Appétit—despite still attracting hundreds of thousands of viewers on most videos—has also failed to mint new stars. (So as not to pick on Bon App, it’s fair to note that Vogue hasn’t had a breakout video hit since “73 Questions.”) Whether any of this resulted in the pre-layoffs exit of Condé Nast Entertainment head Agnes Chu, and the dissolution of that unit, is an open question. Some believe the division was doomed from the beginning, and Chu was just the first of many cuts that Lynch needed to make this year in order to hit his numbers. (Experts will recall that Chu was only hired after Dawn Ostroff left for Spotify, and the company replaced her with this guy Oren Katzeff, who came from a thing called Tastemade and lasted about 12 seconds.)

In a statement, Carrig said that global advertising revenue is projected to be down “less than 3 percent” this year from 2023, which Carrig said mostly comes from an expected decline in print. I’m hearing that advertising revenue in the U.S., where the business generates about $1 billion a year in sales, is down more than that—in the vicinity of 5 or 6 percent. Because of the decline, it’s likely that there will not be end-of-year bonuses. (Carrig said that decision has not been made yet.) Additionally, it’s important to remember that these numbers are not what was budgeted. The financial goals that were budgeted were far higher than last year’s recorded revenue, and therefore are significant misses. 

350 Madison, This Isn’t

So how can Lynch say that the business is going to exceed, or meet, its goals? Sure, there are other ways to hit revenue numbers that don’t have to do with online advertising, like live events: Vogue World, for instance, made something like $10 million on the top line, and apparently $3 million net, although at least some of that goes on the advertising line. But scale is limited for a business of this size. Subscriptions contribute a lot, but aren’t growing as quickly as anticipated, and have a ceiling. 

Lynch has mentioned in interviews that doubling down on e-commerce is part of his current strategy, and affiliate marketing is certainly one way to increase the numbers. But affiliate links are a tricky business, heavily reliant on the whims of Amazon, and only serve as a boost, not a supplantation. In fact, the knock on Lynch during his tenure is that he’s been able to cut, but not to innovate. The question is whether that’s a failure of strategy or execution, or simply a secular reality of the company.

Perhaps the only thing Lynch needs to worry about is managing the board, which may uniquely understand his challenges. In the end, many management teams resemble their ownership structure, and Lynch reports to a board controlled by a media dynasty now entering its fourth generation. Si Newhouse, the delightfully capricious godfather of the business, has been gone for six years, and the family has other, far more material business interests—to wit, it remains the largest individual shareholder in David Zaslav’s Warner Bros. Discovery and a major investor in Reddit, which might I.P.O. in 2024, plus Charter, the cable entity that just hit the mattresses with Disney. (Advance, the family’s parent company, also owns The Ironman Triathlon for some reason.) Meanwhile, it’s also hard to imagine drastic changes at the helm while Anna Wintour remains chief artistic director, and the majority of the business—including video now—reports to her.

But many former and current executives nevertheless still want to know why Lynch is there. Why did the Newhouses, the family that created this company through decades of M&A and brand revival—don’t forget that Si bought The New Yorker from the Fleischmann butter heirs, resurrected Vanity Fair, and so much more—hire him to lead an era of consolidation? To sell? Almost zero percent likely. To ruthlessly manage a declining business? Perhaps. Or was it to create something new with what’s left of the old? 

That’s my guess. The problem, though, is that he hasn’t done that—partly because he’s the first leader hired from outside the company, forced to have to learn on the job, and secondly because he still has a lot of disgruntled near-lifers laying booby traps for him, perhaps unaware of the magnitude of his Sisyphean task. That’s a relic of the good ole days, to be sure, and maybe a sign of the company’s enduring culture.

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