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Bill Gates Rescues PlanetOut

Gaytes_bill_2 Word leaked out over the holiday break that someone had come to the rescue of troubled gay media empire PlanetOut, whose stock (Nasdaq: LGBT) closed at a paltry $1.66 a share on Tuesday. A news release said that the company had (mysteriously) raised "$26.2 million in private placement financing." The Seattlest is now reporting that it was Microsoft co-founder Bill Gates, aka the second richest man in the world, who did the good deed, keeping the doors open at The Advocate, Gay.com, PlanetOut.com and Out magazine for the foreseeable future.

Some have suggested this may be Gates' attempt at redeeming himself for letting Microsoft go neutral on Washington state gay rights legislation a couple of years ago, but given the fact that that the gays are just wild about Macs, perhaps he's trying to woo some to the PC world.

Whatever the case may be, it's good that The Advocate will be around. It would be sad to see another 40-year-old gay put out to pasture. And with the sharp-as-a-tack Anne Stockwell in charge over there, the seemingly erstwhile magazine could still have its best years ahead of it. And the boys still need Gay.com for those hookups dating purposes, don't they? Nice work, Mr. Gates!

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  1. Four points:

    1. It was not Gates personally, it was several very large venture capital funds, one largely financed by Gates, making a small (to them) investment -- one among hundreds. There is no evidence whatsoever that Gates had any direct input into this particular decision.

    2. The aforementioned fund paid, not the $1.66 per share market price, but $0.86 per share. This does not bode well for current investors.

    3. Such bailouts almost always include the ouster of management, who are then replaced by agents of the VC fund. They do not reflect a "vote of confidence" -- exactly the opposite.

    4. Back to Gates -- even if he did personally inject himself into the decisio, his and Microsoft's track record regarding the Internet is pretty lame. He has been wrong on almost every call regarding the Web, social networking, etc. Just saying...

    Posted by: KipEsquire | Jul 5, 2007 7:33:28 AM


  2. I'm laughing at "woe some to the PC world" - appropriate mistake - I think you meant "woo"

    Posted by: Greg | Jul 5, 2007 8:10:18 AM


  3. I think Gates is trying to do the right thing by us, along with his buddy, Warren Buffet (my neighbor.) Just know this: the Gates Foundation wants to "live in the light" of the twenty-first century...but everything has it's growing pains. Including "Kipesquire."

    Posted by: Mark Hutt | Jul 5, 2007 8:21:01 AM


  4. "It would be sad to see another 40-year-old gay put out to pasture."
    ...and what the fuck do you mean by that ??

    Posted by: A.J. | Jul 5, 2007 8:39:22 AM


  5. AJ - He means he does not want to see the Advocate go out of business. The Advocate being a 40 year old gay publication and our guest blogger being a 40 year old gay.

    That what the fuck he means by that.

    Posted by: Steve | Jul 5, 2007 8:52:37 AM


  6. Unless there is a change in management, this is only good money following lots of bad money.

    Posted by: hoya86 | Jul 5, 2007 9:49:39 AM


  7. My story for this morning:

    The sun is shining, it's payday, I still have a roof over my head. I've just finished reading my first artilcle on Towleroad - about planetout.

    Seems good. Too good?

    So I thought - enough of that morning smile Mark, read the comments section - get some negativity and bitterness!

    And I did.

    End of story.

    Posted by: marks | Jul 5, 2007 10:15:42 AM


  8. I'm very pleased that PlanetOut was rescued from it's dire situation. It would be extremely unfortunate to lose a primary source of media coverage for the gay community.

    Financial straits of this magnitude can often be indicative of a problem with the business model and/or management. Hopefully, with the cash infusion will also come positive changes to bring PlanetOut back on a road of sustainable profitability.

    Posted by: Sid | Jul 5, 2007 10:39:39 AM


  9. This screams out for commentary from half of Towleroad.

    As the founder of Out and a longtime Microsoft employee, Mike must have unique insight into this turn of events.

    We're all ears.

    Posted by: 24play | Jul 5, 2007 10:43:11 AM


  10. You'd only buy these assets if you think their price is undervalued. I suspect the social networking assets are seen as more valuable than the magazines, which may still fold (put out to pasture) therefore.

    Posted by: anon (gmail.com) | Jul 5, 2007 10:55:39 AM


  11. Angelina Jolie could try and woo me too... and it might even work once...but no way am I switching teams. Same is true of my Mac. Sorry, I use both PC and Mac for my work and PC's are just too damned annoying for me to ever consider giving up my Mac.

    Posted by: mark m | Jul 5, 2007 11:56:35 AM


  12. There is little or no problem with the magazines or websites. The financial woes of this gayconglomerate are almost entirely due to its acquisition (about two years ago) of RSVP Vacations---and more specifically, the recent Queen Mary trip, which apparently achieved no more than a 60 percent booking level. I'm sure I'm not the only person who received increasingly desperate solicitations (free airfare to NYC and back from England! free balcony view!) for that voyage, but despite some great entertainment (yay Varla Jean Merman!) I wasn't about to go simply becuase it was expensive, I hate being on boats for long periods, and it looked like I'd need to buy formal wear for seven evenings.

    RSVP does OK when it takes over a Mexican Club Med for a week or does a beachy tour of the Caribbean, but they really bet the farm on the Queen Mary trip---and the queens didn't bite. I could speculate on the reasons, but I feel no need to open myself to the ridiculous personal attacks that would bring from needlessly bitchy commenters.

    Posted by: Paul | Jul 5, 2007 12:10:59 PM


  13. Assuming this transaction did in-fact take place, the senior management of Planet Out needs to be out on the street. Every division of this company is poorly managed. The gay.com domain is one of their most valuable assets and nothing has been done to improve the website since the company went public. A check of alexa.com which tracks web traffic for every major site in the world, shows the gay.com global ranking is 2,124, with traffic down over 55% in the past five years! This is due to their abhorrent chat room software which locks up and crashes computers no matter what browser you use.

    I approached Planet Out four years ago about running advertising in selected major market chat rooms. Their reply was "buy the whole network or buy nothing.....we don't do that." The amount of advertising revenue that could have been generated in those local chat rooms would easily top $1.5 million per year by conservative estimates. I wrote them an exhaustive proposal with spreadsheet analysis and never got any response. Local bars, restaurants and entertainment venues would have jumped at the chance to have their ad viewed hundreds of thousands of times per month in major markets.

    This is just one poorly managed slice of their company. With proper restructuring this could be a very profitable business model given their demographic has the highest amount of disposable income.

    To see the five year decline in their internet traffic, go to this link.

    http://alexa.com/data/details/traffic_details?url=gay.com

    Posted by: Johnny Lane | Jul 5, 2007 12:12:21 PM


  14. Kipesquire is right...it was not Gates alone. It was a group of investors, specifically :
    Special Situations Funds, Cascade Investment LLC (Gates' investment arm), SF Capital Partners, PAR Investment Partners LP and Allen & Co. NY based Allen and Co. was the placement agent for the private offering.

    Allen and Co specializes in investments in the entertainment space and hosts an annual retreat in Sun Valley, which has attracted the likes of Gates, Buffet, etc.

    From the SEC form 8k:
    Purchase price : $1.15 / share

    Cascade Inv. (Gates) : $6M
    Spec Situations : $6M
    David Herro : $1M
    PAR Invest. : $2.75M
    SF Capital Part. : $4.7M
    T Rowe Price : $4.5M
    Allen and Co :750K
    numerous smaller investments...

    Given that Gates invesstment is approx 25%
    its perhaps stretching things to say he rescued PlanteOut.

    Regarding management, the SEC form says "
    Concurrently with the approval of the Financing, on June 28, 2007, the Board of Directors of the Company approved an amendment to the terms of employment of the Company’s CEO, Karen Magee, to fix the term of her employment agreement to run through June 30, 2010, and granted Ms. Magee 300,000 shares of restricted stock, vesting annually over a three-year period, for the purposes of retention and additional incentive to Ms. Magee. "

    Posted by: Jack | Jul 5, 2007 1:03:16 PM


  15. My thoughts on the different parts of the company, used to love the advocate but lately it's been rather thin; Out mag- I have to hide when my folks visit so they aren't exposed to the sheer vapidness of its content; Gay.com used to be better but now I only go to Adam4Adam as it's so much easier to navigate. But I will now renew my subscriptions in the hopes things pick up.

    Posted by: Jersey | Jul 5, 2007 1:33:56 PM


  16. If Karen Magee is to be the CEO through June 2010, then this deal is dead on arrival. She has already demonstrated that her abilities and foresight are so far behind the curve, this is throwing good money after bad.

    Posted by: Johnny Lane | Jul 5, 2007 1:43:24 PM


  17. Traditionlly, investment funds invest in businesses because they think that the PARTs of the business are worth more than the market cap of the whole business, in other words, selling off Planetout piece-by-piece will net the investors more money than they paid to TAKE OVER Planetout. And, this lastest "investment" amounts to ownership of 56% of Planetout shares, this was a takeover.

    The "current" management of Planetout MAY end up presiding over The Advocate and/or Out Magazine/Out.com. However, you can bet your ass, your condoms and all your lube that GAY.COM WILL be sold and most likely to Microsoft. The buzz on the street is that the domain name gay.com may be worth more than all of Planetout.

    I disagree that Bill Gates had "no hand" in this investment. I don't think Gates' investment fund would invest in something as potentially "controversial" as a gay media company without Gates' knowledge and approval. A GAY PORTAL has to be as attractive for Microsoft as Logo Online is/was for Viacom.

    Bottom line, Planetout is OVER. Planetout is in business only so long as it takes for the investment group to sell off Planetout Piece by Piece. Reportedly, the investment group has already made a 40% return on their investment simply on the news of their purchase (and the fact that the investment community knows that Planetout was under valued, particularly with respect to the domain name/website gay.com)

    Posted by: Peter Everhard | Jul 5, 2007 2:00:31 PM


  18. Mark S., I have to agree with you. I love Towelroad but there has been way too much bitterness in the comment section lately. I would quit reading it but that would be unfair to Andy and all the hard work he puts into this great blog.

    Posted by: Another Mark S | Jul 5, 2007 2:19:30 PM


  19. This isn't 1997. "gay.com" is certainly valuable, but not to the point of saving a sinking ship. A site can achieve considerable access with a name lacking any clear relation to its activities---to wit, google, ebay, amazon. We're beyond the days of "General Motors" and hopefully beyond the (equivalent) "General Fags" as well.

    Posted by: Paul | Jul 5, 2007 2:31:08 PM


  20. No one involved is expressing a vote of confidence in feckless CEO Karen Magee. That 3-year contract extension and grant of shares is just an appallingly generous golden parachute.

    Good to know that, just like in the straight world, top management of tragically underperforming gay companies first gets paid ridiculous sums of money to run the damn thing into the ground THEN gets paid a multiple of their yearly compensation to go away. We really have made it!

    Posted by: 24play | Jul 5, 2007 2:45:15 PM


  21. I'm so pleased, as a former employee, that the majority of readers are wise to the plight of PlanetOut. Hubris, bravado, and an inability to actually LISTEN to employees who know more about the products on which they work than out-of-touch management and overpayed consultants are what killed the company. PlanetOut will never recover until serious housecleaning is done in upper management, and promotions are made from the INSIDE of the company. The Advocate, and even poor, pathetic OUT are not beyond saving with innovative ideas and a 21st century outlook. For starters, how about a moritorium on Melissa Etheridge for a month or two?

    That said, I find it intriguing that the most profitable part of PlanetOut, Specialty Publications, is ignored in press release after press release. Could it be that the ever-so-enligtened Gates, or the gay and proud PlanetOut higher-ups are ashamed to admit that they also publish MEN, FRESHMEN, UNZIPPED, and [2], not to mention that they produce UNZIPPED VIDEO, with a little help from Chi Chi LaRue? These titles have kept the company afloat for years, yet no mention is ever made (even in GAY media) about them. Yes, PlanetOut is OUT and PROUD. Right. As long as nudity isn't involved...

    Posted by: Nathan | Jul 5, 2007 3:18:24 PM


  22. To paraphrase Bette Midler, the question before us is less where's the clitoris [though I agree the idea of retaining and raising the compensation of the captain of the ship when it began to sink is absurd on its face] than whether or not PlanetOut's salvation is, in fact, good for the community.

    In short, unique, independent sources of serious information for LGBTs are an endangered species. That, by definition, leaves out the slick-coated toilet paper that is "OUT" and PO's jerk off rags. But they own not just "The Advocate," gay.com, and planetout.com, but also HIV+ magazine and Alyson Books, the largest single publishing source for LGBT-related nonfiction and fiction. As PlanetOut's mission statement long ago became profit-driven far above any community responsibility, the inevitable result is homogenization [based on "what sells"] of points of view reflected in those entities.

    The leading gay TV network, LOGO, has sucked up the excellent, and always-most-up-to-date gay "news" site 365gay.com, AfterElton.com, and AfterEllen.com. And, they have a "relationship" with guess who -- the aforementioned LPI Media owned by PlanetOut.

    If you live on the East Coast, the "local" gay paper you're most likely to read is owned by Window Media whose right-leaning "Washington Blade" and Miami/Ft. Lauderdale’s "Express Gay News,” regardless of the names on their mastheads, are virtual carbon copies of each other, accessorized with a few local angles. E.g., BladeWire/BladeBlog and ExpressWire/ExpressBlog have identical content, as do their National News and Other News sections. I’ll leave it to someone else to sort out why the “NY Blade” still also looks like an identical sibling though now identified as being owned by “HX Media” [best known for the bar rag “HX”] yet still listed on Window Media’s site as one of THEIR publications. The same cookie-cutter content is true to a lesser extent of Window Media’s “Houston Voice” and “Southern Voice” [SOVOWire/SOVOBlog] out of Atlanta. They also own “Genre” magazine, “David Atlanta,” and “411 Magazine” The bottom line: a significant percentage of American gays are only hearing one “voice.”

    Yes, New York City also has “Gay City News,” but Miami’s older gay community newspaper, “TWN,” recently folded. How much of this was related to the likelihood that “Express” is cheaper to produce given that most of its content is generated by a conglomerate?

    And I recognize that many other cities/areas have locally-owned papers, some more than one. One, the Northeast’s “Bay Windows,” out of Boston, has aligned with an online presence that seems to be something of a conglomerate while explicitly rejecting the characterization. Again, despite extensive local angles and input, “EDGE Boston,” “EDGE New York,” EDGE Providence,” EDGE Philadelphia,” et al., share many national stories, advertisers, and columnists.

    Potential “group think” is always counterproductive, even more so when that group is so relatively small and still struggling for full equality. Mainstream media, while having progressed, still gives little attention to our community. Therefore, we remain dependent upon gay media for information and insight into, e.g., where candidates for public office [all candidates, not just those they prefer] stand on issues vital to our welfare.

    All of which leads me to say that I wish “The Advocate,” our only national news magazine [however currently intellectually malnourished] is sold to independent new owners less intoxicated by ways to milk gay money by land and sea.

    Posted by: Free Ideas | Jul 5, 2007 3:50:32 PM


  23. Nathan, where have you seen Melissa Etheridge lately? Not in Out, I'll warrant, which is a different (better) magazine lately, and not I suspect in The Advocate... it's fine to be a critic, but it usually helps to have an aquaintance with what you're criticizing. Hey, this is Towleroad's comment board -- who am I kidding?

    Posted by: Toby | Jul 5, 2007 5:38:34 PM


  24. It seems a strangely backward-looking thing to do.

    Those magazines are in trouble because, other than hookups, there's less and less need for specifically gay media, or so it seems to me.

    Posted by: thin mint | Jul 5, 2007 10:26:14 PM


  25. Toby, my friend, I was an employee of LPI and PlanetOut for years. Can you make that same claim? The running gag around the Advocate office was "how many more covers can La Etheridge grace?" It's not ME who is unaware of what he speaks... look in the mirror. I lived through it first hand. If it wasn't Saint Melissa, it was Ellen. If it wasn't Ellen, it was Martina... I'm not slamming these great gals, they are true heroes to our community. I'm slamming the lack of imagination at The Advocate. And if you, Toby, think the Advocate is creative, diverse and interesting, you meed to get out more...

    Posted by: Nathan | Jul 6, 2007 4:26:25 AM


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