Essence Communications, Inc.

FOUNDED: 1969

Contact Information:

HEADQUARTERS: 1500 Broadway
New York, NY 10036
PHONE: (212)642-0600
FAX: (212)921-5173
URL: http://www.essence.com

OVERVIEW

Essence Communications publishes Essence, one of the leading general interest magazines targeting African American women. The monthly publication boasts a circulation of more than 1 million and a readership of 7.6 million, nearly one-third of which is male. In addition, the company operates a mail order business through which it sells books, art, and apparel. Other activities include the Essence Awards, a prime-time televised network special which honors African American entertainers, athletes, government officials, community activists, and other noteworthy individuals, and the Essence Musical Festival, an annual three-day celebration of African American culture that features artists such as Stevie Wonder and Luther Vandross.

COMPANY FINANCES

Sales for Essence Communications grew steadily throughout the 1990s. After reaching $77 million in 1994, sales grew to $92.8 million in 1996, and to $104.8 million in 1997. In 2000, Essence posted sales of $145 million , a 17.5 percent increase over the previous year. Despite falling advertising revenues for most magazine publishers, largely the result of a North American economic recession, Essence saw its advertising pages grow 5 percent in the first half of 2001.

ANALYSTS' OPINIONS

The reason for Essence Communications' strong performance in the first half of 2001, despite weakening market conditions, had to do with its target market, according to some analysts. In a September 2001 issue of Crain's New York Business, columnist Valerie Block explained, "During the heady days of the advertising boom, one of the biggest changes in the landscape was the ascension of ethnic media. Buoyed by the growing number and wealth of their constituents, ethnic media outlets, especially those catering to African Americans and Latinos, began to catch up to their mainstream rivals." When the advertising boom began to fizzle in late 2000, many ethnic publishers continued to see their advertising dollars increase. According to Block, the reason for this is multifaceted, but it has a lot to do with the fact that "advertisers, finding traditional markets tapped, are looking to the minority media to help them attract new customers." In addition, some analysts believed that working in the Essence Communications' favor was the fact that it had not embraced online advertising and publishing to the extent more mainstream publishers had; as a result, when the dot-com market crumbled along with the economy, minority focused firms like Essence Communications simply weren't hit as hard as those who had come to rely more heavily on the Internet.

HISTORY

After attending an African American entrepreneur-ship conference, bank manager Edward Lewis and insurance salesperson Clarence O. Smith—along with graphics designer Cecil Hollingsworth, advertising salesperson Jonathon Blount, and photographer and writer Gordon Parks—created Hollingsworth Group in 1969. The new firm began working on the development of the first general interest magazine targeting African American women. To launch operations, the partners used their own savings and asked friends and family members for loans. Freedom National Bank, based in New York City, was the first organization to fund the new company, offering $13,000 in startup capital. In addition, a consortium of banks and venture capitalists willing to invest in a minority venture loaned Hollingsworth Group $130,000. Eventually, the new firm secured __BODY__.87 million in loans from Equitable Life Assurance Society of the United States and other investors.

The first issue of Essence was published in 1970. The magazine's pages numbered roughly 100, 13 of which contained advertising. At a price of 60 cents each, Hollingsworth Group sold nearly 50,000 copies of the new publication. In 1971, Marcia Ann Gillespie took over as editor-in-chief, a role she would retain for nine years, despite various shifts in the firm's management. Hollingsworth Group was renamed Essence Communications early in the decade, following a management restructuring that left Lewis serving as both chairperson and publisher and Smith acting as president. In 1977, Hollingsworth, Parks, and Blount filed suit against Essence Communications in an effort to gain control of the firm; after three years of legal wrangling, Essence neared bankruptcy, and the trio dropped their suit. However, legal fees had cost nearly $2 million, and as a result, the firm was unable to pay off its startup loans until the mid-1980s.

Throughout the 1970s, Essence covered general interest topics such as beauty, fashion, food, child rearing, and health. A fiction section included original works by African American writers like Maya Angelou, Toni Morrison, and Alice Walker. The magazine also addressed more controversial topics at the time, such as women's careers and political scandals. Circulation grew to 450,000 in 1975. The number of pages containing advertising grew from a total of 455 in 1974 to 884 in 1979. It was this increase in advertising revenues that allowed the magazine to achieve profitability in 1976. The firm itself turned its first profit in 1980 on sales of $14 million.

Susan L. Taylor took over as editor-in-chief in 1981. She expanded the magazine's target market to include African American males. Along with a new yearly issue devoted to men, Essence also launched a "Say, Brother" column, written by various African American men, in each issue. Sales grew to more than $20 million by the mid-1980s. The firm began publishing a mail-order catalog in conjunction with Hanover House Inc., and it also started to license the Essence name for products such as hosiery, eyeglasses, and lingerie. In 1983, Taylor began producing and hosting a television show that evolved into the first African American talk show to achieve national syndication in the United States. Two years later, Essence Communications acquired a stake in a New York-based television broadcaster. Eventually, a new subsidiary, Essence Television Productions Inc., began to handle the firm's television production operations. The firm purchased a portion of Amistad Press, another black-owned publishing house, in 1987.

Essence Communications added to its holdings in 1992 with the purchase of Income Opportunities, a magazine targeting aspiring entrepreneurs. Estee Lauder began advertising in Essence in 1993. Monthly circulation reached 1 million the following year. It was during the early 1990s, that the Essence Television Productions Inc. subsidiary began producing the annual Essence Awards program. Essence Communications expanded its target market to include Hispanic women with the launch of Latina magazine in 1995. In conjunction with Golden Books, Essence Communications also began to develop children's books written by African American authors and illustrated by African American artists. To celebrate its 25th anniversary, the firm hosted the first annual Essence Musical Festival, which featured performances by the likes of Bill Cosby, Aretha Franklin, and Boyz II Men. More than 150,000 people attended the event, which garnered national press coverage.

Essence redesigned its look in 1997, increasing its existing content, adding new content, and boosting the number of advertisements on its pages. The magazine also raised its price from $2.50 to $2.75. In January of 2000, Monique Greenwood took over as editor-in-chief. She instituted another redesign of the magazine, adding special sections, such as bridal guides, to various issues of Essence. In November, Time Inc. acquired a 49 percent stake in Essence Communications. By then, Essence Communications had sold Latina and refocused solely on the African American market.

STRATEGY

To attract more advertisers in the early 1990s, Essence Communications put in place a market research strategy designed to bolster the firm's insistence that advertisements targeting minority groups were a good investment for various businesses. To this end, the firm created focus groups of Essence readers who completed extensive surveys about what types of products and services they purchased. The firm also began hosting various events, such as free mall tours which provided attendees with free samples of products from various advertisers, as well as seminars on topics such as fitness, spirituality, and beauty.

Efforts to attract new advertisers continued into the early 2000s. New editor-in-chief Monique Greenwood decided to increase fashion and beauty coverage, hoping to attract apparel and cosmetics makers. The strategy paid off when Estee Lauder upped its advertising with the magazine; firms like L'Oreal and Jaguar began to purchase adds as well. In 2000, Time Inc. acquired 49 percent of Essence Communications. According to a January 2002 issue of Mediaweek, Essence Communications planned to "reap the benefits of its new partner's consumer-marketing muscle and ad-sales savvy." In early 2002, the firm also began to make use of the subscription fulfillment and distribution services in place at Time Inc.

PRODUCTS

Along with its flagship product, Essence magazine, Essence Communications also sells art reproductions, books, hosiery, and apparel for African American women. Most non-magazine sales take place via the firm's mail-order catalog.

FAST FACTS: About Essence Communications Inc.

Ownership: Essence Communications Inc. is a privately held company. Time Inc. owns a 49 percent stake in the firm.

Officers: Edward Lewis, Chmn., CEO, and Publisher; Clarence Smith, Pres.; Barbara Britton, Dir. of Advertising

Employees: 178

Principal Subsidiary Companies: Essence Communications operates offices in Atlanta, Georgia; Chicago, Illinois; Detroit, Michigan; Los Angeles, California; and New York City.

Chief Competitors: Major rivals of Essence Communications include Johnson Publishing, publisher of Ebony and Jet, Vanguarde Media Inc., and other publishers of minority focused magazines.

EMPLOYMENT

The work environment at Essence Communications is casual and boisterous, according to Folio: the Magazine for Magazine Management. The firm does face issues of high turnover because it can't offer pay comparable to what some larger publishing companies offer. Benefits include healthcare coverage, profit sharing, management bonuses, and paid vacations. Hours are fairly unpredictable as no fixed schedule is in place.

CHRONOLOGY: Key Dates for Essence Communications, Inc.

1969:

Hollingsworth Group is founded

1970:

The first issue of Essence is published

1981:

Susan L. Taylor takes over as editor-in-chief of Essence

1984:

Essence begins licensing its name for various products

1994:

Monthly circulation exceeds 1 million for the first time. Essence begins producing the Essence Awards

1995:

Essence hosts the first Essence Music Festival in New Orleans, Louisiana

2000:

Time Inc. acquires 49 percent of Essence Communications

MINORITY ADVERTISING GROWS AFTER RACISM IS EXPOSED

Minority media firms like Essence Communications began to see their advertising revenues grow in the late 1990s after the racist advertising tactics of Katz Media Group were made public. An internal Katz Media memo discouraged salespersons from placing advertisements with minority media outlets, explaining that advertisers wanted "prospects, not suspects." This revelation validated the complaints of many minority media firms, who had insisted for years that national advertisers avoided advertising their products with minority publications, radio stations, etc. due to racist beliefs about the populations those media outlets targeted. According to Valerie Block, writing in Crain's New York Business, the incident "embarrassed national advertisers, which were forced to face deep-seated prejudices and pony up with advertising buys."

SOURCES OF INFORMATION

Bibliography

Block, Valerie. "Advertising Darlings: Amid Slump, Ethnic Media Continues Climb." Crain's New York Business, 3 September 2001.

"Corporate Culture: Essence Communications Inc." Folio: the Magazine for Magazine Management, 1 December 2001.

"Essence Communications, Inc." International Directory of Company Histories. Detroit: Gale Research, 1998.

Essence Communications Inc. Home Page, 2002. Available at http://www.essence.com.

Granatstein, Lisa. "All in Good Time." Mediaweek, 7 January 2002.

Lefevre, Lori. "Essence Plans to Branch Out." Mediaweek, 16 October 2000.

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. Essence Communications' primary SIC is:

2721 Periodicals Publishing & Printing

Also investigate companies by their North American Industrial Classification System codes, also known as NAICS codes. Essence Communications' primary NAICS code is:

511120 Periodical Publishers