As an IP-driven business model, Reader's Digest once looked as though it was assured of eternal success. But times are tough, readers' habits mutate and technology is unforgiving. Now Reader's Digest US has filed for Chapter 11 bankruptcy protection. Says the Reader's Digest Association, the deal will protect its US business and reduce its $2.2bn debt. In doing so, it buys itself a 30-day grace period to continue discussions with its lenders over its debt restructuring plan.
Friday, 21 August 2009
While the filing does not apply to Reader's Digest operations in Canada, Latin America, Europe, Africa, Asia and Australasia ("international operations are expected to have "adequate funding" to continue publishing"), the news will do little to encourage advertisers, or indeed contributors, that its homey blend of stories of courage and bravery, practical lifestyle tips and victimless humour has a future.
IP Finance suspects that RD is facing problems on all fronts. Online advertising is more focused and increasingly reckoned to be more effective by many spenders; sales of all printed media are dented by free, instant and largely relevant reader-selected online material; also, the lower-to--middle-class family oriented readership which was its home territory is itself eroded by the forces of social and cultural change.
The question is, can RD pull itself up again? An internationally well-known and instantly recognised trade mark is only an asset where its goodwill brings in customers, and it's not immediately apparent where brand extensions might avail the title. The subscribers' database is probably worth a great deal more -- but with a diminishing interest in the title it is natural that this asset will be shrinking too.