As a sale of the National Enquirer collapses, some wonder if the tabloid is too hot to handle

The National Enquirer, at left, on a New York newsstand in February 2019 with some of its cousin publications. (Timothy A. Clary/AFP/Getty Images)

In the spring of 2019, the National Enquirer appeared once again to be riding out another storm in its long, tumultuous history.

The gossip tabloid was embroiled in political scandal, but that was hardly anything new — if anything, that was part of its business model. Circulation was down, but that was the case for the entire publishing industry. Its parent company had put it up for sale, but a surprisingly appropriate new buyer had emerged for this impulse-buy fixture of the supermarket checkout lines — Hudson News, perhaps the last thriving operator of newsstands in the country.

But a year and a half later, that long-stalled sale has fallen through, and questions surround the Enquirer’s future as never before. Its longtime publisher and champion, David Pecker, has been sidelined within the company, and the chief of the hedge fund that now owns it has to contend with pension fund investors who are uncomfortable with the tabloid’s role in alleged scheming to tilt the 2016 election to Donald Trump.

And last week, when parent company American Media Inc. announced its merger with an unlikely partner — a distribution company specializing in products like face masks and hand sanitizer, which like AMI is currently owned by Chatham Asset Management — the news release cited AMI titles like Us Weekly, Life & Style, and Men’s Journal. But strikingly, it made no mention of the Enquirer, its former flagship.

The collapse of the deal AMI announced last year to sell the Enquirer and two of its lesser-known tabloid cousins — the National Examiner and the Globe — to James Cohen, CEO of Hudson News, for an eye-popping $100 million raised questions for some industry observers as to whether the Enquirer had become too hot to handle.

Last year, Chatham pushed Pecker — then the CEO and chairman of AMI — to sell the Enquirer. Though the tabloid continues to be a lucrative property, it was coming off an unusually high-profile slate of scandals.

In the first scandal, Pecker and his top deputy, Dylan Howard, entered into non-prosecution agreements with federal investigators for their role in buying and then burying the story of a former Playboy model who alleged having an affair with then-candidate Trump. AMI admitted it buried this story to ensure that McDougal did not publicize damaging allegations about Trump and to influence the election in favor of Trump, a longtime business friend of Pecker’s.

Not long after that agreement was made public, AMI published a controversial scoop in January 2019 about the extramarital affair of Jeff Bezos, the CEO of Amazon and owner of The Washington Post. Bezos then accused Pecker and Howard of attempting to blackmail him by threatening to publish intimate photos of his that they claimed to have obtained. The Bezos allegations threw their deal with prosecutors into jeopardy, and federal investigators explored whether they had broken the law, which could have nullified the deal.

As prosecutors continued to question witnesses, Cohen began to doubt the wisdom of purchasing the Enquirer, according to two people familiar with his thinking.

But Cohen denied that the investigation played a role in his decision. “The economics of the deal simply changed too much following the covid outbreak,” he said in a text to The Post, citing a “significant sales drop-off.”

Experts noted that it was nearly a year from the announcement of the sale to the onset of the pandemic that dramatically slowed activity at airports and other places where Hudson operates. Cohen explained that because Hudson was a major customer of AMI’s as its wholesale distributor, they had to go through lengthy reviews of supply contracts and antitrust issues.

Still, a lingering federal probe and the possibility of legal liability would be “really significant issues,” said Douglas Arthur, managing director covering publishing and advertising at Huber Research. “For a prospective buyer to walk into that, how could it not be a huge issue?”

As time passed without a deal closing, the Enquirer’s financials continued to erode, raising further questions in the industry about the agreed-upon sale price of $100 million. AMI lost $72 million in a single year ending in March 2018, according to documents acquired by the Associated Press. The company has not invested heavily in its digital operations, and the National Examiner does not even have a website. Yet Cohen’s price compared to those of top daily publications in recent years — the $70 million that billionaire John Henry paid for the Boston Globe or the $250 million that Bezos paid for The Post.

Meanwhile, even before the onset of the coronavirus pandemic, the print publishing industry has shown further signs of collapse and has increasingly become the domain of private equity investors and cost-cutting hedge funds like Chatham. “If those tabloids were in trouble before covid, they’re in a lot more trouble now,” Arthur said.

The Enquirer’s circulation has dropped by roughly 90 percent over the past two decades, and it is a far smaller and less significant publication than it was in the days of publishing photos of Elvis Presley in his casket, or even when it broke the 2008 story about the extramarital affair during which former senator John Edwards fathered a child while seeking the Democratic nomination for president.

Three weeks ago, Chatham won control of McClatchy, the chain of 30 regional outlets led by the Miami Herald, after the company was forced to file for bankruptcy. Some McClatchy employees and outside observers fretted about whether the tabloid culture at AMI, which Chatham obtained in 2014, would infect their prizewinning local papers.

Yet last Friday’s merger announcement charted a different future for the media companies. Instead of bringing AMI and McClatchy under the same umbrella, Chatham rolled AMI into another of its properties, Accelerate360, a sales and distribution company with which it seemingly has little in common. Accelerate’s CEO, David Parry, kept his job while Pecker was named “executive advisor” of the newly named division A360 Media. Chris Scardino, an 18-year veteran of AMI who recently served as executive vice president, was named president of A360 Media.

The company alluded to “synergies” that would be available to the two firms but did not lay out the exact way those would work.

However, photographs of celebrities wearing masks in AMI publications have already started to be featured adjacent to ads for masks sold by Accelerate, according to two AMI staffers.

Correction: A previous version of this story incorrectly reported that National Enquirer publisher David Pecker and editor Dylan Howard admitted in their non-prosecution agreements that they bought and buried a story to influence the presidential election in favor of Donald Trump; in fact, the newspaper’s parent company, American Media Inc,. made that admission. And while the story stated that the men avoided prosecution on campaign finance violations by signing the agreements, it is unclear if they were ever specifically investigated for that offense.