American Media Buys Us Weekly in Challenge to People

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Time Inc.’s (NYSE: TIME) People has held the top tier of the celebrity magazine business for decades. American Media has made a deal to challenge that. The company bought Us Weekly from Wenner¬†Media in a deal valued at $100 million.

(Update: The New York Post reports that the American Media buyout will result in as many as 100 layoffs at Us Weekly.)

The American Media deal was made possible, in part, because earlier Us Weekly bidder, Tronc Inc. (NASDAQ: TRNC) dropped out of the bidding.

People claims to reach 73 million consumers, which is one in three “adult consumers” in the United States. It is widely accepted that the property is the largest contributor to Time’s profits. As such, it sits in one of the sweet spots of the troubled magazine market. Incidentally, People may be sold as part of a decision of Time’s board of directors to field buyout offers.

American Media is an odd collection of gossip magazines and men’s titles. Its active lifestyle group is led by Men’s Fitness. American Media says this lifestyle group reaches 14 million people each month. The other unit of the company is its entertainment group, led by the 88-year-old National Enquirer. This group reaches 37 million people each month. Us Weekly would add 50 million consumers to its stable, according to American Media’s comments about the transaction.

The celebrity and gossip part of the media market is among its largest and most crowded. The segment is currently dominated by the Yahoo! Inc. (NASDAQ: YHOO) celebrity section, TMZ, E Online and People. Presumably combining Us Weekly with its active lifestyle business will put American Media into this very small, exclusive group.

American Media has relied heavily on sales of its magazines at checkout stands. This makes these sales fickle, depending on which covers pull well and which do not. A digital presence is presumably more steady. Us Weekly gives American Media that advantage.

It is far too early to tell whether large gossip and celebrity properties will continue to prosper, even online. The more established players face several new ones that have grown quickly. These include RadarOnline and PopSugar. Most broad national media sites also have celebrity sections, which stretches the size of the competitive market further.

American Media has expanded its gossip and celebrity media footprint substantially. Now, it gets to find out if it has doubled down into a market that will continue to support a large stable of competitors.