Monday, June 17, 2019

F&W Media Bankruptcy Protection UPDATE re SALES of Artist Network, Wet Canvas & North Light Books

An update for those who have had, in the past, a connection with Wet Canvas.  
SALES of assets have taken place.

How much Artists Network sold for
- and the relative status of "Crafts" and "Art" should anybody be in any doubt


The Debtors continue to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. The Debtors have filed a motion seeking joint administration of the Chapter 11 Cases pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure. 
  • On 7th June the CEO announced that the Books Division had been sold and that the Random House/Penguin bid had been selected as the winning bid and was due to be ratified in court last Monday (June 10th)
  • On 13th June, an auction was held in Wilmington and the Communities Division was sold in separate lots. 
  • On 17th June (today), documents were filed, which seem to me to say that the sales are approved subject to certain conditions. (but bear in mind I'm ignorant of USA bankruptcy law) 
It remains to be seen what will happen to the art books, art magazines and communities and forums relating to artists - and the royalties due to authors.

Below are more details about the sale of the two divisions - and how come my name ended up in the Court documents!

F&W Media: Books Division

F+W Books. In September 2018, F+W Media established F+W Books as a new, separate subdivision to handle all of the book publishing across the Communities described above through its dedicated book team. F+W Books is a leading publisher of illustrated non-fiction books in several categories, including art instruction, crafts, writing, genealogy, antiques and collectibles, woodworking, and the outdoors. In 2018, F+W Books’ revenue was approximately $22 million, approximately 80% of which was derived from its United States based business and approximately 20% of which was derived from its United Kingdom based business
North Light publishes a highly curated and exclusive selection of painting and drawing resources for artists of all levels. (CEO Affidavit to the Bankruptcy Court)
Penguin Random House is acquiring the book publishing assets of F+W Media, which is in chapter 11.

This includes North Light Books.
“Penguin Random House has acquired the book-publishing assets in the United States and the United Kingdom of F+W Books, a division of F+W Media, in an auction held Thursday (June 6) by the U.S. Bankruptcy Court for the District of Delaware.
“F+W’s new titles and its backlist of more than 2,000 illustrated nonfiction books across a broad range of categories and brands will be published within Penguin Random House’s Penguin Publishing Group division.”  statement by Random House/Penguin
It looks as if the books will continue to be published - and presumably Random House/Penguin now acquires an interest in publishing books about art.

Penguin seems to have a strong bias towards the 'intelligent' commentary on the history of art and design. Random House has no category for art

I'd characterise both as having a distinct gap in their portfolio at the moment when it comes to art instruction - as in ZERO titles - so no experience there then!  Should be interesting

The odd bit!

The oddest part of writing this post was finding my own name in the list of active titles sold by North Light Books. See Exhibit A (item 1706 on page 238) of Exhibit(s) Notice of Filing of Disclosure Schedules to the Asset Purchase Agreement for the F+W Books Business Line (related document(s)[79], [291]) Filed by F+W Media, Inc.. (Attachments: # (1) Exhibit A) (Kochenash, Jared)
and on Page 624 of 636 of Case 19-10479-KG Doc 294-1 Filed 06/11/19 of the "bought in items" 

i.e. my book started life in the UK and was licensed to North Light Books where it has been sold as 
Drawing 365: Tips and Techniques to Build Your Confidence and Skills

F&W Media: Communities Division

In 2018, the Communities Division generated turnover of $67.7 million in revenue in 2018.
Communities is a diversified multi-media company owning and operating print and digital media platforms to provide content distribution and marketing channels to a variety of enthusiast audiences. Headquartered in New York, New York, Communities segments its media into ten enthusiast categories or “Communities,” including Crafts, Artist’s Network, Collectibles, Writing, Outdoors, Sky & Telescope, Woodworking, Family Tree, Construction, and Horticulture. 
  • 13. The Crafts Community is the largest community within F+W Media and represented approximately $32.5 million of Communities’ revenue in 2018. It manages the most extensive list of media properties serving craft enthusiasts in the United States and the United Kingdom. Its portfolio includes magazines, books, websites, videos, podcasts, and e-commerce serving a variety of craft categories including interweave, sewing, scrapbooking, and quilting. Representative titles include Beadwork, Love of Quilting, and Quiltmaker. 
  • 14. The Artist’s Network is the second largest community within F+W Media and represented approximately $8.7 million of Communities’ revenue in 2018. This Community covers two primary categories, art and design, through a suite of magazines, e-commerce stores, websites, videos, social media platforms, e-newsletters, and in-person events. Representative titles include Artists Magazine and Watercolor Artist  CEO Affidavit to the Bankruptcy Court

Terry O-Toole, the Chairman and Co-Managing Member of F+W Media, Inc. has purchased,  (via his private investment partnership Macanta Investments LLC), the Crafts and Artist's Network Communities for a combined total of nearly $3.5 million.
  • the Crafts Community - for $2.8 million
  • the Artist's Network Community - for $675K
Craft Industry Alliance commented as follows- in F+W Craft Communities Have Been Auctioned Off to Macanta Investments By Abby Glassenberg (Jun 14, 2019)
Macanta Investments is the family investment platform for Terence M. (Terry) O’Toole. Macanta was an owner of F+W alongside Tinicum Incorporated, a private equity firm where Terry O’Toole is a partner. O’Toole was the chair of the board of F+W Media and, through Macanta, likely had significant personal wealth invested in F+W. It’s possible that Macanta is taking ownership of F+W Craft Communities in return for forgiving debt owed to it that was unlikely to be paid in the bankruptcy settlement. O’Toole did not respond to our request for comment.
To me that looks like a management buy-back by the person who provided the funds when F&W originally got into trouble

Very odd.

The strategy for funding the F&W Media company is described below as  "Providing capital to assist companies with good businesses but bad balance sheets"

Add caption

The Artists Network Customer Notice

It's quite difficult to find out what the people running the Artists Network think.

This is what they officially think - but you have to scroll a very long way down the home page to find this letter

It states
To Our Valued Customer,

Over the years, F+W Media, Inc. and its affiliated companies (“F+W Media”) have strived to provide inspiration, instruction, and exclusive products and services through its various magazines, online education, print and digital books, subscription video sites, consumer and trade events, and online stores. Many things have changed over the years, but one will always remain the same: our commitment to you, our customer, in making sure that you have access to the latest content of our craft, art, writing, design, knitting, quilting, and outdoor enthusiast communities.

We recently announced a plan to strengthen F+W Media through a financial restructuring. This plan is designed to guarantee that there will be no change in the services and content that our customers expect from F+W Media.

In order to avoid any confusion or inaccuracy, I am writing to you personally to share two things that we want all customers to know:
We are open for business. Customers can continue to subscribe to our magazines and shop across our online stores without disruption.
All orders will arrive on time as promised.

The financial restructuring will be done through a court-supervised process. On March 10, 2019, we began that process by voluntarily filing reorganization cases under chapter 11 of the Bankruptcy Code in the District of Delaware. Operations will continue as usual throughout the court-supervised process, including meeting and exceeding the needs of our valued customers.

We have asked for, and the court has approved, our ability to keep serving you in the same way we have in the past.

At F+W Media, we are honored to offer products that provide inspiration in the daily lives of our customers and we want to thank you for being a part of our enthusiast communities.

If you have specific questions with respect to our Chapter 11 reorganization please contact us here.

Gregory J. Osberg,

Chief Executive Officer

The Wet Canvas perspective

Nobody seems to know what's going on. Administrators seem to prefer to keep the news on current events re. "what's happening" to a very low profile in relation (unlike previous changes of owners when every forum got a notice).  One gets the impression they're getting no more news than customers are getting via Artists Network!

I took a look at few of the forums - attendance and posting is way, way down on what it used to be over a decade ago.

Is it a dead asset? Not yet - but very nearly by the look of it.......  If I woke up one day to a Facebook post asking where Wet Canvas has gone I wouldn't be in the least bit surprised.

Previous Posts

The end result is the bankruptcy filing, in which the 106-year-old company—with over $100 million in debt—is seeking protection from creditors as it moves to sell itself.

The story of what happened from the CEO Perspective

Bottom line, a company which was a successful publisher 
  • failed to identify and respond appropriately to changes in the marketplace following the impact of the internet, 
  • tried to become an ecommerce retailer and 
  • failed to run the business successfully
  • refinanced and burned through the money fast
  • effectively died in the Chapter 11 bankruptcy court
  • likely to liquidate in a Chapter 7 Bankruptcy Court before the end of 2019.
It's a great lesson in "sticking to the knitting"! 

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