A leading gay Internet company merged with the publisher of top selling gay magazines and books last week to become one of the nation's largest gay media companies.

San Francisco-based PlanetOut acquired Los Angeles-based LPI Media for $24 million in cash, about $7.1 million in seller-financed debt and will reimburse about $1 million in other expenses in a deal that closed Nov. 9.

The new company, with 275 full-time employees, now boasts a combination of popular Web sites — including PlanetOut.com, Gay.com and Kleptomaniac.com — and several gay publications — including the Advocate, Out and HIVPlus — that will reach 153,800 paid online subscribers and distribute more than 8.2 million copies of its magazines each year, according to information from PlanetOut.

Included in the acquisition is Alyson Publications, a gay book publishing company, and SpecPub, which publishes adult-oriented titles Freshmen, Men and Unzipped.

Bob Witeck, whose Washington, D.C.-based public relations company, Witeck-Combs Communications, helped launch PlanetOut in 1995, said the consolidation is a positive sign for gay businesses.

At the same time, Witeck acknowledges that “bigger is not always better” and it will be up to PlanetOut to ensure that gay men and lesbians don't become simply numbers for a successful company.

Tim Redmond, executive editor of the straight weekly publication the San Francisco Bay Guardian, said he opposes any merger that seeks to “homogenize” content, whether it be straight or gay media.

Yet, Todd Evans, president of Rivendell Marketing — which sells ad space for publications read by gay men and lesbians, including this newspaper — said the merger is a natural, economic progression.

This was the second merger attempt in five years for PlanetOut and LPI Media. The first try, which began in March 2000, was called off a year later due to the souring of “the economic environment” for Internet companies, Selvin said.

Last October, PlanetOut became the first business targeting gay consumers to trade publicly on a major stock exchange. Under the ticker symbol LGBT, the company made its initial public offering at $9 per share on NASDAQ.

On its first day, the company sold 4.65 million shares, raising $41.9 million, and closed at $10.40. This week the stock was selling around $8.30 a share.

Two weeks ago, PlanetOut announced revenues of $7.6 million and a net income of $841,000 for the third quarter, up from $6.3 million in revenue for the same period in 2004. For all of 2004, the company reported $25 million in revenue; in three quarters this year, revenue has reached $22.4 million.

In 2004, some 67 percent of the company's revenue came from premium subscription services, 26 percent from advertising and 7 percent from transaction services, including sales of clothing and DVDs.

According to PlanetOut projections, LPI entities are expected to record $29 million in revenue this year. PlanetOut officials would not discuss additional financial information about LPI.

The Advocate, founded in 1967, has a biweekly circulation of 120,000, up nine percent in paid circulation this year, according to the Audit Bureau of Circulations. Out, which debuted in 1992, has seen a nearly seven percent increase in circulation this year, upping it to 130,000 a month. LPI distributes more than 8.2 million copies of its magazines a year, according to the company.

According to information provided by PlanetOut, it currently has 152 full-time employees. LPI and its related companies employ 123 full-time employees. Selvin said there are no plans for layoffs.

“We plan to bundle our premium service with magazine offers — that's the major change you'll see. Our approach is building, not cutting and when you build you need people,” he said.

Out Editor Brendan Lemmon, who is leaving the publication, is departing for reasons other than the merger, Selvin said, though he would not discuss further details of Lemon's employment.

Change is afoot for PlanetOut.com, though, according to Mark Elderkin, president of PlanetOut. The company wants to focus the site on lesbians, Elderkin told the Commercial Closet in a story published Nov. 16.

In purchasing LPI, PlanetOut also acquired SpecPub, which publishes adult-oriented magazines for gay men including Freshmen, Men and Unzipped. It's not the first acquisition of sex-related publications for a public company.

New Frontier Media, Playboy and Private Media Group are a few publicly traded adult entertainment companies listed on the New York Stock Exchange and NASDAQ. According to Forbes, the only adult stock to lose money last year was Playboy, due to hesitating to offer harder edge content.

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