M. Shanken Communications, Inc.

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M. Shanken Communications, Inc.

387 Park Avenue South
New York, New York 10016
U.S.A.
Telephone: (212) 684-4224
Toll Free: (800) 866-0775
Fax: (212) 684-5424
Web site: http://www.mshanken.com

Private Company
Incorporated: 1972
Employees: 150 (2000)
Sales: $31.2 million (2000 est.)
NAIC: 511120 Periodical Publishers; 511130 Book Publishers

M. Shanken Communications, Inc. is a diversified publishing and communications company founded by chairman Marvin R. Shanken. In 30 years, Shanken has transformed a beverage-industry newsletter he bought for $5,000 into a nifty publishing empire worth more than $31 million. M. Shanken Communications’ publications include Impact, Market Watch, and Food Arts for the trade, as well as Wine Spectator, Cigar Aficionado, and Cigar Insider for the consumer. The company’s annual reviews and forecasts covering the alcohol beverage industry are widely considered the most authoritative in their field. The company also produces books such as James Laube’s California Wine and Wine Spectator’s Ultimate Guide to Buying Wine. In addition, M. Shanken Communications produces the award-winning Web sites CigarAficionado.com and WineSpectator.com. The company also plays host to events held around the country, including the Impact Annual Marketing Seminar, Market Watch’s Annual Leaders Award Banquet, Wine Spectator’s Wine Experience, and Cigar Aficionado’s Big Smokes. The company also has raised millions of dollars for worthy charities and supported wine education and research through the Wine Spectator Scholarship Foundation.

Starting Up

Marvin Shanken, the founder of the company that bears his name, was not new to the entrepreneurial world, although it might have seemed that way when he bought a struggling beverage-industry newsletter for $5,000 in 1973. That newsletter, Impact, was a trade publication covering the spirits industry. It was a change of direction for Shanken, who had previously been an investment banker. Although he was not an outstanding student at the University of Miami, he went on to earn an M.B.A. from American University. As an investment banker, he specialized in real estate, which eventually took him to Northern California. There, he acquired a personal passion for wine. Shanken told Forbes magazine in January 1993, “I have two passions in life—wine and cigars.” Combining this personal passion for what he has referred to as “the finer things in life” with a consumer’s perspective, Shanken turned his personal interests into a successful business.

In 1979, Shanken purchased Wine Spectator for $40,000; hardly a princely sum, even then, for a publication destined to become the most widely read wine enthusiast’s magazine in the world. The magazine debuted in 1976 in San Diego, under the leadership of a wine enthusiast named Bob Morrisey. In an interview with his own publication 17 years later, Shanken said, “It was a tabloid newspaper, and the first time I laid eyes on it I loved it… Wine publications then were either highly technical or elitist, a turnoff to consumers who were interested in learning more about wine.” Thus began Shanken’s enterprise of popularizing what had previously been considered an esoteric luxury, although, as he put it, “I think the only reason I agreed to do it is that I didn’t want the Wine Spectator to die.”

From the beginning, however, Shanken set his sights on improving the magazine. At the time his company purchased it, it was still primarily a regional publication, focused almost entirely on Northern California. “I wanted to cover the whole wide world,” Shaken told Wine Spectator in 1996. He also concentrated on improving the overall quality of Wine Spectator’s content. “The idea was to upgrade the quality of our commentary and our research and our tasting reports to the journalistic level of non-wine publications I admired, such as the Wall Street Journal and the New York Times … Today,” he added, “I believe that goal is achieved.”

The 1980s: Expansion and Complication

Taking over a struggling publication based on a personal passion may have seemed like a questionable business model, but M. Shanken had some good fortune along the way, chiefly in the form of the growing popularity and selection of wines. Although from the beginning Shanken wanted his magazine to be for wine consumers, in the late 1970s this was a less daunting proposition than it might be today. As Thomas Matthews commented in a 1996 editorial in the magazine, “In 1976 … the wine world was a smaller, simpler place.”

Nonetheless, in 1980, Wine Spectator began panel-based tasting and scoring of wines. That same year, the magazine’s circulation reached 35,000, up from its inaugural run of 3,000 copies in 1976, and a vast improvement from its circulation of 1,000 when M. Shanken purchased it. Already, it seemed, its orientation toward the consumer and broader focus were paying off. By 1986, the magazine was reviewing over 1,000 wines every year, and that number continued to grow into the next decade.

In 1990, M. Shanken purchased Food Arts, a specialty-interest publication for the fine food industry with a circulation of 50,000. Its readership, primarily chefs, restaurateurs, and caterers, was in line with the company’s existing audience of wine enthusiasts and beverage-industry professionals; by this time, M. Shanken had added Market Watch, an industry publication similar to Impact, to the fold. Shanken told Folio magazine at the time of the purchase that “Food Arts represents a unique and compatible property in the context of my basic business.” Like Wine Spectator, Food Arts made a business out of appealing to an under-explored niche, albeit a narrower one: “What they [Food Art’s readership] want is not normally found in the major restaurant magazines.”

Food Arts, which was launched in 1989, had lost money its first year, but Shanken was determined to turn the magazine’s performance around. “We expect this book to be an important financial success within three years,” Shanken told Folio. His goal at the outset was to triple the amount of advertising in the magazine; advertising had already been established as a major revenue source for M. Shanken’s other publications.

By 1990, M. Shanken had expanded in other ways in addition to the growth of its flagship publication. Shanken told Folio that Wine Spectator had grown 40 percent in revenue yearly since his company purchased it, and the magazine’s paid circulation in 1990 was 100,000—an increase of almost 200 percent from its circulation only ten years earlier. Meanwhile, although Shanken would not reveal circulation numbers for Impact, he claimed its distribution covered almost every company in its industry. Revenue was estimated at over $1.5 million by Forbes in 1989.

In the 1980s, M. Shanken also expanded into book publishing and catalog sales. Both of these areas were closely in line with the company’s main industry; the books included yearly market reports from Impact magazine, and the mail-order catalogs offered Shanken products. Revenue from the catalogs alone was expected to exceed $4 million in 1989.

One of the secrets of M. Shanken’s success was aggressive promotion on the part of its founder—which amounted, essentially, to promotion of personal tastes. Since 1979, Shanken had collected antique poster art, including works by artists such as Henri de Toulouse-Lautrec. As owner of these works, Shanken was entitled to use them for promotional purposes—and that is exactly what he did. Other products in M. Shanken’s mail-order catalogs included merchandise featuring poster art Shanken owned. The images were also used to promote M. Shanken’s magazines. “Posters were the first important means of building brand names,” Shanken told Forbes in October 1989. “I’m just trying to expand my market.” By using every means available to promote his publications and his company, Shanken had turned a few minor magazines into a small empire. As Fortune put it in 1994, “[Shanken] markets his own tastes and passions to readers seeking guidance in theirs.”

Key Dates:

1973:: Marvin Shanken buys beverage-industry newsletter Impact for $5,000
1976:: Wine Spectator magazine launches in San Diego.
1979:: Shanken buys Wine Spectator for $40,000.
1980:: Wine Spectator begins panel-based scoring and tasting of wines.
1982:: Wine Spectators editorial office moves from San Diego to San Francisco
1989:: Wine Spectator’s circulation reaches 65,000.
1990:: M. Shanken purchases Food Arts; Wine Spectator ’s circulation reaches 100,000.
1992:: M. Shanken launches Cigar Aficionado, which reaches a circulation of 100,000 with its second issue.
1993:: Wine Spectator’s circulation reaches 120,000; the magazine is extensively redesigned as a lifestyle publication
1994:: Cigar Aficionado interviews Fidel Castro.
1995:: Cigar Insider launches.
1996:: The company launches WineSpectator.com.
1997:: M. Shanken acquires regional affluent-lifestyle magazine Country, and Aspen Country.
2000:: Cigar Aficionado is revamped with a new logo and greater coverage of non-cigar-related topics.
2001:: Wine Spectators circulation reaches 323,000.
2002:: Hamptons Country suspends publication.

A Tasteful Cigar

[sw2]In 1992, apparently against all common sense—“Most people thought I’d lost my mind,” Shanken told Folio in 1996—M. Shanken took another plunge, launching Cigar Aficionado. Despite the growing intolerance of tobacco, plus the fact that cigars were not as popular as cigarettes, the magazine took off at a pace that surprised even Shanken. The original circulation goal for Cigar Aficionado was 20,000. By the second issue, it was 100,000. “There will always be successful people with dough who are only interested in living the good life—but even I can’t believe this is possible,” Shanken told Forbes in January 1993.

In fact, Shanken initially expected his new magazine to lose money. As he told Fortune in 1994, “I figured we’d get maybe 15,000 to 25,000 readers, and I’d be running it at a loss for the rest of my life.” Instead, it turned a profit immediately; of the 154 pages of the first issue, 53 were ads. By 1994, Cigar Aficionado had interviewed Fidel Castro and was drawing advertising from companies such as Mercedes, Cartier, and Rolex due to its upscale readership. Between this and a yearly charity event called the Big Smoke, Cigar Aficionado —and, by extension, Marvin Shanken—was credited with jump-starting the popularity of cigar smoking, which swelled in the early to mid-1990s.

By the end of 1995, the magazine’s circulation had reached a quarter of a million, and other publications were reporting the growing popularity of cigar smoking. William Rusher of the National Review wrote in 1995, “Cigars are making a comeback in the United States that deserves to be called historic … the immediate precipitating factor is a new quarterly magazine called Cigar Aficionado. ” The high profile of some cigar smokers, including business executives and celebrities, contributed to the upscale, individualistic image of the cigar, and cigar bars and cigar-related events sprouted across the United States. Other publishing companies launched cigar-related magazines, and M. Shanken introduced a monthly newsletter, Cigar Insider.

By 1997, Cigar Aficionado had become a bimonthly publication, with an estimated worldwide readership of 1.5 million. Four major cigar manufacturers had gone public, and cigar imports had soared to 297 million in 1996, from 100 million yearly from 1980 to 1992. The magazine had also become an award winner, picking up Temple University’s “Acres of Diamonds” award, a 1999 National Magazine Award for General Excellence in New Media, and regularly winning Folio magazine’s award in the men’s lifestyle category. In fact, Cigar Aficionado had been positioned as a men’s magazine, as opposed to specifically a cigar smoker’s magazine, since its inception. An editorial written by Marvin Shanken for the company’s debut issue in the fall of 1992 was titled “A New Men’s Lifestyle Magazine” and noted, “Cigar Aficionado is about taste. But it is not limited to the taste of a great smoke. This magazine intends to awaken and explore many of the pleasures that drive successful men.” This included coverage of travel, fine liquor, restaurants, and other features only tangentially related to smoking.

As the popularity of cigars rose during the 1990s, the twin concerns of health and sales to children—emphasized by the massive litigation that took up much of the decade—were applied to cigar smoking. In 1995, 800 Cigar Aficionado readers marched in front of the White House in protest of anti-smoking laws, before adjourning to a local Big Smoke event. In 1998, the cigar industry responded to mounting concerns with an advertising campaign called Banding Together, which was reported in the March/April issue of Cigar Aficionado, emphasizing that cigars were for purchase by adults only. “We … have said it repeatedly from the day the magazine was launched—cigars are an adult pleasure,” the magazine said.

As with Wine Spectator, Cigar Aficionado’s editorial approach was as an advocate for consumers, even in 2001 challenging the conventional wisdom that the best cigars came from Cuba. Ironically, the cigar boom in the mid-1990s—itself attributed at least in part to Cigar Aficionado —was at least partly to blame, despite the Cuban embargo; as demand rose, production was forced to keep pace, leading to a decline in quality.

The 1990s: Generalization and Retraction

In general, M. Shanken’s practice throughout the 1990s was to generalize. This not only involved shifting both of its flagship publications away from their specialized interests, but taking on other related projects as well.

In 1993, Wine Spectator had an audited circulation of 120,000 and, according to Shanken, revenues of $11 million. It was by far the largest moneymaker for the company, which reported overall revenues of $20 million for 1993. Despite these impressive numbers, that year the magazine underwent a substantial redesign. The magazine shifted emphasis from wine enthusiasts to lifestyles for people who loved wine, a subtle but significant difference that allowed Wine Spectator to expand its readership, its content, and its advertising. Shanken was quoted in an April, 1996 issue as saying, “This was what was needed to sustain and increase the growth of the audience of Wine Spectator in the ‘90s and beyond.” Nonetheless, Shanken maintained, “The winemakers and their wines are the stars of Wine Spectator. ”

The year 1997 saw the acquisition of Country magazine. A lifestyle magazine for affluent New Yorkers, Country’s readership was perfectly aligned with M. Shanken’s target audience. Country was launched in 1993 by editor and publisher Joseph DeCristofaro, and was a controlled-circulation, regional-oriented publication focusing on the Hamptons and published four times each year during the summer. Aspen Country, a similar magazine focusing on Aspen, was launched in 1996. In 1998, Shanken announced plans for a Napa edition as well, based on his long familiarity with the region and its particular attractions for Country’s upscale readership. This was intended to be merely the first of a series of regionally focused expansions, a different application of M. Shanken’s niche-market appeal. “This is a national brand that we are developing slowly,” Shanken told Mediaweek in December 1998. “We think of ourselves as niche marketers—we have a niche with cigars, we have a niche with wine. There’s no reason not to have niches by market.”

However, in the January 2002 issue of Circulation Management, it was noted that Country had suspended publication the previous November. There were, however, plans to resume publication in 2003.

Another significant expansion for M. Shanken was a web presence. The company launched WineSpectator.com in 1996; a cigar site followed soon after. By 1999, the wine site had attracted over 15 million visits and had 300,000 registered users. It also provided content to WineShopper.com, linking reviews and other editorial content. M. Shanken also entered into partnerships with other online ventures; among the most significant was an agreement with eSkye.com, a business-to-business site for the alcohol beverage industry. The agreement gave eSkye.com users access to Wine Spectator’s extensive database of wine ratings, allowing users, which included restaurants, bars, and liquor stores, to make informed purchasing decisions.

As the new millennium began, M. Shanken seemed poised to adapt to changing market conditions that had led to a decline in circulation in 1999. Emphasizing its role as a general lifestyle magazine since its inception, Cigar Aficionado shifted even more in that direction as the popularity of cigar smoking began to wane. Quoted in Folio in February 2000, executive editor Gordon Mott said, “The magazine has never been just about cigars—it’s been a men’s lifestyle magazine.” Marvin Shanken added, “Seventy-five percent of the editorial has nothing to do with cigars.” By April of that year, Cigar Aficionado had undergone a substantial revamp, complete with a new logo, greater coverage of non-cigar-related topics, and the relegation of cigar content to the back pages. Shanken told Advertising Age, “This magazine’s potential can be converted into a larger readership if non-smokers understand it to be a true lifestyle magazine for affluent men.” And M. Shanken’s Senior Vice-President Niki Singer was quoted in a June 1998 issue of Advertising Age: “Now that the cigar industry has leveled off, we’re still seeing double-digit increases because of strong growth in luxury goods.”