By Andrew White
Superstar Bono is now as famous for fighting world poverty as he is for fronting rock group U2. But, as Andrew White reports, he has also built up a business empire, which now includes a stake in media giant Forbes
|~|53203908-200.jpg|~|Plea: The rock star pictured raising poverty awareness at the Live8 concert. But he has also been busy raising his business interests.|~|Superstar Bono is now as famous for fighting world poverty as he is for fronting rock group U2. But, as Andrew White reports, he has also built up a business empire, which now includes a stake in media giant Forbes Of the 3000 attendees that had crammed into the main ballroom of the Hilton Washington Hotel, few failed to notice US president George W Bush shifting uncomfortably in his seat. Before Bush, at the podium, a diminutive Irishman dressed in a cowboy hat and dark glasses was warming to a familiar theme.
“I truly believe that when the history books are written, our age will be remembered for three things: the war on terror, the digital revolution, and what we did - or did not do - to put the fire out in Africa.”
Bono is, of course, used to captivating far larger audiences. The U2 frontman, real name Paul Hewson, sells out huge stadiums each time he and his band embark upon a mammoth world tour. Last summer, they performed for 150,000 people in London’s Hyde Park, opening the Live 8 charity concert that was broadcast to an estimated three billion people worldwide.
Yet while February’s speech at the 54th Annual National Prayer Breakfast might have focused upon Africa, lately Bono has also found plenty of time to address the second of his concerns – that of “the digital revolution”.
Earlier this month Elevation Partners, a buy-out fund of which Bono is a founding partner, acquired a large minority stake in the Forbes family media empire. The 40% stake - estimated to have cost Elevation around US$250m - involves the formation of a new company, Forbes Media, which aims to drag the right-wing capitalist institution Forbes magazine into the digital age.
However, if the sale of part of the Forbes empire was not unexpected – JP Morgan had been touting the media giant to suitable bidders for months – Elevation’s involvement certainly was.
A two-year-old fund with US$1.9bn capital to invest in media and entertainment deals, the Forbes acquisition marked the third deal for the fund, after investments in videogaming partnership BioWare/Creative Studios and web-based real estate firm Move. It is now rumoured that the star is interested in buying a stake in US newspaper group Knight Ridder, to add to his well-publicised bid for BMG Publishing, which owns the publishing rights to music from top acts Coldplay and Christina Aguilera.
So why is the world’s highest-profile celebrity humanitarian taking a stake in Forbes, a magazine that proclaims itself the ‘capitalists’ bible’? Can Bono be the world’s first left-wing capitalist rock star?
His association with humanitarian causes, and in particular the famine and AIDS crises engulfing Africa, began with U2’s breakthrough performance at the original Live Aid event in London in 1985.
In the years since, as U2 have risen to claim the mantle of the world’s biggest rock band, Bono’s work to raise awareness of third world poverty has been unstinting. Alongside Bob Geldof, he has spent years cajoling US presidents and other world leaders into increasing debt relief to poorer countries, improving aid to Africa, and helping AIDS victims.
This work has intensified over recent years. In March 2002 Bono travelled to Washington for a private meeting with Bush, who had just unveiled a US$5bn aid package for some of the world’s poorest countries. The star, dressed in customary cowboy hat and dark glasses, stood alongside the president on the White House lawn, and praised the administration’s “serious and impressive new level of commitment” to poverty eradication.
Later that year, Bono established an organisation named DATA – which stands for Debt, AIDS, Trade in Africa – committed to raising awareness of the continent’s troubles, and in early 2005 he launched the socially conscious fashion label EDUN.
Last year, Bono’s humanitarian profile soared to new heights, as he played a fundamental role in the effort to organize and publicise Live 8, the successor to the concerts 20 years previously. Under the ‘Make Poverty History’ banner, he urged members of the G8 to write off Africa’s enormous debt, reform trade policy, and grant considerably more cash for crises such as the AIDS epidemic.
These humanitarian leanings, however, have not prevented Bono from acquiring a firm appreciation of the rock n’ roll business, and the financial rewards it offers. He has a property portfolio that includes a villa in the South of France and a lavish Italian-style palazzo overlooking the sea near Dublin, not to mention a US$28m penthouse on Manhattan’s Upper West side, which he bought from Apple supremo Steve Jobs.
There are also proposals to construct a so-called U2 Tower, which will be the tallest residential development in Ireland. The tower, a 31-floor construction on the banks of the River Liffey, will house luxury apartments and provide space for the band’s recording studios.
The band is worth upwards of US$890m, according to the most recent Sunday Times Rich List, and is the world’s most profitable, earning US$267m last year.
These record earnings were boosted by a huge deal with Apple to market the company’s flagship product, the iPod. A high-profile ad campaign for the MP3 player featured the band’s single Vertigo, and now Bono and the three other members of U2 - Adam Clayton, Larry Mullen and guitarist David ‘The Edge’ Evans - have also invested in Vertigo 3, an Airbus A320, to fly them around in style on their current world tour.
These luxuries have been acquired through a combination of canny investment and ruthless business decisions. When their label, Island Records, fell into financial difficulties in the mid-80s, the band loaned the label enough to keep it going, in return for ownership of the U2 master tapes. Thus, the band achieved that which the most successful band in history, the Beatles, had failed to – ownership of their own back catalogue. In addition, the band also got an undisclosed stake – believed to be around 20% - in Island, which turned a handsome profit in 1989 when Polygram paid US$300m for the smaller label.
Another of the key factors behind the band’s amassing of this enormous wealth was Ireland’s tax break for artists. The famously lenient tax laws, introduced in 1969, exempted U2’s huge royalty earnings, and allowed the band members to accumulate the wealth with which to fund a number of other investments, including the Clarence House in Dublin.
However, the relationship between Ireland and her most celebrated sons soured earlier this year, after the government decided to cap the artists’ exemption at US$320,000. The band, and Bono in particular, was accused of hypocrisy as they announced plans to decamp their main company, U2 Limited, to the Netherlands in order to avoid the taxman.
The Irish Labour party’s finance spokeswoman, Joan Burton, was bitter in her response to the move. “Having listened to Bono on the necessity for the Irish government to give more money to [official government development co-operation programme] Ireland Aid,” she said, “I am surprised that U2 are not prepared to contribute to the exchequer on a fair basis along with the bulk of Irish taxpayers.”
In addition, when Bono criticised the Irish government for not meeting the DATA target of 0.7% of GDP to be set aside for the Third World, another government minister suggested that if the star paid his taxes then the government would be halfway to meeting the figure.
So what does the future hold for Forbes, now that Bono’s hip outfit has bought their way into one of capitalism’s established bastions?
Sources close to the deal indicate that around two-thirds of the investment will be used to develop Forbes’s online capability. This strategy, after all, lies at the core of Elevation’s interest in Forbes. After all, whilst there is little chance that Forbes magazine will return to the glory days of the 80s and 90s, Forbes.com is in better shape than competitors such as CNN Money and BusinessWeek Online.
During the dot-com boom of the 90s, Forbes invested tens of millions of dollars in its digital operations, with an eye toward an initial public offering (IPO). Although the IPO failed to materialize, this investment nevertheless left the company strongly positioned for growth once the Internet became a viable advertising proposition. In June this year, Forbes.com welcomed 10 million unique visitors worldwide, according to comScore Media Metrix.
Enter Elevation, and its conviction that its edge lies in their ability to help old-line media companies, with strong brands, recreate themselves and thrive on the Internet.
“We are in the business of helping content creators in the traditional media world manage the transition imposed by the Internet,” states Elevation co-founder Roger McNamee. The media world, he continued, is “in the middle of a transformation and no one is in charge… Everyone can play and anyone can win.”
President and chief executive officer of Forbes, and Editor-in-Chief of Forbes magazine, Malcolm Stevenson “Steve” Forbes Jr., concuurs with McNamee’s assessment.
‘”No one is the master of their own universe. Time and circumstances change,” he said. “We wanted the wherewithal to pursue the enormous opportunities in front of us, and Elevation understands technology, media and print. They are not just a source of capital; they are a source of insight.”
In particular, the emerging markets of China, India and the Middle East are seen as key opportunities to develop local language print and online publications. In the latter region, the battle for the attention of the online business readership has already begun with the launch of Forbes Arabia, and the acquisition of regional business information site AME Info for US$29m by Emap earlier this year.
“We see enormous opportunities for growth on the web side,” added Steve Forbes. “There is a growing entrepreneurial community there and we believe who gets there first will do best.”
The final third of the investment will be used to pay members of the Forbes family, who had struggled to maintain profits at the magazine at a time when print advertising revenues across the industry continue to fall. The magazine industry is under intense pressure, with the internet continuing to draw advertising away from traditional media, and some analysts have questioned whether Forbes’s success online will be sustainable.
Competitors complain that the site has used pay-for-click alliances with AOL and Yahoo to build traffic artificially and in the short-term. Critics also contend that the website has revelled in editorial gimmickry in lieu of purely business stories. A recent feature, entitled ‘Top Topless Beaches’, is cited as an example.
However, one direction that Steve Forbes is determined to avoid is that of an IPO.
Whilst it is suggested that such a route might offer the family an easy exit from the firm they inherited, the Forbes’s are determined to retain control of their legacy. “I am the controlling shareholder and as long as I am alive, that is the way it is going to be,” he said.
He also revealed that the company had been looking for a partner on and off since 1999. Bono’s boys, he insists, came along at just the right time: “This was a very good time to get the kind of wherewithal we need for the kind of expansion we need to have,” he said. “This is a natural step for the company with the right people. Forbes has always been about entrepreneurial capitalists.”
So, is Bono a left-wing campaigner for social justice, or a committed entrepreneurial capitalist? When the history books are written, for which will he be remembered?
Steve Forbes, for one, doubts that his new partner will have any difficulties adjusting to life at the business end. Asked if Bono is a follower of the ‘capitalists’ bible’, Steve Forbes explains: “I’m told he was – and he certainly will be now.” ||**||