Readers Digest To Slip Into Chapter 11

It most probably would have been in a doctor’s and dentist’s waiting room, but most of us have glanced through or read a Readers Digest magazine. The model of short and serialised stories set it apart from the book and made it attractive to many. Reader’s Digest was first launched in 1921 by a husband and wife team and began as a mail-order collection of condensed articles from other magazines and evolved into direct- mail pioneer and one of the world’s largest publishers. Of its 94 magazines, 9 claim to have a circulation over 1m in the US alone, and its titles claim a combined global readership of 130m people in 78 countries.

Short stories and articles are well suited to the new eformat and better still to the mobile world. Readers Digest also already has a well honed mail order and direct mailing operation and finally their model is advertising based. If anyone was equipped to migrate into the digital age, one would think it would be Readers Digest.

However, the advertising downturn and the high charge of servicing a significant debt has forced the US arm of Reader's Digest magazines to file for Chapter 11 bankruptcy. Chapter 11 gives firms time to straighten out their finances while continuing trade and Readers Digest aim to use it to get rid of up to 75% of its debts, cutting them from a staggering $2.2bn to $550m. This will reduce its annual interest payments on the remaining debt to less than $80m. Today's Chapter 11 filing does not apply to Reader's Digest operations in Canada, Latin America, Europe, Africa, Asia and Australasia, where the company claims to have "adequate funding" to continue publishing.

So will Readers Digest make it through today’s transition and economic difficulties and sieze their digital market opportunity, or will they like so many well placed players such as book clubs, loose their way and allow others to steal their lunch?