After 106 years of creating content for hobbyists, F+W Media has filed for bankruptcy, citing $105.2 million in outstanding debt after a failed decade-long attempt to reinvent itself as an ecommerce company—and the exorbitant tech contracts it signed as a means to that end.
To be sure, 2008 was a rough time to be in media. And as consumer demand for print declined, F+W decided to focus more on ecommerce. In 2014, former CEO David Nussbaum doubled down on the space, announcing a new name—F+W, a Content + Ecommerce Company—and announcing that F+W was “strategically moving away from our traditional roots in the media business” to focus on “its fastest-growing businesses, digital and ecommerce.” This was, it turned out, not to be a good bet.
An enthusiastic customer base
The company serves “enthusiasts in various core vertical communities, including crafts, art, writing, design, knitting, quilting and outdoors,” with titles like Antique Trader, Gun Digest and Popular Woodworking, but its investments in commerce came at the detriment of its media business and it lost both customers and revenue.
In a petition submitted with the bankruptcy filing, CEO Gregory Osberg said the thought at the time was F+W customers were passionate about their hobbies and would “purchase items from the company related to their passions besides periodicals, such as craft and writing supplies.”
Indeed, the 2014 release was overwhelmingly optimistic, noting F+W had grown its ecommerce business from one store with $6 million in revenue to 31 ecommerce stores with nearly $60 million in revenue in 2014. It attributed this growth to “hiring the right people,” including ecommerce directors, online product managers and marketers, SEO/SEM experts, email and traffic managers, third-party partnership managers and an in-house customer service call center.
But perhaps they weren’t the right people after all. Or maybe too many cooks spoiled the proverbial broth.
According to Osberg’s petition, the company vastly underestimated how much it would cost to run an ecommerce business, including buying merchandise, leasing warehouses, marketing products, fulfilling orders and responding to customer service inquiries.
“These additional obligations came at a tremendous cost to the company, both in terms of monetary loss and the deterioration of customer relationships,” he added.
In fact, subscribers decreased to 21.5 million from 33.4 million in 2015 and advertising revenue dropped from $20.7 million to $13.7 million.
F+W also signed contracts with technology vendors that increased its expenditures by 385 percent in a single year. Case in point: According to its bankruptcy filing, some of its largest creditors include cloud applications and platform services company Oracle, to which it owes $953,000, and software company Adobe Systems, to which it owes $695,000.
“And, because the company had ventured into fields in which it lacked expertise, it soon realized that the technology used on the company’s websites was unnecessary or flawed, resulting in customer service issues that significantly damaged the company’s reputation and relationship with customers,” Osberg wrote.
As a result, it spent $6 million to generate $3 million in revenue from selling crafts online.
One last chance
In late 2016, lenders agreed to a restructuring and F+W threw good money after bad, spending $15 million in six months on technology contracts, merchandise and staffing for its ecommerce business.
“The company’s decision to focus on ecommerce and de-emphasize print and digital publishing accelerated the decline of the company’s publishing business and the resources spent on technology hurt the company’s viability because the technology was flawed and customers often had issues with the websites,” Osberg said in his petition.
He was appointed interim CEO in January 2018 after a long history in publishing with former positions as: president of CNET; president and worldwide publisher of Newsweek and Newsweek.com; and publisher of the Philadelphia Media Network, parent company of the Philadelphia Inquirer, Daily News and Philly.com.