Rival publishers Condé Nast and Hearst Magazines are teaming up to create PubWorx, an independent company that will handle production, procurement and circulation management for both companies, and a range of custom products and services to third parties. According to the official announcement, client services will include:

• Procurement: Purchasing and supply chain management including paper, printing and distribution

• Production: Efficient, high-quality work flows, systems and technologies, quality control and distribution planning for subscription and retail delivery

• Circulation Management: management of subscription acquisition and retention operations, and retail operations including in-store programs

PubWorx has named Al Perruzza its president and CEO who will report to the boards of Condé Nast and Hearst. Perruzza most recently served as executive vice president of business operations at Reader’s Digest. Along with Perruzza, PubWorx will incorporate staff and back-office functions from the two publishers.

“PubWorx is an innovative new company that combines the commitment to excellence and publishing expertise of both Condé Nast and Hearst, and offers it to third-party companies for the first time,” said Bob Sauerberg, president and CEO for Condé Nast in a statement. “Having the two parent companies as its first clients sets PubWorx up for success and we are looking forward to the new company developing untapped business opportunities with its unique position in the market.”

David Carey, president of Hearst Magazines, also comments on the joint venture:

“We’re thrilled to continue building our business relationship with Condé Nast. In addition to serving Hearst and Condé Nast, PubWorx will provide important, turn-key infrastructure for the industry, allowing publishers to access the scale of our two companies for production and circulation functions, freeing them to concentrate on innovation, content creation and advertising revenue.”

With the streamlining of back-office operations, layoffs are likely. According to The Wall Street Journal, the new unit will staff between 130 and 140 employees who will be based in Manhattan.

“The primary focus is not outright job reduction, but to bring the scale of the two companies together to benefit ourselves and other publishers,” Carey said.

Insider Take:

As print circulation and print advertising revenue across the industry shift, and publishers test new ideas and revenue opportunities, publishers are searching for ways to consolidate operations and cut costs. Partnerships are a good way to achieve this, provided the companies avoid conflicts of interest and agree to work to their mutual benefit.

In this case, Condé Nast and Hearst have found a way to work together in a way that benefits the two publishing companies and also produces an additional revenue stream through third party sales. We expect to see more of such deals in the future.