What Went Wrong? – Vanguarde Media and Chisholm-Mingo in retrospect.

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Cover - Heart & SoulThis was no ordinary day at Vanguarde Media Inc., owner of Honey, Savoy and Heart & Soul magazines. In 2003, with just two days to Thanksgiving, it was especially busy as workers tried to wrap things up before heading to lunch with their co-workers. There was a lot of catching up to do, especially since the employees had taken an extended break the previous afternoon to share cultural dishes at a potluck lunch and exchange tales with their co-workers. At that gathering, one staff member blessed the food and gave thanks: ?We have so much to be thankful for,? he said softly to his fellow employees, all of whom were holding hands.

So, when an official e-mail went out at 2 p.m., requesting that all employees be present for a special announcement later that day, no one knew exactly what to make of it. The tone of the e-mail certainly did not reflect the holiday cheer of the day before. ?Well, if it is really bad, then Corynne (editor in chief of Heart & Soul) would be here,? offered staff writer Bevin Cummings. It wasn?t enough to quell the rumors or ease the staff?s growing fears.

Like a dress with a loose thread, Vanguarde?s fabric slowly began to unravel that afternoon. At four o?clock, Keith Clinkscales, Vanguarde’s chairman and CEO, and top investor Fred Terrell, managing partner and CEO of Provender Capital Group, delivered the dreaded news that Vanguarde Media was filing for bankruptcy and shutting its doors. ?This is a sad day?? Clinkscales began.

With that, Vanguarde Media took its place in history as another Black company gone bust.

Caught off guard

Vanguarde was not the only high-profile Black-owned company in New York that found itself in trouble that fall. Marketing communications firm Chisholm-Mingo Group Inc. was forced to file for Chapter 11 in October when it found its expenditures and revenues just weren?t matching up. ?[Filing for Chapter 11] gave us an opportunity to adjust how we were doing business,? explains agency chairman Samuel J. Chisholm. ?That?s fundamentally why we did it. The nature of Chapter 11 allows you to put things in the past on hold and restructure the organization so you can do business better.? With the filing, creditors are held at bay until the courts, the firm?s trustees, Chisholm-Mingo itself and its various groups of creditors develop a payout plan. ?This is not a fire sale,? insists Chisholm.

Those who follow business trends say neither Vanguarde nor Chisholm-Mingo was able to ride out the latest economic troubles.

Cover - HoneyVanguarde appeared to be emerging as a major player in Black media. Honey, the fashion and entertainment publication and the largest title under Vanguarde?s aegis?average circulation was 419,621 for the first six months of 2003?was popular among urban teens and twenty-something women. Savoy, a reincarnation of BET?s defunct Emerge, was becoming known as the voice of the new Black power. Launched in January 2001 with a circulation of 120,000, its circulation had grown to 325,000 by 2003. Its popularity enabled Vanguarde to spin off Savoy Professional, which packaged lifestyle and career advice for Blacks, and to develop Savoy Life, a cable network television program that brought the pages of Savoy to the tube. Heart & Soul was also finding its niche. The editorial staff was anticipating rave reviews for the newly designed February 2004 issue that now will never see the light of day.

With total advertising revenues for the three publications rising an astounding 54 percent in 2002 from the previous year, what went wrong? Unquestionably, the troubled economy was a factor. Even Penthouse filed for Chapter 11 protection in August 2003.

Things changed, says Clinkscales. He had taken on the publications with the belief that BET would be his major backer, he says. ?The whole reason we did the deal was because we?d get to put Honey and Heart & Soul on a network that reaches 70 million homes and that would give us a chance to enhance our presence and ability to get subscribers.? That opportunity vanished when Viacom Inc. came on the scene, he says. ?Once BET was purchased by Viacom, BET [was required to] dispose of all assets that were not profitable and Vanguarde was one of those assets. Things changed.?

Changing with the times

Could Vanguarde have shifted gears when BET bailed? ?It was hard to adjust because we had the magazines and our own Internet play,? Clinkscales says. That Internet play spelled disaster.

Vanguarde Media had started at the height of the dotcom craze in 1999, but toward the end of 2000 the Internet boom began to bust and the economy nose-dived. During that time, much of Vanguarde?s financial resources were dedicated to various Internet-based ventures, including Web sites such as SideHustle.com, UrbanIQ.com and AdHere.com. The firm also tried to beef up the content and reach of the radio trade publication Impact! with a site primarily featuring business, television and advertising news.

All of those ventures were unsuccessful. Attempts to reallocate funds to other areas came too late, says editor Roland S. Martin in an article on BlackAmericaToday.com. ?Hindsight is 20/20. But it is clear that for a young company like Vanguarde, those precious dollars could have been used a year or two later to sustain the magazine division,? he says.

The Chisholm-Mingo group also had trouble changing with the times. To this day, Chisholm attributes a large part of his company?s financial woes to the events of 9/11, though he has publicly admitted that his company did not react to those events as quickly as it should have. ?It?s been a very tough environment in the entire marketing communications industry,? he says, adding that the conservative mood has hurt his bottom line tremendously. ?It wasn?t that we were losing business,? he insists. ?But clients became very suspicious about communicating. This is the way the environment happened to be.?

In addition to laying off employees, the company is reevaluating how it has been doing business. ?How do you do business differently in the current environment? You change,? Chisholm says. ?There will be a lot of changes. We will operate more efficiently and service clients better. We are redoing our board [of directors] and looking for other revenue streams. We?re looking for growth opportunities both inside and outside of the organization.?

Learning from the competition

Had Vanguarde and Chisholm-Mingo looked at their competitors, they might have seen what was coming, experts say. For example, the concept of a Black lifestyle magazine had already been explored. Earl G. Graves Ltd., owner of Black Enterprise magazine, had attempted to launch such a publication, Verve, but could not obtain the necessary advertising dollars. Instead, the company incorporated lifestyle into the already established Black Enterprise. Other attempts to launch stand-alone publications targeting teens and kids were also abandoned for the same reasons. Chairman and CEO Earl G. Graves Sr. has said publicly that start-up magazines in the current environment are simply too expensive to undertake, particularly since it typically takes several years for such ventures to turn a profit.

Vanguarde experienced that firsthand. According to AdAge.com, the company lost $3 million to $6 million last year on revenues of $25 million.

Some companies have teamed with stronger mainstream firms for financial muscle, a move Vanguarde and Chisholm-Mingo should have considered, experts say. Essence Communications? partnership with Time Warner in 2000, for example, which gave Time Inc. a 49 percent stake in the company, afforded Essence access to resources and capital to expand the brand and weather the economy. To Vanguarde?s credit, it had no intention of floating solo with its three publications, but simply got caught in an undertow when BET joined Viacom.

Chisholm-Mingo should have looked to Global Hue for leads, insiders say. Global Hue posted billings of $350 million in 2003, a 6 percent gain over 2002 billings, after reinventing itself to match the nation?s changing demographics.

The company (formerly Don Coleman Associates) acquired Los Angeles-based Asian-American advertising agency Innovasia and San Antonio, Texas-based Hispanic advertising agency Montemayor y Asociados. Those acquisitions, plus a merger with True North, enabled Global Hue to position itself as a full-service multicultural advertising agency and snag lucrative accounts, including a $40 million Chrysler account that was later increased to about $140 million. Chisholm now says his company is ?investigating mergers, acquisitions, affiliations, associations and anything that will make this organization better and able to service clients better. We?re open to a lot of different of scenarios.?

Moving on

Chisholm still plans to come out on top. ?I think the new Chisholm-Mingo will be significantly different than the old Chisholm-Mingo,? states an optimistic company chairman. ?We?re building an organization that is for today, not focused on yesterday. We?re determined.?

For now, Clinkscales is dissecting the lessons of his latest venture. But the man that the Washington Post once called ?the boy wonder of Black magazine publishing? vows the public has not seen the last of him or Vanguarde?s magazines. ?They are good assets and good products,? he states proudly. ?There is a good chance that they will come back.?