October 7, 2019 • 40 mins
Where else can you go when you need a desk that doubles as a Ping Pong table? No where! You go to SkyMall Magazine, and you like it! But what sent the once omnipresent magazine of the skies into a free fall?
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Episode Transcript
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Speaker 1 (00:04):
Welcome to Business on the Brink, a production from I
Heart Radio and how stuff works. It's and you're about
to jet off to a city on the other side
of the country. But how are you going to spend
all that valuable time on a plane with no personal
entertainment services? And how do you handle the in flight jetters?
(00:25):
What can soothe your consumer list mind? How about you
indulge in some retail therapy. This is Skymall on Business
on the Brink. Hey, everybody, my name is Jonathan Strickland
(00:48):
and I'm Ariel cast In this episode was another listener
requests from al Con. Yes, thank you for that. And
before we get into this, uh, I am someone who
has traveled extensively by aeroplane. I have traveled occasionally by aeroplane,
and I can tell you that many an aeroplane trip
(01:09):
that I have taken it was spent perusing the various
odd and assorted weirdness of Skymall Magazine. Did that magazine
include a dictionary that told you to pronounce the word
aeroplane as aeroplane? It did not, It did not. I
mean maybe, I mean, who knows that the stuff in
(01:30):
Skymall magazine became famous for how weird it got, that's
not how it all started off. So we will tell
the story of Skymall Magazine. I also want to say
before we get into this, Uh, like I knew about
Skymall magazine, and I just assumed that Skymall Magazine kind
of went away because of lots of very obvious reasons,
(01:52):
right Like, you had the rise of entertainments systems on planes.
You had the ability to use your electronic devices on
planes that was instated later on. You have internet ordering,
yeah you had you know, you had competitors like Amazon
coming up, and yes, all of that will play a
very large part in this story spoiler alert. But there's
(02:15):
also some crazy, shady business stuff that ended up playing
a very large factor that I was completely unaware of
until we did this. Should it have been called slime Mall, Well,
I would suggest that sky Mall was not the one
at fault here, but rather a different company. But that
is putting the cart before the plane. So anyone who
(02:40):
traveled a lot, especially in the nineties maybe early two thousand's,
is probably familiar with sky Mall. So it's it's called
a magazine, but most of us probably thought of it
as a catalog, but it was a catalog of stuff
largely from other companies. Um. And there are a lot
of jokes about this magazine and there's even a song
(03:01):
about it, yes, by Jonathan Colton, who is an artist
both Jonathan and I like a lot. Yeah, yeah, Ariel,
you like Jonathan Colton a lot. I remember that you
got proposed to right in front of him. Yes, as
my husband saying our song, which is one of his
songs on a the second Jonathan Colton cruise. We were
also on the first one. Uh, fun time you guys,
(03:21):
that's beside the point. Yeah, I've never been on the
Joco cruise, but I I do, uh, I do appreciate that.
So yes, Jonathan Colton has a song that really is
dedicated to how strange, bizarre, and in some ways wonderful
this magazine was. Although it does start with the lie
O'Hare is nice this time of year, we all know
(03:42):
O'Har is never nice. It's never been to O'Hara. Oh gosh,
I've flown through it a few times. That's mostly Jonathan's
biased opinion there, but after that line it really picks up.
So here's the thing is that Skymall could have gone
away before it ever even really got going because of
the initial business model that was the underpinning of the company.
(04:06):
It was one that we can say, uh, pretty effectively
did not work. But here we go. So it all
starts with a guy named Robert Worsley. He was one
of the founders and is frequently cited as the main
founder of the company. And he came up with the
idea for sky Mall. And if the name Robert Worsley
(04:26):
sounds familiar, you may be someone who lives in Arizona
because he serves in the state Senate in Arizona. In fact,
his term is up at the end of two thousand nineteen.
So but before that, he was a public accountant, right, yes,
he was a public accountant with Price Waterhouse and he
(04:47):
was coming up with this this idea about what if
you had a catalog that you could find on a plane,
and the catalog had all these sorts of different things
that travel might want. It was less uh novel stuff
back then, so you like, you weren't going to find
(05:07):
a big foot statue or but that's the best stuff,
like the butler wine holder that where it looks like
the butler's drinking a bottle of wine. That's the best.
But none of that was none of that was really
in it there. It was more like luggage and belts
and ties and that kind of stuff. And the idea
was that, uh, you would actually order that while you
(05:28):
were on the plane. I mean that that kind of
makes sense because if you forgot to pack a high
or a belt, or you broke your suitcase and route,
you might want to have a quick replacement already and available.
And so yeah, that was sort of the concept. And
the idea was that the would be customer would use
an air phone, which in the old days was a
(05:48):
phone that was in the back of the passenger seat
ahead of you. Sometimes there's only one per row, so
like a car phone, kind of like a car phone,
and you would swipe a credit card in order to
be able to use it, and you would pay an
exorbitant amount of money for a very short phone call.
That sounds like a fantastic deal to me. Yeah, well,
and keep in mind that this is also a time
(06:08):
where air travel, I mean, it wasn't like it was uncommon,
but this was a time where people tended to dress
up on planes and stuff. Still, like it wasn't quite
it was making the transition into what air travel is today,
but it was still a fairly expensive method of getting around.
I mean air travel. If you are not married to
(06:31):
somebody in the air travel business, it's still pretty expensive,
is it. I wouldn't know, yeah, ok, yeah. And also
side note, I still like dressing up to get on
an airplane. I think it's classy. It's shortsand for me,
and by thongs, I mean fops. Yeah, no, I don't know,
(06:51):
we all thank goodness. So the idea was that you
would use the air phone to actually place the order
for whatever it was he wanted in the catalog, and
then on the ground in a warehouse near whatever destination
airport you were flying to, there would be all the
different items in the catalog, and someone from the skymall
company would pack up your order, rush it over to
(07:14):
the airport, and you would be greeted on the ground
with whatever it was he ordered, so you would have
your delivery upon arriving at your destination. That was the
That was the business model plan, and I think anyone
with a little, you know, skepticism or or thought might
have a few concerns about that plan. Yeah, but you
(07:38):
know who didn't have a few concerns about that plan. Well,
Graham Alcock, Alan Loebuck and Matthew del Bianco didn't because
they were the other co founders. They said, they said, cool,
let's do this. Yeah, so they establish it in or
maybe there's some disagreement on dates. I assume that would
(07:59):
happen and was worsely came up with the idea in
eighty nine and then they were officially incorporated. But uh,
the original plan was that they were going to try
and carry stuff from very very recognizable brands like yeah,
exactly like things that people would know, they'd be, you know,
confident that the quality was going to match their expectation,
(08:21):
rather than I'll just buy a tie from this thing
that I have no idea where it came from, from
the news stand in the airport it says we love Atlanta. Yeah,
this was a little better than that. And so the
idea was that you would then sell these things at
a healthy mark up because obviously you need to make
a profit, right, So you would buy the stuff at
(08:43):
wholesale from wherever the you know, whatever the manufacturer was,
and you would sell it for a decent mark up
to make a profit. Making expensive things more expensive, Yes,
but as you would imagine establishing warehouses near airport it's
and then staffing them and then filling them with inventory,
(09:04):
and not knowing which pieces of inventory are going to
be popular for any given warehouse. Yeah, I mean, what
if you order five ties and you have six people
who want to tie, and then you don't have a
tie at the warehouse that they're landing at. You know,
how do you know five people in Chicago are gonna
want to tie? What if you order three hundred ties
and nobody ever orders a tie for the airport that
(09:25):
that that it's close to. Yeah, that's that's a logistical nightmare. Yeah, exactly.
Just even keeping track of what stock is in which warehouse,
that alone was a real challenge. But yeah, you you
there was no way to predict which products were going
to be in demand because it was all dependent upon
who was traveling where, right, Like you can't even say,
(09:47):
like if you're if you're the owner of a retail
business and it's a chain and you're looking at a
chain across regions, you can draw general conclusions. You can say, oh,
in the Southeast region, we see that X, Y and
Z products are really popular but A B and C aren't,
so we won't worry about those. But in the Midwest,
A B and C are really popular. But you can't
(10:08):
do that with a business like this because you're not
looking at a region of population. You're looking at people
who are traveling to that destination. Well, and like, you
can order duty free stuff on a plane a lot
of times if you travel overseas, but that's stuff that's
already available for other people in the airport. It's not
things outside of airport goods. And of course, obviously this
(10:31):
is also before UH nine eleven in the United States,
where it was also possible to meet people at the
gate without having a ticket and things. So these challenges
beyond the nine eleven thing, because this again is a
decade before that. These challenges meant that that business model
hit a real rocky start, and even by when the
(10:55):
business that was only a few years old, it was
losing six million dollars per year ADS. Yeah, so this
could have been the end of the company right there.
They could have just said like, wow, we're never you know,
we're just gonna have to keep raising funding, like do
finance rounds to stay in business. And you can only
do that so long before your investors say yeah, or
(11:18):
we have to change our business. So they decided they
had to change the way the company operated. And from
what I've read, this was not a unanimous decision among
the founders like this, there was arguments, but a good one.
It was a good one. Yes. So they decided instead
of being a company that would run its own warehouses
and maintain its own stock, they would rather publish a
(11:41):
magazine and then they would charge other companies to advertise
their goods in that magazine. So essentially it was a
magazine completely made up of ads. Uh. There were two
different types of advertisements that you could get, and there
were different sizes, like you could get a quarter of
a pay, you could do a half page, you could
(12:01):
do a full page. But they said, this way we
will charge companies to advertise their stuff. We won't have
to carry all that overhead. I've worked for a couple
of theater companies where I've had to do the generation
for the programs at spaces is pretty expensive. Yeah, as
it would turn out, Skymall space would be really expensive.
(12:23):
So in the Atlantic had an article about sky Mall
and they said that in a full page sky Mall
magazine presence if you were if you were doing an
advertisement was forty two thousand nine dollars per month, and
(12:44):
sky Mall came out quarterly, which meant that and an
issue would last three months, so at minimum, you would
have to spend three months worth of that full page
ad in order to get one issue of sky Mall.
So you're looking at a full page advertisement for one
edition of Skymall magazine could set you back a hundred
(13:05):
thirty dollars just about golly. You gotta have a lot
of distribution for that. UM. But they also changed how
they delivered product right, yes, because now they were no
longer the ones responsible for getting the product to the customer.
They were facilitating the transaction. So it was the company
(13:26):
that was behind whatever the product was, it was their
responsibility to ship the product to the customer. So also
it would never it wouldn't get to you when you
landed anymore. It would be shipped to whatever address you
gave when you ordered it. So that was a big
difference to UM. And this again removed a lot of
the cost of doing business off of sky Mall, which
(13:50):
certainly helped it make money. This was like a sea
change when it comes to the way the company was
doing business. Yeah, well they had another CE change in
their C suite executives. Do you like what I did there?
You don't face, Jonathan. That was great. Pray continue aerial. Uh.
(14:13):
So The Atlantic had an article, or in the same article,
which was titled the Strange Story of America's most delightfully
Weird Catalog. Yeah, it's a great article. By the way,
it quoted Christine Aguilera. Yeah. I was so disappointed because
(14:34):
when I first read that, I said what and then
I realized, oh wait, it's Christine Aguilera, not Christina Aguilera.
So I was very sad because I was fully expecting
to have Genie in a bottle play through this entire episode.
She was a former president of Skymall, and hence the
joke about c suite changes. Yeah, she would become the
(14:55):
president after Warsley. We'll get to that in a second.
She said that on average, every week's sky Mall would
field about one hundred requests to feature stuff in the publication. Yeah,
so there was no shortage of companies that wanted to
get there, uh their information in the magazine. And it's
understandable because one of the very savvy things the company
(15:16):
did was it established these contracts with various airlines to
be carried on those airlines, and they had an incredible penetration.
It was like eight percent of people traveling on planes
in the United States, we're traveling on planes that were
carrying sky Mall magazine. So yeah, nearly all air travelers.
(15:39):
So it didn't matter if you were on Delta or
United or Southwest or American airlines, they all had sky Mall.
So those eyeballs were going to that magazine. Because again
this was also before you could have electric Well, first
of all, it was before smartphones, so nobody had no
one has smartphone to begin with, and no one at
e readers or anything like that ring like a paperback
(16:01):
on the plane. But there were so many times where
you would get onto the plane and then you think,
oh I forgot a book, or oh my book is
in my checked luggage, you know, and you would realize
you didn't have anything, so you would just you know,
you'd root around for whatever you could read, and Skymall
was always there. Well. Plus I always tell you to
check out the literature in the pocket seat in front
of you. So seat pocket in front of you. So, yeah,
(16:23):
once you had really gone over the emergency procedures, then
you can graduate up to Skymall. But things were going
well at the time because now they had had this
massive change in the way they did business. But soon
a sequence of changes in ownership would create a massive
brain moment for Skymall. But first we're going to take
(16:44):
a quick break. Okay, So arial, you know how we
sometimes cover companies that end up having very confusing ownership
stories just because as the industry they're in ends up
being incredibly incestuous. Yeah, like beer, beer or fast food. Yeah,
(17:08):
the beer and fast food companies in particular, those are
ones that are really complicated. Well, sky Mall is also complicated,
and it's made more so because for most of its
existence it was a private company, and as a private company,
it kept a much lower profile. You know, it didn't
have to file the same information you would if you
(17:29):
were a publicly traded company, and so unless you were
really paying at attention to the industry, changes in ownership
probably wouldn't really you know, to use an airline quote
fall on your radar, because the magazine was still in
pockets on airplane seats with no matter who the owner was. Yeah,
(17:50):
I don't usually look at the publisher of the magazine
or riding and even if you did, it would still
say sky Mall just was alright. So we're gonna try
and talk about the changes in ownership. So pay attention
because this is like a game of three card Monty.
You gotta find the little lady as I'm flipping the
cards around. So, for the first decade or so of
its existence, sky Mall was its own private company, right
(18:14):
Worsley's company essentially, And after that rocky start, it turned
into a profitable business once it changed from being a
retail type company to a publishing company and an advertising company.
In fact, you could argue that it's business turned it
into something akin to Google, Like Google is not really
(18:35):
a search engine company you think of it as, but
it's really an advertising company. Well, and I was going
to say, where you're talking about incestuous genres of company.
I was like, how many airline magazines are there other
than sky Mall in Delta? Well, how many other airlines
have you flown? Uh? So there are other airlines that
(18:56):
do have their own in house magazines, but Skymall was
the one that was across all of them, and so
they established an online store. Not too long after that
became started becoming a thing. It took a little while,
but yeah, um, and you know, they're operating things pretty regularly.
And then in two thousand one we get our first
(19:18):
change in ownership. A company called jim Star tv Guide,
not TV Guide, but jim Star tv Guide acquired Skymall
and jim Star tv Guide, according to a helpful press release,
was quote a leading media and technology company that develops, licenses, markets,
and distributes technologies, products and services targeted at the television
(19:41):
guidance and home entertainment needs of consumers worldwide. End quote.
It sounds like a whole bunch of buzz talk. We're
just getting started, aerial. But yeah, they made like interactive
TV menu. Okay, so they actually made something legit. Yeah,
like you know how how a lot of televisions you
would hit the menu button and the little pop guid
would pop up. They made stuff like that. I have cable,
(20:03):
I understand. Okay, well I might be one of the
few people, but yeah, I don't remember the last time
I turned my television on. So uh so, anyway, uh,
Robert Worsley was deciding he had he was deciding to
retire at this point he had made a fortune off this. Uh,
and so then Christina Aguilera at this point becomes the president.
I'm a Genie and a sky Mall baby. Still not
(20:26):
still not genie and a bottle of Christina Aguilera, but
in my heart she always will be. So she ends
up becoming the president for the in flight business of Skymall.
Now that's going to be important a little bit later
because there'd be another division within Skymall that would become
increasingly important over the years. But everyone thinks of the
in flight business of Skymall because that was the public
(20:47):
facing part, right, That was the magazine that we all
were familiar with. And then Jim Star TV Guide itself
would end up eventually going out of business in two
thousand and eight, but between its purchase of sky Mall
and when Jim Starr went bye bye, it would actually
sell sky Mall. This happened in two thousand five. Sky
(21:08):
Mall wasn't part of their downfall, No, No, Jim Store
was already like they had actually said that they were
selling off sky Mall because it didn't align with their
other business practice, Like there are other business strategies. They said, well,
this is kind of outside of what we want to
focus on, and then what they focused on ended up
not saving I wonder if they had a change of
management that made that call, Well, that'll have to be
(21:30):
a future of different of the brink, right. So a
company called Spire Capital Partners, along with Zelnick Media Corporation
and Green Spun Media Group together bought sky Mall for
fifty two million dollars and Aguilera would continue her bottle
days as president. She stayed in that role. This is
(21:52):
also kind of interesting because we're going to see multiple
changes in ownership and not changes in leadership, which is
that's that's not usual, it's atypical. Yeah, but it also
meant that at least the parts of the sky Mall
business would remain constant despite changes in ownership. So the
next change of management happened in two thousand twelve when
(22:14):
they sold to Najaffee Companies. Yes, so this was an
investment from a private investment firm named after the founder
of Najaffee Companies, and this was through a subsidiary of
Najaffee Companies. Here's where it gets even more complicated. The
subsidiary was direct Brands, and it was specifically done through
an affiliate of direct brands called book spant It Books, uh,
(22:38):
magazine Span Flying And I would love to tell you
how much this transaction was, but it was an undisclosed sum.
I'm going to say five dollars, okay for five smackaroos.
And Aguilera would remain as president. So the Jaffee Companies
also owned a couple of other direct consumer brands. That's
what sky Mall was kind of considered to be, as
(23:00):
you know, advertising director consumers. Uh So the Book of
the Month club was in a Jaffee company's property. It
seems in line with their with their product. Yeah, this
was like, this is all kind of following the same strategy.
And in the Jaffee Companies announced that Kevin Weiss, who
had previously led a self publishing company called Author Solutions,
(23:21):
would be the new CEO of Skymall, and Aguilera was
still a president, but she was president of the in
flight Businesses. And by this time there was another division.
It was the Loyalty Program division, which we'll talk about
in a little bit. But now to get to the
truly weird part, so we just had all those different
changes in management, and almost all of all those are
(23:43):
changes in ownership. Almost all of those owners were private
equity companies, right, So it was like private equity company
selling to a different private equity company that would sell
to a different private equity company, over and over and
over again, with companies that made things that we're trying
to make skype Mall for it into their brand. Yeah.
And so then we get Exhibit Corporation and they acquired
(24:06):
Skymall in May two thirteen. And this is amazing because
we have Christine Aguilera and Exhibit. Although it's not spelled
the same way as Exhibit the Rapper, it is spelled
differently from the word example. To say neither the rapper
nor the Exhibit Corporation are spelled correctly. Well, I would
argue the rapper's name is spelled exactly the way he
(24:27):
wants it. But yes, Exhibit Corporation is spelled x H I,
B I T. And I can't tell you how many
times I had to correct myself from spelling it like
the rapper's name, which of course is x Z. Yeah,
I kept on spelling it as the rappers name, as
opposed to the corporation's name. Okay, so tell me about
this really complicated story of Exhibit because you can tell
(24:49):
it why better than I can? All Right, this is
this is bonkers. This, this is what started to make
my head buzz when I was researching this episode. So
here's how it described itself in the press release that
that it issued when it merged with Skymall, because that
is what happened. It was actually a merger, not an acquisition.
(25:10):
Exhibit Corporation is a cloud based marketing and technology development
company focused on digital advertising, mobile and social media development,
and CRM customer relationship management solutions. Exhibit offers a total
solution for digital advertising and marketing that is integrated throughout
its divisions and shares technology and resources across all of
(25:30):
its services through its subsidiaries. Exhibit utilizes its branded products
and services to provide digital marketing and advertising solutions for
top tier advertisers and agency clients. It sounds like they
just said the three the same thing in three different sentences,
three different ways. Yeah, and by the way, news flash,
according to everything I read, it didn't do any of
(25:52):
those things at all. It didn't do anything at all. Well,
it apparently brought in some revenue by selling some weird
new a G food supplements and stuff. Colon cleansers you
have here, yep, colon cleanser. Yep. In case your semi
colon is dirty, it's a colon cleanser. Yeah. No. That
(26:14):
was the thing was that it was not, from what
I could tell, doing any sort of business in the
cloud sphere or in advertising or in marketing, apart from
selling weight loss supplements and stuff like that, which is
truly weird. And on top of that, to make this
even more complicated, before they merged with Skymall, they had
(26:36):
done a different merger in June two thousand twelve, where
the Exhibit Corporation spent three hundred fifty thousand dollars to
purchase another company. This company was called n B Manufacturing,
which makes it sound like it's a manufacturing componer. Yeah,
maybe it makes the coaling cleansing doesn't make anything. It
was a shell company. So shell companies are used for
(27:00):
usually as a holding space for financial transactions. And we
could do a whole episode on what shell companies are,
and maybe at some point we should, because it's a
pretty confusing concept for people who yeah, not not the
shell company but shell companies, and so uh, this shell
company was a publicly traded company, and this was what
(27:22):
you would call a reverse merger or reverse takeover. Because
what Exhibit Corporation did was they buy in by Manufacturing.
Then they reorganized so that In by Manufacturing is technically
the parent company of Exhibit Corporation, which effectively makes Exhibit
Corporation a publicly traded company. So they went from private
to publicly traded without having to have an initial public offering.
(27:44):
That sounds very questionable to me, and the SEC would
agree with you. It is something that a lot of
investors and the SEC say beyond the lookout for. Uh,
it's not technically illegal, but it is very questionable. And
beyond that, Exhibit already had a pretty bad reputation, and
(28:06):
this particular move made that reputation even more questionable. Seeking Alpha,
a website called Seeking Alpha with a journalist named Isaac Silberman,
a sort of a financial analyst, looked into this and
Silberman raised a big warning flag about Exhibit Corporation and
said that it looked like it was a pump and
(28:29):
dump type of company. So a pump and up scheme,
for those who don't know, is when somebody or a
group of somebody's gets hold of a lot of cheap stock,
and then, through various efforts, usually involving misrepresentations of the truth,
pumps the value of the stocks up before selling them off.
If you've seen Wolf of Wall Street, it's Wolf of
Wall Street where you you're like, I can get stocks
(28:51):
for pennies, and then if I can convince people that
the company is about to make a big move, the
stocks value will go up because people will think that
the company is more valuable. Then I offload it and
then it's off to Rio de Genero. Well, Exhibit was
saying that their stock was around forty million dollars or so. Well,
thus because they printed it like crazy when they took
(29:15):
over and became a publicly traded company. So yeah, on
paper it was worth forty million dollars and then eventually
its value was it was it was valuing itself really
or really by the stocks that had printed at three million.
But this was a value that it couldn't support with
any like anything like it wasn't based on anything. It
(29:37):
was all just dream money. Yeah. Well, the CFO of Exhibit,
Michael Schifsky, was involved with a lot of kind of
bad penny stocks. Yeah, so he had a he had
a reputation for already being involved in this kind of
pump and dump sort of world, if not in a
direct scheme, certainly within that same realm. And this would
(30:01):
be the company that would merge with Skymall, and in
less than two years the magazine would be in bankruptcy, Jonathan,
when the heck happened? Well, Ariel, I'll tell you, but
I need to simple Watts. Let's take a quick break,
all right, So Skymall sounds like it's been a bit
(30:23):
of a joke, right for years it had included listings
for all sorts of weird. I'd say cool, some people
would say odd, whimsical, somewhat useless, and very expensive goods. Uh.
You have a note here that says, who needs a
yetti in the in their garden? I do, Jonathan, But
that's beside the point. I think technically they called it
(30:45):
a bigfoot statue, but I always think of it as
the yetti in the garden. Either way, I need one.
But regardless of that, and and what being what they're
known for. In January two, news broke that they were
going bankrupt, were filing for bankruptcy protection. Now, now that
is the way a lot of of news outlets reported it.
(31:06):
But then if you read the articles, you would see
in every single case that what was actually happening was
the parent company, Exhibit Corporation, was the one that was
declaring bankruptcy, and so sky Mall belonged to Exhibit Corporation.
But it was a bigger story than just sky Mall
going bankrupt, and so what was going on, Well, let's
roll back the clock a little bit two th thirteen,
(31:28):
when that merger happened with Exhibit Corporation, things were already
going poorly for sky Mall for the reasons that we
mentioned at the top of the show. You know, you
had a lot of things competing for passengers attention, You
had a lot of competitors entering into the space like
Amazon and eBay. So there were a lot of things
that were contributing to sky Mall's decline and financial loss exactly.
(31:52):
So in two thousand thirteen, Skymall reported that it had
made thirty three point seven million dollars in sales and
that the magazine had lost three point two million dollars
that year, So it was overall a loss, even though
it had thirty three point seven million in sales. That
was a significant drop from the height of its performance.
At its height, I think it made a hundred thirty
(32:14):
million in sales, so it had dropped precipitously. Now did
this include the loyalty program you who had talked about earlier.
It did not. The loyalty program which was it was
essentially that sky Mall was handling the loyalty program for
some big, big companies where if you use the big
companies services, you would get loyalty points that you could
then return for different goods or gift cards or whatever.
(32:38):
Sky Mall was handling those transactions. So this was a
separate part of their business, a different division. So that
one was bringing in forty nine million dollars in two
thousand thirteen, so they made the loyalty program made more
money than the magazine program in and the loyalty program, however,
(32:59):
was dependent primarily on three clients, Capital One, Caesar's Entertainment,
and Marryott Rewards. And if you're if your business is
dependent on just three clients, that's a big problem because
if any one of those three goes your revenue exactly.
So this was while it was bringing in more money
(33:19):
than the magazine. It was also scary because you couldn't
predict that that was going to be steady year to year. Well,
and it's scared exhibit because they sold off that division
in two thousand four. YEP, they sold it for twenty
four million dollars. So the year earlier it brought in
more than twice that amount, it brought in forty nine million,
and then they sell it off the next year for
twenty four million. They did that, by the way, because
(33:41):
they had an outstanding fifteen million dollar loan from Najafi
actually UH that they needed to pay off, and so
they sold off the loyalty program part of sky Mall.
It's gone and they end up paying off this loan.
Well unfortun at least, Skymall continues to decline. Yes, the
(34:03):
following year, their sales dropped to fifteen point eight million dollars.
They don't have the loyalty program anymore. The changing rules
and airlines had really affected Skymall because now people were
using e book readers and tablets and smartphones rather than
flipping through the crazy stuff that was in Skymall magazine.
So this was uh the beginning of the end, you
(34:24):
had a lot of airlines that decided, once the contract
was up to carry sky Mall, that they weren't going
to renew that contract. Well, and not only that, but
Skymall ended up owing these airlines a lot of money. Yea,
they ended up in their bankruptcy filing they listed debts
to Delta for one and a half million dollars, American
Airlines for one point six million dollars, Southwest was four
(34:47):
hundred thousand dollars, and United Airlines three d thousand dollars.
And then we have exhibits. So at the time of
the merger, Exhibit reported that it had done about nine
million dollars in revenue, so a fraction of what sky
Mall was doing. But then again they were also only
selling weight loss supplements and colon cleansers. Yeah. So so
(35:07):
while sky Mall, even when it was struggling, it was
bringing in way more money than Exhibit Corporation. And yet,
according to the merger deal exhibit and hey, hey look
I spelled it the wrong way, Exhibit got sixty percent
of the merged company and sky Mall got So you're like,
wait a minute, So Skymall is bringing in the vast
majority of revenue, but it gets the minority stake in
(35:31):
the merged company well. And by the time they filed
for bankruptcy, Skymall was the only operating division in Exhibit. Yeah,
the colon cleansers got cleaned out. Yeah, but yeah, Skymall
was that was it. That was the only business Exhibit
Corporation was doing. And uh, it was clear that things
(35:52):
had gone wrong. So if, like, we don't know what
the actual strategy was Exhibit Corporation. If the strategy was
to drive up the perceived value of Exhibit Corporation and
then get the heck out of Dodge, it didn't things
collapse too quickly for that to happen if that was
(36:13):
the plan. We don't know. If that was the plan.
Maybe they were sincere on the up and up the
whole time, but there were a lot of flat red
flags to worry about. Um. So then in the spring
of two thousand fifteen, the bankruptcy court ends up having
an auction of the assets and auctions off Skymall Magazine,
and another company called Sienna Marketing purchases it for one
(36:35):
point nine million dollars. Sienna Marketing operates Photo Chance like
Rits and Wolf and it licensed Polaroid. I guess that's
the one that most people would be familiar with. Yeah. Yeah,
if you don't know what Rits and Wolf are, I
mean not, I don't blame you, because that's you know,
the photo industry is also one that, as is largely
(36:56):
mothballed at this point. So see, they would then use
Skymall's Twitter handle to send little messages that indicated that
Skymall would soon be back. Yeah. Uh, And sure enough
it did come back a little bit, because the online
store came back, and the folks over at Cena Marketing
(37:18):
said their plan was to get back into planes, but that,
as of the recording of this podcast, has yet to happen. Now,
I was on a plane I think in the past
year or two where I could swear there was a
Skymall catalog. But it also could have been somebody punking me.
I mean it's possible, it's possible that, but it's like,
(37:40):
nowhere when I was doing research could I find any
indication that it was coming back and had been back
in airplanes. Now that's not to say that it has it.
It might have and it skipped my attention, but um, yeah,
the website is still around. You can't buy stuff off
the website. I looked, yet he's not there. You can't
buy your bigfoot yet. I'm sad. I'll have to Uh,
(38:03):
I'll have to drown my sorrows and in a wine
bottle carried by a Butler statue. Right, thank goodness, you've
got that before Skymall went under. But the so, the
the lessons we would tell you about in this particular episode,
I think part of it is just that obviously, business
models can change dramatically, and we saw that early on
with Skymall, where they had to make a business model
(38:26):
change or else they would have collapsed before they got started.
But then the emergence of things like the competing sources
of attention or or demands on attention I should say
within an airplane meant that sticking with the airplane method
of distributing your magazine was not going to sustain it. Yeah,
(38:48):
And those were out of their control. Yeah. And then
the emergence of things like Amazon and eBay meant that
online stores were going to be far more difficult to
manage and be competitive. So in a way you could
say that that sky Mall was muscled out just because
of a changing market. But on top of that this
crazy Exhibit Corporation merger story, which is it's hard to
(39:12):
say that you draw a lesson from that other than
as an investor, it's really good to do research on
the company before you invest. You don't you don't want
to be a part of that pump and dump mess. No, yeah,
you don't want to be, Like, well, as long as
I get out before it collapses, I'm fine, because that
just just means you're exacerbating a problem. So yeah, do
research on companies and and be be a responsible investor.
(39:36):
And I and and then uh, you know, next time
you fly pour out a ginger ale for well, this
is a really interesting story, Jonathan. Thank you for all
of the research you've done on it. Well, you know,
it's no Lisa Frank, but I could try and tackle it.
And thanks Al again for the for the great suggestion. Yeah,
(39:57):
you've You've given us a lot of suggestions, so I'm
sure we're going to tackle more of them in future episodes.
But let's say that we've got somebody out there who
is just it shouldn't to hear us talk about Hello Kitty,
how would they get in touch with us well, they
could email us at Feedback at the Brink Podcast dot Show.
I look forward to getting that. Hello, Kitty, email me too. Yeah.
You can also go to our website That's the Brink
(40:18):
Podcast dot Show that has a list of all of
our previously published episodes, plus information about your beloved hosts,
speaking of which I have been Jonathan Strickland and I've
been aerial casting. Business on the Brink is a production
of I Heart Radio and How Stuff Works. For more
(40:38):
podcasts for my heart Radio, visit the I heart Radio app,
Apple Podcasts, or wherever you listen to your favorite shows.
Welcome to Business on the Brink, a production from I
Heart Radio and how stuff works. It's and you're about
to jet off to a city on the other side
of the country. But how are you going to spend
all that valuable time on a plane with no personal
entertainment services? And how do you handle the in flight jetters?
(00:25):
What can soothe your consumer list mind? How about you
indulge in some retail therapy. This is Skymall on Business
on the Brink. Hey, everybody, my name is Jonathan Strickland
(00:48):
and I'm Ariel cast In this episode was another listener
requests from al Con. Yes, thank you for that. And
before we get into this, uh, I am someone who
has traveled extensively by aeroplane. I have traveled occasionally by aeroplane,
and I can tell you that many an aeroplane trip
(01:09):
that I have taken it was spent perusing the various
odd and assorted weirdness of Skymall Magazine. Did that magazine
include a dictionary that told you to pronounce the word
aeroplane as aeroplane? It did not, It did not. I
mean maybe, I mean, who knows that the stuff in
(01:30):
Skymall magazine became famous for how weird it got, that's
not how it all started off. So we will tell
the story of Skymall Magazine. I also want to say
before we get into this, Uh, like I knew about
Skymall magazine, and I just assumed that Skymall Magazine kind
of went away because of lots of very obvious reasons,
(01:52):
right Like, you had the rise of entertainments systems on planes.
You had the ability to use your electronic devices on
planes that was instated later on. You have internet ordering,
yeah you had you know, you had competitors like Amazon
coming up, and yes, all of that will play a
very large part in this story spoiler alert. But there's
(02:15):
also some crazy, shady business stuff that ended up playing
a very large factor that I was completely unaware of
until we did this. Should it have been called slime Mall, Well,
I would suggest that sky Mall was not the one
at fault here, but rather a different company. But that
is putting the cart before the plane. So anyone who
(02:40):
traveled a lot, especially in the nineties maybe early two thousand's,
is probably familiar with sky Mall. So it's it's called
a magazine, but most of us probably thought of it
as a catalog, but it was a catalog of stuff
largely from other companies. Um. And there are a lot
of jokes about this magazine and there's even a song
(03:01):
about it, yes, by Jonathan Colton, who is an artist
both Jonathan and I like a lot. Yeah, yeah, Ariel,
you like Jonathan Colton a lot. I remember that you
got proposed to right in front of him. Yes, as
my husband saying our song, which is one of his
songs on a the second Jonathan Colton cruise. We were
also on the first one. Uh, fun time you guys,
(03:21):
that's beside the point. Yeah, I've never been on the
Joco cruise, but I I do, uh, I do appreciate that.
So yes, Jonathan Colton has a song that really is
dedicated to how strange, bizarre, and in some ways wonderful
this magazine was. Although it does start with the lie
O'Hare is nice this time of year, we all know
(03:42):
O'Har is never nice. It's never been to O'Hara. Oh gosh,
I've flown through it a few times. That's mostly Jonathan's
biased opinion there, but after that line it really picks up.
So here's the thing is that Skymall could have gone
away before it ever even really got going because of
the initial business model that was the underpinning of the company.
(04:06):
It was one that we can say, uh, pretty effectively
did not work. But here we go. So it all
starts with a guy named Robert Worsley. He was one
of the founders and is frequently cited as the main
founder of the company. And he came up with the
idea for sky Mall. And if the name Robert Worsley
(04:26):
sounds familiar, you may be someone who lives in Arizona
because he serves in the state Senate in Arizona. In fact,
his term is up at the end of two thousand nineteen.
So but before that, he was a public accountant, right, yes,
he was a public accountant with Price Waterhouse and he
(04:47):
was coming up with this this idea about what if
you had a catalog that you could find on a plane,
and the catalog had all these sorts of different things
that travel might want. It was less uh novel stuff
back then, so you like, you weren't going to find
(05:07):
a big foot statue or but that's the best stuff,
like the butler wine holder that where it looks like
the butler's drinking a bottle of wine. That's the best.
But none of that was none of that was really
in it there. It was more like luggage and belts
and ties and that kind of stuff. And the idea
was that, uh, you would actually order that while you
(05:28):
were on the plane. I mean that that kind of
makes sense because if you forgot to pack a high
or a belt, or you broke your suitcase and route,
you might want to have a quick replacement already and available.
And so yeah, that was sort of the concept. And
the idea was that the would be customer would use
an air phone, which in the old days was a
(05:48):
phone that was in the back of the passenger seat
ahead of you. Sometimes there's only one per row, so
like a car phone, kind of like a car phone,
and you would swipe a credit card in order to
be able to use it, and you would pay an
exorbitant amount of money for a very short phone call.
That sounds like a fantastic deal to me. Yeah, well,
and keep in mind that this is also a time
(06:08):
where air travel, I mean, it wasn't like it was uncommon,
but this was a time where people tended to dress
up on planes and stuff. Still, like it wasn't quite
it was making the transition into what air travel is today,
but it was still a fairly expensive method of getting around.
I mean air travel. If you are not married to
(06:31):
somebody in the air travel business, it's still pretty expensive,
is it. I wouldn't know, yeah, ok, yeah. And also
side note, I still like dressing up to get on
an airplane. I think it's classy. It's shortsand for me,
and by thongs, I mean fops. Yeah, no, I don't know,
(06:51):
we all thank goodness. So the idea was that you
would use the air phone to actually place the order
for whatever it was he wanted in the catalog, and
then on the ground in a warehouse near whatever destination
airport you were flying to, there would be all the
different items in the catalog, and someone from the skymall
company would pack up your order, rush it over to
(07:14):
the airport, and you would be greeted on the ground
with whatever it was he ordered, so you would have
your delivery upon arriving at your destination. That was the
That was the business model plan, and I think anyone
with a little, you know, skepticism or or thought might
have a few concerns about that plan. Yeah, but you
(07:38):
know who didn't have a few concerns about that plan. Well,
Graham Alcock, Alan Loebuck and Matthew del Bianco didn't because
they were the other co founders. They said, they said, cool,
let's do this. Yeah, so they establish it in or
maybe there's some disagreement on dates. I assume that would
(07:59):
happen and was worsely came up with the idea in
eighty nine and then they were officially incorporated. But uh,
the original plan was that they were going to try
and carry stuff from very very recognizable brands like yeah,
exactly like things that people would know, they'd be, you know,
confident that the quality was going to match their expectation,
(08:21):
rather than I'll just buy a tie from this thing
that I have no idea where it came from, from
the news stand in the airport it says we love Atlanta. Yeah,
this was a little better than that. And so the
idea was that you would then sell these things at
a healthy mark up because obviously you need to make
a profit, right, So you would buy the stuff at
(08:43):
wholesale from wherever the you know, whatever the manufacturer was,
and you would sell it for a decent mark up
to make a profit. Making expensive things more expensive, Yes,
but as you would imagine establishing warehouses near airport it's
and then staffing them and then filling them with inventory,
(09:04):
and not knowing which pieces of inventory are going to
be popular for any given warehouse. Yeah, I mean, what
if you order five ties and you have six people
who want to tie, and then you don't have a
tie at the warehouse that they're landing at. You know,
how do you know five people in Chicago are gonna
want to tie? What if you order three hundred ties
and nobody ever orders a tie for the airport that
(09:25):
that that it's close to. Yeah, that's that's a logistical nightmare. Yeah, exactly.
Just even keeping track of what stock is in which warehouse,
that alone was a real challenge. But yeah, you you
there was no way to predict which products were going
to be in demand because it was all dependent upon
who was traveling where, right, Like you can't even say,
(09:47):
like if you're if you're the owner of a retail
business and it's a chain and you're looking at a
chain across regions, you can draw general conclusions. You can say, oh,
in the Southeast region, we see that X, Y and
Z products are really popular but A B and C aren't,
so we won't worry about those. But in the Midwest,
A B and C are really popular. But you can't
(10:08):
do that with a business like this because you're not
looking at a region of population. You're looking at people
who are traveling to that destination. Well, and like, you
can order duty free stuff on a plane a lot
of times if you travel overseas, but that's stuff that's
already available for other people in the airport. It's not
things outside of airport goods. And of course, obviously this
(10:31):
is also before UH nine eleven in the United States,
where it was also possible to meet people at the
gate without having a ticket and things. So these challenges
beyond the nine eleven thing, because this again is a
decade before that. These challenges meant that that business model
hit a real rocky start, and even by when the
(10:55):
business that was only a few years old, it was
losing six million dollars per year ADS. Yeah, so this
could have been the end of the company right there.
They could have just said like, wow, we're never you know,
we're just gonna have to keep raising funding, like do
finance rounds to stay in business. And you can only
do that so long before your investors say yeah, or
(11:18):
we have to change our business. So they decided they
had to change the way the company operated. And from
what I've read, this was not a unanimous decision among
the founders like this, there was arguments, but a good one.
It was a good one. Yes. So they decided instead
of being a company that would run its own warehouses
and maintain its own stock, they would rather publish a
(11:41):
magazine and then they would charge other companies to advertise
their goods in that magazine. So essentially it was a
magazine completely made up of ads. Uh. There were two
different types of advertisements that you could get, and there
were different sizes, like you could get a quarter of
a pay, you could do a half page, you could
(12:01):
do a full page. But they said, this way we
will charge companies to advertise their stuff. We won't have
to carry all that overhead. I've worked for a couple
of theater companies where I've had to do the generation
for the programs at spaces is pretty expensive. Yeah, as
it would turn out, Skymall space would be really expensive.
(12:23):
So in the Atlantic had an article about sky Mall
and they said that in a full page sky Mall
magazine presence if you were if you were doing an
advertisement was forty two thousand nine dollars per month, and
(12:44):
sky Mall came out quarterly, which meant that and an
issue would last three months, so at minimum, you would
have to spend three months worth of that full page
ad in order to get one issue of sky Mall.
So you're looking at a full page advertisement for one
edition of Skymall magazine could set you back a hundred
(13:05):
thirty dollars just about golly. You gotta have a lot
of distribution for that. UM. But they also changed how
they delivered product right, yes, because now they were no
longer the ones responsible for getting the product to the customer.
They were facilitating the transaction. So it was the company
(13:26):
that was behind whatever the product was, it was their
responsibility to ship the product to the customer. So also
it would never it wouldn't get to you when you
landed anymore. It would be shipped to whatever address you
gave when you ordered it. So that was a big
difference to UM. And this again removed a lot of
the cost of doing business off of sky Mall, which
(13:50):
certainly helped it make money. This was like a sea
change when it comes to the way the company was
doing business. Yeah, well they had another CE change in
their C suite executives. Do you like what I did there?
You don't face, Jonathan. That was great. Pray continue aerial. Uh.
(14:13):
So The Atlantic had an article, or in the same article,
which was titled the Strange Story of America's most delightfully
Weird Catalog. Yeah, it's a great article. By the way,
it quoted Christine Aguilera. Yeah. I was so disappointed because
(14:34):
when I first read that, I said what and then
I realized, oh wait, it's Christine Aguilera, not Christina Aguilera.
So I was very sad because I was fully expecting
to have Genie in a bottle play through this entire episode.
She was a former president of Skymall, and hence the
joke about c suite changes. Yeah, she would become the
(14:55):
president after Warsley. We'll get to that in a second.
She said that on average, every week's sky Mall would
field about one hundred requests to feature stuff in the publication. Yeah,
so there was no shortage of companies that wanted to
get there, uh their information in the magazine. And it's
understandable because one of the very savvy things the company
(15:16):
did was it established these contracts with various airlines to
be carried on those airlines, and they had an incredible penetration.
It was like eight percent of people traveling on planes
in the United States, we're traveling on planes that were
carrying sky Mall magazine. So yeah, nearly all air travelers.
(15:39):
So it didn't matter if you were on Delta or
United or Southwest or American airlines, they all had sky Mall.
So those eyeballs were going to that magazine. Because again
this was also before you could have electric Well, first
of all, it was before smartphones, so nobody had no
one has smartphone to begin with, and no one at
e readers or anything like that ring like a paperback
(16:01):
on the plane. But there were so many times where
you would get onto the plane and then you think,
oh I forgot a book, or oh my book is
in my checked luggage, you know, and you would realize
you didn't have anything, so you would just you know,
you'd root around for whatever you could read, and Skymall
was always there. Well. Plus I always tell you to
check out the literature in the pocket seat in front
of you. So seat pocket in front of you. So, yeah,
(16:23):
once you had really gone over the emergency procedures, then
you can graduate up to Skymall. But things were going
well at the time because now they had had this
massive change in the way they did business. But soon
a sequence of changes in ownership would create a massive
brain moment for Skymall. But first we're going to take
(16:44):
a quick break. Okay, So arial, you know how we
sometimes cover companies that end up having very confusing ownership
stories just because as the industry they're in ends up
being incredibly incestuous. Yeah, like beer, beer or fast food. Yeah,
(17:08):
the beer and fast food companies in particular, those are
ones that are really complicated. Well, sky Mall is also complicated,
and it's made more so because for most of its
existence it was a private company, and as a private company,
it kept a much lower profile. You know, it didn't
have to file the same information you would if you
(17:29):
were a publicly traded company, and so unless you were
really paying at attention to the industry, changes in ownership
probably wouldn't really you know, to use an airline quote
fall on your radar, because the magazine was still in
pockets on airplane seats with no matter who the owner was. Yeah,
(17:50):
I don't usually look at the publisher of the magazine
or riding and even if you did, it would still
say sky Mall just was alright. So we're gonna try
and talk about the changes in ownership. So pay attention
because this is like a game of three card Monty.
You gotta find the little lady as I'm flipping the
cards around. So, for the first decade or so of
its existence, sky Mall was its own private company, right
(18:14):
Worsley's company essentially, And after that rocky start, it turned
into a profitable business once it changed from being a
retail type company to a publishing company and an advertising company.
In fact, you could argue that it's business turned it
into something akin to Google, Like Google is not really
(18:35):
a search engine company you think of it as, but
it's really an advertising company. Well, and I was going
to say, where you're talking about incestuous genres of company.
I was like, how many airline magazines are there other
than sky Mall in Delta? Well, how many other airlines
have you flown? Uh? So there are other airlines that
(18:56):
do have their own in house magazines, but Skymall was
the one that was across all of them, and so
they established an online store. Not too long after that
became started becoming a thing. It took a little while,
but yeah, um, and you know, they're operating things pretty regularly.
And then in two thousand one we get our first
(19:18):
change in ownership. A company called jim Star tv Guide,
not TV Guide, but jim Star tv Guide acquired Skymall
and jim Star tv Guide, according to a helpful press release,
was quote a leading media and technology company that develops, licenses, markets,
and distributes technologies, products and services targeted at the television
(19:41):
guidance and home entertainment needs of consumers worldwide. End quote.
It sounds like a whole bunch of buzz talk. We're
just getting started, aerial. But yeah, they made like interactive
TV menu. Okay, so they actually made something legit. Yeah,
like you know how how a lot of televisions you
would hit the menu button and the little pop guid
would pop up. They made stuff like that. I have cable,
(20:03):
I understand. Okay, well I might be one of the
few people, but yeah, I don't remember the last time
I turned my television on. So uh so, anyway, uh,
Robert Worsley was deciding he had he was deciding to
retire at this point he had made a fortune off this. Uh,
and so then Christina Aguilera at this point becomes the president.
I'm a Genie and a sky Mall baby. Still not
(20:26):
still not genie and a bottle of Christina Aguilera, but
in my heart she always will be. So she ends
up becoming the president for the in flight business of Skymall.
Now that's going to be important a little bit later
because there'd be another division within Skymall that would become
increasingly important over the years. But everyone thinks of the
in flight business of Skymall because that was the public
(20:47):
facing part, right, That was the magazine that we all
were familiar with. And then Jim Star TV Guide itself
would end up eventually going out of business in two
thousand and eight, but between its purchase of sky Mall
and when Jim Starr went bye bye, it would actually
sell sky Mall. This happened in two thousand five. Sky
(21:08):
Mall wasn't part of their downfall, No, No, Jim Store
was already like they had actually said that they were
selling off sky Mall because it didn't align with their
other business practice, Like there are other business strategies. They said, well,
this is kind of outside of what we want to
focus on, and then what they focused on ended up
not saving I wonder if they had a change of
management that made that call, Well, that'll have to be
(21:30):
a future of different of the brink, right. So a
company called Spire Capital Partners, along with Zelnick Media Corporation
and Green Spun Media Group together bought sky Mall for
fifty two million dollars and Aguilera would continue her bottle
days as president. She stayed in that role. This is
(21:52):
also kind of interesting because we're going to see multiple
changes in ownership and not changes in leadership, which is
that's that's not usual, it's atypical. Yeah, but it also
meant that at least the parts of the sky Mall
business would remain constant despite changes in ownership. So the
next change of management happened in two thousand twelve when
(22:14):
they sold to Najaffee Companies. Yes, so this was an
investment from a private investment firm named after the founder
of Najaffee Companies, and this was through a subsidiary of
Najaffee Companies. Here's where it gets even more complicated. The
subsidiary was direct Brands, and it was specifically done through
an affiliate of direct brands called book spant It Books, uh,
(22:38):
magazine Span Flying And I would love to tell you
how much this transaction was, but it was an undisclosed sum.
I'm going to say five dollars, okay for five smackaroos.
And Aguilera would remain as president. So the Jaffee Companies
also owned a couple of other direct consumer brands. That's
what sky Mall was kind of considered to be, as
(23:00):
you know, advertising director consumers. Uh So the Book of
the Month club was in a Jaffee company's property. It
seems in line with their with their product. Yeah, this
was like, this is all kind of following the same strategy.
And in the Jaffee Companies announced that Kevin Weiss, who
had previously led a self publishing company called Author Solutions,
(23:21):
would be the new CEO of Skymall, and Aguilera was
still a president, but she was president of the in
flight Businesses. And by this time there was another division.
It was the Loyalty Program division, which we'll talk about
in a little bit. But now to get to the
truly weird part, so we just had all those different
changes in management, and almost all of all those are
(23:43):
changes in ownership. Almost all of those owners were private
equity companies, right, So it was like private equity company
selling to a different private equity company that would sell
to a different private equity company, over and over and
over again, with companies that made things that we're trying
to make skype Mall for it into their brand. Yeah.
And so then we get Exhibit Corporation and they acquired
(24:06):
Skymall in May two thirteen. And this is amazing because
we have Christine Aguilera and Exhibit. Although it's not spelled
the same way as Exhibit the Rapper, it is spelled
differently from the word example. To say neither the rapper
nor the Exhibit Corporation are spelled correctly. Well, I would
argue the rapper's name is spelled exactly the way he
(24:27):
wants it. But yes, Exhibit Corporation is spelled x H I,
B I T. And I can't tell you how many
times I had to correct myself from spelling it like
the rapper's name, which of course is x Z. Yeah,
I kept on spelling it as the rappers name, as
opposed to the corporation's name. Okay, so tell me about
this really complicated story of Exhibit because you can tell
(24:49):
it why better than I can? All Right, this is
this is bonkers. This, this is what started to make
my head buzz when I was researching this episode. So
here's how it described itself in the press release that
that it issued when it merged with Skymall, because that
is what happened. It was actually a merger, not an acquisition.
(25:10):
Exhibit Corporation is a cloud based marketing and technology development
company focused on digital advertising, mobile and social media development,
and CRM customer relationship management solutions. Exhibit offers a total
solution for digital advertising and marketing that is integrated throughout
its divisions and shares technology and resources across all of
(25:30):
its services through its subsidiaries. Exhibit utilizes its branded products
and services to provide digital marketing and advertising solutions for
top tier advertisers and agency clients. It sounds like they
just said the three the same thing in three different sentences,
three different ways. Yeah, and by the way, news flash,
according to everything I read, it didn't do any of
(25:52):
those things at all. It didn't do anything at all. Well,
it apparently brought in some revenue by selling some weird
new a G food supplements and stuff. Colon cleansers you
have here, yep, colon cleanser. Yep. In case your semi
colon is dirty, it's a colon cleanser. Yeah. No. That
(26:14):
was the thing was that it was not, from what
I could tell, doing any sort of business in the
cloud sphere or in advertising or in marketing, apart from
selling weight loss supplements and stuff like that, which is
truly weird. And on top of that, to make this
even more complicated, before they merged with Skymall, they had
(26:36):
done a different merger in June two thousand twelve, where
the Exhibit Corporation spent three hundred fifty thousand dollars to
purchase another company. This company was called n B Manufacturing,
which makes it sound like it's a manufacturing componer. Yeah,
maybe it makes the coaling cleansing doesn't make anything. It
was a shell company. So shell companies are used for
(27:00):
usually as a holding space for financial transactions. And we
could do a whole episode on what shell companies are,
and maybe at some point we should, because it's a
pretty confusing concept for people who yeah, not not the
shell company but shell companies, and so uh, this shell
company was a publicly traded company, and this was what
(27:22):
you would call a reverse merger or reverse takeover. Because
what Exhibit Corporation did was they buy in by Manufacturing.
Then they reorganized so that In by Manufacturing is technically
the parent company of Exhibit Corporation, which effectively makes Exhibit
Corporation a publicly traded company. So they went from private
to publicly traded without having to have an initial public offering.
(27:44):
That sounds very questionable to me, and the SEC would
agree with you. It is something that a lot of
investors and the SEC say beyond the lookout for. Uh,
it's not technically illegal, but it is very questionable. And
beyond that, Exhibit already had a pretty bad reputation, and
(28:06):
this particular move made that reputation even more questionable. Seeking Alpha,
a website called Seeking Alpha with a journalist named Isaac Silberman,
a sort of a financial analyst, looked into this and
Silberman raised a big warning flag about Exhibit Corporation and
said that it looked like it was a pump and
(28:29):
dump type of company. So a pump and up scheme,
for those who don't know, is when somebody or a
group of somebody's gets hold of a lot of cheap stock,
and then, through various efforts, usually involving misrepresentations of the truth,
pumps the value of the stocks up before selling them off.
If you've seen Wolf of Wall Street, it's Wolf of
Wall Street where you you're like, I can get stocks
(28:51):
for pennies, and then if I can convince people that
the company is about to make a big move, the
stocks value will go up because people will think that
the company is more valuable. Then I offload it and
then it's off to Rio de Genero. Well, Exhibit was
saying that their stock was around forty million dollars or so. Well,
thus because they printed it like crazy when they took
(29:15):
over and became a publicly traded company. So yeah, on
paper it was worth forty million dollars and then eventually
its value was it was it was valuing itself really
or really by the stocks that had printed at three million.
But this was a value that it couldn't support with
any like anything like it wasn't based on anything. It
(29:37):
was all just dream money. Yeah. Well, the CFO of Exhibit,
Michael Schifsky, was involved with a lot of kind of
bad penny stocks. Yeah, so he had a he had
a reputation for already being involved in this kind of
pump and dump sort of world, if not in a
direct scheme, certainly within that same realm. And this would
(30:01):
be the company that would merge with Skymall, and in
less than two years the magazine would be in bankruptcy, Jonathan,
when the heck happened? Well, Ariel, I'll tell you, but
I need to simple Watts. Let's take a quick break,
all right, So Skymall sounds like it's been a bit
(30:23):
of a joke, right for years it had included listings
for all sorts of weird. I'd say cool, some people
would say odd, whimsical, somewhat useless, and very expensive goods. Uh.
You have a note here that says, who needs a
yetti in the in their garden? I do, Jonathan, But
that's beside the point. I think technically they called it
(30:45):
a bigfoot statue, but I always think of it as
the yetti in the garden. Either way, I need one.
But regardless of that, and and what being what they're
known for. In January two, news broke that they were
going bankrupt, were filing for bankruptcy protection. Now, now that
is the way a lot of of news outlets reported it.
(31:06):
But then if you read the articles, you would see
in every single case that what was actually happening was
the parent company, Exhibit Corporation, was the one that was
declaring bankruptcy, and so sky Mall belonged to Exhibit Corporation.
But it was a bigger story than just sky Mall
going bankrupt, and so what was going on, Well, let's
roll back the clock a little bit two th thirteen,
(31:28):
when that merger happened with Exhibit Corporation, things were already
going poorly for sky Mall for the reasons that we
mentioned at the top of the show. You know, you
had a lot of things competing for passengers attention, You
had a lot of competitors entering into the space like
Amazon and eBay. So there were a lot of things
that were contributing to sky Mall's decline and financial loss exactly.
(31:52):
So in two thousand thirteen, Skymall reported that it had
made thirty three point seven million dollars in sales and
that the magazine had lost three point two million dollars
that year, So it was overall a loss, even though
it had thirty three point seven million in sales. That
was a significant drop from the height of its performance.
At its height, I think it made a hundred thirty
(32:14):
million in sales, so it had dropped precipitously. Now did
this include the loyalty program you who had talked about earlier.
It did not. The loyalty program which was it was
essentially that sky Mall was handling the loyalty program for
some big, big companies where if you use the big
companies services, you would get loyalty points that you could
then return for different goods or gift cards or whatever.
(32:38):
Sky Mall was handling those transactions. So this was a
separate part of their business, a different division. So that
one was bringing in forty nine million dollars in two
thousand thirteen, so they made the loyalty program made more
money than the magazine program in and the loyalty program, however,
(32:59):
was dependent primarily on three clients, Capital One, Caesar's Entertainment,
and Marryott Rewards. And if you're if your business is
dependent on just three clients, that's a big problem because
if any one of those three goes your revenue exactly.
So this was while it was bringing in more money
(33:19):
than the magazine. It was also scary because you couldn't
predict that that was going to be steady year to year. Well,
and it's scared exhibit because they sold off that division
in two thousand four. YEP, they sold it for twenty
four million dollars. So the year earlier it brought in
more than twice that amount, it brought in forty nine million,
and then they sell it off the next year for
twenty four million. They did that, by the way, because
(33:41):
they had an outstanding fifteen million dollar loan from Najafi
actually UH that they needed to pay off, and so
they sold off the loyalty program part of sky Mall.
It's gone and they end up paying off this loan.
Well unfortun at least, Skymall continues to decline. Yes, the
(34:03):
following year, their sales dropped to fifteen point eight million dollars.
They don't have the loyalty program anymore. The changing rules
and airlines had really affected Skymall because now people were
using e book readers and tablets and smartphones rather than
flipping through the crazy stuff that was in Skymall magazine.
So this was uh the beginning of the end, you
(34:24):
had a lot of airlines that decided, once the contract
was up to carry sky Mall, that they weren't going
to renew that contract. Well, and not only that, but
Skymall ended up owing these airlines a lot of money. Yea,
they ended up in their bankruptcy filing they listed debts
to Delta for one and a half million dollars, American
Airlines for one point six million dollars, Southwest was four
(34:47):
hundred thousand dollars, and United Airlines three d thousand dollars.
And then we have exhibits. So at the time of
the merger, Exhibit reported that it had done about nine
million dollars in revenue, so a fraction of what sky
Mall was doing. But then again they were also only
selling weight loss supplements and colon cleansers. Yeah. So so
(35:07):
while sky Mall, even when it was struggling, it was
bringing in way more money than Exhibit Corporation. And yet,
according to the merger deal exhibit and hey, hey look
I spelled it the wrong way, Exhibit got sixty percent
of the merged company and sky Mall got So you're like,
wait a minute, So Skymall is bringing in the vast
majority of revenue, but it gets the minority stake in
(35:31):
the merged company well. And by the time they filed
for bankruptcy, Skymall was the only operating division in Exhibit. Yeah,
the colon cleansers got cleaned out. Yeah, but yeah, Skymall
was that was it. That was the only business Exhibit
Corporation was doing. And uh, it was clear that things
(35:52):
had gone wrong. So if, like, we don't know what
the actual strategy was Exhibit Corporation. If the strategy was
to drive up the perceived value of Exhibit Corporation and
then get the heck out of Dodge, it didn't things
collapse too quickly for that to happen if that was
(36:13):
the plan. We don't know. If that was the plan.
Maybe they were sincere on the up and up the
whole time, but there were a lot of flat red
flags to worry about. Um. So then in the spring
of two thousand fifteen, the bankruptcy court ends up having
an auction of the assets and auctions off Skymall Magazine,
and another company called Sienna Marketing purchases it for one
(36:35):
point nine million dollars. Sienna Marketing operates Photo Chance like
Rits and Wolf and it licensed Polaroid. I guess that's
the one that most people would be familiar with. Yeah. Yeah,
if you don't know what Rits and Wolf are, I
mean not, I don't blame you, because that's you know,
the photo industry is also one that, as is largely
(36:56):
mothballed at this point. So see, they would then use
Skymall's Twitter handle to send little messages that indicated that
Skymall would soon be back. Yeah. Uh, And sure enough
it did come back a little bit, because the online
store came back, and the folks over at Cena Marketing
(37:18):
said their plan was to get back into planes, but that,
as of the recording of this podcast, has yet to happen. Now,
I was on a plane I think in the past
year or two where I could swear there was a
Skymall catalog. But it also could have been somebody punking me.
I mean it's possible, it's possible that, but it's like,
(37:40):
nowhere when I was doing research could I find any
indication that it was coming back and had been back
in airplanes. Now that's not to say that it has it.
It might have and it skipped my attention, but um, yeah,
the website is still around. You can't buy stuff off
the website. I looked, yet he's not there. You can't
buy your bigfoot yet. I'm sad. I'll have to Uh,
(38:03):
I'll have to drown my sorrows and in a wine
bottle carried by a Butler statue. Right, thank goodness, you've
got that before Skymall went under. But the so, the
the lessons we would tell you about in this particular episode,
I think part of it is just that obviously, business
models can change dramatically, and we saw that early on
with Skymall, where they had to make a business model
(38:26):
change or else they would have collapsed before they got started.
But then the emergence of things like the competing sources
of attention or or demands on attention I should say
within an airplane meant that sticking with the airplane method
of distributing your magazine was not going to sustain it. Yeah,
(38:48):
And those were out of their control. Yeah. And then
the emergence of things like Amazon and eBay meant that
online stores were going to be far more difficult to
manage and be competitive. So in a way you could
say that that sky Mall was muscled out just because
of a changing market. But on top of that this
crazy Exhibit Corporation merger story, which is it's hard to
(39:12):
say that you draw a lesson from that other than
as an investor, it's really good to do research on
the company before you invest. You don't you don't want
to be a part of that pump and dump mess. No, yeah,
you don't want to be, Like, well, as long as
I get out before it collapses, I'm fine, because that
just just means you're exacerbating a problem. So yeah, do
research on companies and and be be a responsible investor.
(39:36):
And I and and then uh, you know, next time
you fly pour out a ginger ale for well, this
is a really interesting story, Jonathan. Thank you for all
of the research you've done on it. Well, you know,
it's no Lisa Frank, but I could try and tackle it.
And thanks Al again for the for the great suggestion. Yeah,
(39:57):
you've You've given us a lot of suggestions, so I'm
sure we're going to tackle more of them in future episodes.
But let's say that we've got somebody out there who
is just it shouldn't to hear us talk about Hello Kitty,
how would they get in touch with us well, they
could email us at Feedback at the Brink Podcast dot Show.
I look forward to getting that. Hello, Kitty, email me too. Yeah.
You can also go to our website That's the Brink
(40:18):
Podcast dot Show that has a list of all of
our previously published episodes, plus information about your beloved hosts,
speaking of which I have been Jonathan Strickland and I've
been aerial casting. Business on the Brink is a production
of I Heart Radio and How Stuff Works. For more
(40:38):
podcasts for my heart Radio, visit the I heart Radio app,
Apple Podcasts, or wherever you listen to your favorite shows.
Business on the Brink News
Hosts And Creators
Jonathan Strickland
Ariel Kristen Kasten
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