January 29, 1996

Guccione Halts Publication of Omni in Print Form


General Media International, whose flagship publication is Penthouse magazine, has suspended publication of Omni and Longevity magazines and laid off 40 staff members.

Increases in postal and paper costs have made the two magazines "only marginally profitable" Bob Guccione, chairman and chief executive, said Saturday. He said both magazines would still be available in their electronic versions through on-line services and that publication would be resumed when paper costs go down.

Omni, a magazine of science fact and fiction was started in 1978 by Kathy Keeton, Guccione's wife and also the president and chief operating officer of General Media. A bimonthly, its circulation averaged 703,019 in the first six months of 1995, according to the Audit Bureau of Circulations. Although that was down 2 percent from the first half of 1994, its newsstand sales rose 10 percent.

Longevity, a health magazine, was started in 1989 and had an average circulation of 358,418 in the first half last year, up 2 percent. Newsstand sales were down 7 percent.

Guccione, in a telephone interview, said General Media had been hit with paper-cost increases of 60 percent and postal-rate increases of 34 percent in the last year, adding that "1995 was the first year in 30 years that Penthouse ever lost money."

But Guccione said the slide in Penthouse's circulation, to 1 million in 1994 from 3.2 million in 1985, has been stemmed. Circulation for the first six months of 1995 was 1.1 million, up 1.6 percent over the same period in 1994, according to the Audit Bureau of Circulations.

Guccione said Penthouse's advertising revenues had increased by $2 million last year as the number of its ad pages rose 10 percent.

General Media has decided to cut operating expenses and reduce its work force to concentrate on its core franchises -- Penthouse and its spinoffs and new media. The company also owns a group of automotive magazines and animation studios in Russia.

More than 40 staff members from Omni and Longevity were laid off last week with severance pay. Guccione said the company's goal for 1995 had been to eliminate 100 people but only about 30 had left before the weekend announcement.

News of the shutdown of Omni and Longevity first appeared in The New York Post on Saturday. Guccione denied the report there, which had also appeared in Crain's and Advertising Age, saying that he would be hard pressed to make a debt payment that is due in June, on General Media's $85 million junk bond offering. He said a payment of more than $10 million had already been made and that the $4.2 million due in June was in the bank.

"We have never missed a payment, ever," he said.

General Media was privately owned until 1994, when it offered the public high-risk bonds and divided its operations in two. The public part, subject to regulation by the Security and Exchange Commission, includes the magazines and their spinoffs, a video division and animation studios in Russia.

The private portion of General Media, what Guccinone called "the non-issuer company," owns Guccione's home, one of the largest private mansions in New York City, a 27,000-square-foot house on the Upper East Side with its own interior swimming pool. It also includes an art collection that Artnews magazine described in 1993 as one of 200 strongest in the world, with drawings and paintings by Renoir, Degas, Botticelli, Van Gogh, El Greco and Picasso.

But General Media's bottom line showed losses of "$8 or $9 million for the whole year."

He said that Penthouse continued to be a strong and "highly profitable" franchise and that the company would continue to invest in its on-line presence and other spinoffs. Last year Penthouse showed a 10 percent rise in advertising pages.

Guccione said that his own salary was $1.5 million, while his wife, Kathy Keeton, the president and chief operating officer of General Media, earned $500,000.

Omni's ad pages were down 60 percent in 1995, from the previous year, according to the Publishers Information Bureau.

General Media was one of the first companies to go on line and begin producing CD-ROMs, due in great part to Ms. Keeton's belief that the future of the magazine business is in electronic publishing.

Guccione said that new technology, which he expects to have in the next five weeks or so, would enable General Media to start charging people who are on line on a pay-per-hit basis. He said that Penthouse was now getting more than 3 million hits a day and that viewers would soon be able to get subscriptions to the on-line magazine and be billed per year, per month or per hit.

"I think that will make more money than a magazine can make on the newsstand," he said.

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