Over 45 days, Black Enterprise
shares 45 milestone events among the nation’s largest
black-owned businesses that have had widespread impact on black
economic development and American industry across four decades.
This is in tribute to the 45th anniversary of Black
Enterprise’s iconic BE 100s yearly list of the largest
black-owned companies.

Today we reveal No. 36 in the web series “Great Moments in
Black Business.” 

2005: Essence Communications Partners sells
the remaining 51% of the company that publishes the leading
black women’s magazine to Time Inc. brings shock and awe from
black consumers.

Essence is back on the block.

(Image: Black
Enterprise Magazine, June 1980)

 

The Wall Street Journal reported yesterday that Time
Inc. has decided to hawk a majority stake in the media property
once boldly regarded as “The Voice for Today’s Black Women,”
seeking a “strategic partner with investment capital” while the
media company—home to Fortune, Sports Illustrated,
and InStyle—seeks to retain minority ownership. In
fact, the report further stated that this was Time Inc. “first
major move since it decided not to sell itself in April.”

(Image: Black
Enterprise Magazine, June 1980)

 

That news report represents the latest chapter in the ongoing
saga of one of African Americans’ most treasured black-owned
institutions at one time. In fact, the news about the sale of
BE 100s companies—from haircare firms to media
companies—has always gone viral—even pre-Internet—when it
involved one of our most revered companies having fallen into
white hands.

Why Essence’s Sale Is a Vital Moment in Black Business
History

 

The sale of Essence may not be considered one of the
greatest achievements in black history but the moment
represents one of the most vital. It’s central to the debate
that continues today: Should African American entrepreneurs
retain ownership to build multigenerational black-owned
institutions or unlock value in companies by selling them, in
many cases, to majority-owned acquirers? Over the years, a
number of BE 100 CEOs have wrestled with
that question, feeling additional heat from loyal consumers
about whether they would be selling out or selling up.

Reviewing Essence’s history may offer some valuable clues.

Launched in 1970, Essence’s mission of celebrating the beauty
and brilliance as well as accomplishments and aspirations of
African American women resonated with its audience across
generations. Essence started as a partnership between
four black men—Edward Lewis, Clarence Smith, Cecil
Hollingsworth and Jonathan Blount—that would eventually owe
much of its decades of brand-building success and business
growth to a leadership triumvirate.

Building a Media Powerhouse

 

That’s why when BE developed its list of
Titans: 40 Most Powerful African Americans in Business
in 2010, this collective trio was recognized as a single entry:
Chairman & CEO Lewis and President Smith, who handled
operations, finance, and sales, and Editor-In-Chief Susan
Taylor, the face of the publication who guided its
uncompromising editorial direction and gave black women a
powerful voice. Together, they built Essence Communications
Inc. (ECI) into a media powerhouse. In fact, ECI was one of a
handful of BE 100s companies that could boast
inclusion on the Top 100 for 31 consecutive years after its
appearance on the first list in 1973.

(Image: Black
Enterprise Magazine. June 1997)

 

In 2000, ECI decided to sell a 49% stake of to Time Inc., a
division of Time Warner (it was spun off into a separate entity
in 2014), and was renamed Essence Communications Partners. Five
years later, in 2005, the company sold the remainder to the
media conglomerate. At the time, Lewis said that “Time Inc. has
distinguished itself by recognizing the impact of African
Americans on a global scale and their influence within the
cultural landscape. Thanks to our partnership with Time Inc.,
Essence Communications is a stronger, more competitive
publisher.” (According to Lewis’ autobiography, The Man
from Essence, “
the combined amount of the two sales
totaled nearly $270 million—the highest price-per-page Time
Inc. had ever paid for a single-title magazine publishing
company.”

Break Up of One of the Greatest Media Partnerships

 

BE covered ECP’s five-year transition, which
included the bitter dissolution of Lewis’ and Smith’s 32-year
partnership, one of the longest-running unions in black
business.

The final sale was greeted with shock and awe from quarters of
the black community. Ken Smikle, president of Chicago-based
Target Market News had approved of the deal but
explained that the sale hit a raw nerve because it represented
the loss of one of “our cultural guideposts” like Motown, BET,
and black haircare companies. “These are institutions that we
share a common experience with. They are woven into our
everyday life,” he asserted. “We feel that we lost something
because these institutions and their ownership by extension
represent a part of us.”

Decrying Essence as a “Sell Out”

 

After the sale, a BlackEnterprise.com poll revealed that 34% of
respondents felt that ECP had “sold out” vs. 14% who felt the
transaction made good business sense. Another 46% of those who
replied were concerned with how the new ownership structure
would affect the magazine and other events like its popular
Essence Music Festival. For instance, Leslie Mays,
then-president of the National Coalition of 100 Black Women and
an Essence subscriber, found it “extremely
disappointing on a personal level” to have discovered that ECP
surrendered control and ownership of the publication. “It
enables Time to reach an influential market segment—black
women—directing our dollars away from reinvestment in our
community and businesses and into the deep pockets of another
multinational corporation,” she asserted. “I also have a worry
that such a deal almost certainly guarantees loss of editorial
control and content on subjects of interest and concern to
black women as a primary audience.”

Rev. Al Sharpton made the case at the time for creation of a
bidding process in which African Americans would gain a shot at
retaining black ownership. The civil rights leader had met with
Lewis, who said that he sold Essence to Time Inc., in part, “do
what Bob Johnson did”—use the proceeds, clout, and connections
from his corporate dealings to build other black institutions.
But Sharpton countered, asserting there were African Americans
within the financial community who could have raised the
necessary capital to acquire ECP. He further argued that
African American entrepreneurs and financiers should have at
least been given the option to make a bid.

Johnson Quells the Controversy

 

When Thomas J. Burrell, for example, decided to step down from
his post as chairman and CEO of his Chicago-based
BE advertising firm, Burrell Communications
Group, he  intentionally crafted a succession plan to sell
51% majority ownership to his top managers even though Publicis
Groupe, the French global media, owned a 49% minority stake. A
more recent example was BE
100s 
media company Urban One—formerly Radio One
Inc. —buying back media giant Comcast’s stake to gain 100%
ownership of cable channel TV One as well as having its digital
unit gobble up existing black digital properties to become one
of the largest digital outlets for black consumers.

BET founder Robert L. Johnson weighed in during the controversy
of ECP’s sale, maintaining that it was part of an evolutionary
model of black media—a paradigm shift that includes
deep-pocketed corporate partners and, in some cases, acquirers.
“The only reason Time Warner would want to buy
[Essence] is because of the strength and power of
Essence‘s voice that has been built up over 30-plus
years,” he said. “It’s just a sheer economic fact of life that
over time, as black companies become very valuable for their
brand and market penetration, it’s going to be very difficult
for African American [potential buyers] to offer the kind of
financial transaction that’s going to maximize shareholder
value for the seller.”

(Image: Black
Enterprise Magazine. September 2000)

 

The Essence sale illustrates the continuing need for
companies to continue to scale up through partnerships and, in
some cases, divestitures to gain expansion capital and other
strategic resources.

Even though the news reports on Time Inc.’s announcement does
not provide financial details, the move, however, may open the
door for African American entrepreneurs to bring
Essence back into the fold of the BE
100s.

 

Watch Susan Taylor’s interview at Black Enterprise’s Women of
Power Summit:

 

 

Access the entire digital version of the 2017
May/June issue of BLACK ENTERPRISE featuring our 2017 BE 100s
report and subscribe to Black Enterprise Magazine here.
 

And view the full list of the 2017 BE
100s here.

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