Gemstar-TV Guide International (NASDAQ:GMST) announced big news this week: Its flagship TV Guide magazine is headed for a marketing mutation.
Say goodbye to those tiny tabloid-sized magazines. Gemstar plans to expand TV Guide to full size and focus more on fresh features and TV-related pop culture than gray charts full of channel listings. According to the release, the company will target a younger, female audience.
Make no mistake -- Gemstar must evolve its core brand or watch it wither and die. TV Guide is now an alien on a new world, finding its plans for domination thwarted by its unsuitability for its environment. As technologies and habits change, older media formats such as TV Guide can seem dated and irrelevant; most people are now content to use the Internet or a television-listing cable channel to see when their favorite shows will air. I'm reminded of Playboy's (NYSE:PLA) problems with its own flagship magazine, which is suffering from both Internet competition and hipper, younger competitors such as Maxim.
Rupert Murdoch owns 40% of Gemstar-TV Guide International through his News Corp. (NYSE:NWS) empire, so I'm sure he'll be carefully watching the return on investment yielded by these changes. Although I foresee initial enthusiasm when the new TV Guide hits newsstands in October, I can't necessarily see this redirection as a cure-all. TV Guide must still compete with the Internet and a galaxy of story-driven weekly and monthly magazines for celebrity information.
According to the business plan described in the release, the intended changes may cause up to $100 million in operating losses through fiscal 2006. The magazine's circulation will also be reduced to pursue more favorable distribution.
Gemstar-TV Guide International is a low-priced stock with a history of negative earnings. Even with this ambitious turnaround plan for its core product, I'm in no rush to invest in it.
I mentioned Maxim earlier, and a crazy thought popped into my head -- would a sexier version of TV Guide, targeting younger males, better enhance shareholder value than the new magazine's pursuit of female readers? Rupert Murdoch has taken edgy chances before in the network broadcasting arena. I wonder what he would think of my idea.
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Fool contributor Steven Mallas owns none of the companies mentioned. The Fool has a disclosure policy.
