Pete Petersen Stacked Up As A Magazine Magnate

When Robert “Pete” Petersen said he was leaving high school at 15, the principal told an assembly that “Pete is the least likely to succeed.”

Petersen (1926-2007) worked hard to prove him wrong.

He washed dishes, pumped gas and stocked produce.

Then he moved from the California desert to car-mad East Los Angeles, where he got an idea to publish Hot Rod, all about cars.

With $400 of borrowed money and credit from a printer, the 21-year-old launched the magazine in 1948, with the first issue selling on newsstands for 25 cents.

By 1995, he was on the Forbes list of the 400 richest Americans, with a net worth of $400 million.

That was the year before he sold the 77 periodicals of Petersen Publishing for $450 million.

Pete’s mother died when he was 10. His father, a Danish immigrant truck mechanic, moved the family often to follow construction crews around Southern California while his son delighted in engines.

When Pete moved to L.A., his first job was as a messenger boy for $18 a week at the MGM movie studio, where he met Clark Gable, Tyrone Power and other stars.

That led to a job in publicity, where he passed on news to Hollywood gossip columnists Hedda Hopper and Louella Parsons.

After a stint in the Army Air Forces as a reconnaissance photographer, Petersen returned to MGM. Soon he and other publicists were forming their own agency.

Then came the magazine brainstorm.

He partnered with a friend who agreed to run special events for hot rods while Petersen did the writing, editing, layout, ad sales and distribution.

After printing 5,000 copies of the eight-page first issue, Petersen distributed them to local newsstands.

In Gear

After his initial deliveries, he received calls that the newsstands needed more. By the time he rode his motorcycle to peddle the rest at speedways, the first run was gone.

“So he assumed that selling out 100% was the norm!” Ken Elliott, who became a vice president of one of Petersen’s publishing divisions in 1973, told IBD.

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Yet a problem arose with big advertisers, said Elliott: “The guys who drag-raced illegally in the streets and bought Hot Rod didn’t have a good image.”

That gave Petersen another brainstorm. In 1949 he launched Motor Trend to attract older readers with a better image — those who wanted to know everything about the latest car production models. The publication attracted national advertisers, grew to over a million readers and remains one of the most respected magazines in the industry.

Petersen also organized the National Hot Rod Association in 1951 to bring drag-racing off the street and make it more respectable. It now sanctions 80,000 drivers.

Now Petersen decided to buy out his partner for $200,000 — worth $1.7 million today. “That sounded like a lot of money to a young guy who just wanted to live the high life, so he took it,” said Elliott.

Petersen focused on segmenting his market further. Out came Sports Car Graphic, Sport Truck, Circle Track, Rod & Custom, Chevy High Performance, 4-Wheel & Off-Road, Custom & Classic Trucks — magazines that sought to turn his initial teenage readers into lifelong fans.

He also created or acquired related periodicals, including Motorcyclist, Motorcycle Cruiser, Sport Rider, Dirt Rider, Bicycle Guide and MTB for mountain bike fans.

He figured his readers would share his other enthusiasms, so out came Hunting, Bowhunting, Guns & Ammo, Skin Diving, Photographic and Snowboarder.

“He built the first really special-interest magazine empire, which went against conventional wisdom that you needed the broadest audience possible,” said Elliott. “He had a built-in advantage with each one because the advertisers who wanted to target those readers would pay a premium, especially because of the large pass-along rate.”

Petersen kept the company private “because I don’t want anyone telling me what to do — and going public is a big liability against moving fast or doing what you need to do,” he said.

Petersen had a formula that kept readers coming back.

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1. He hired experts first and writers second, said Elliott: “He didn’t care if you had credentials, and he made sure that even his salesmen and distribution managers really knew their subject.”

Before he would hire anyone for his motorcycle magazines, they had to complete two laps around a nearby service station.

2. He was a hands-off manager. “He believed his job was to hire talented people and let them do their jobs,” explained Elliott.

3. Everything — from cover photos to headlines — was designed to grab attention at the newsstand; sales there kept distribution costs low, although eventually Petersen magazines came to be based more on subscriptions.

The Downside

Not all of his efforts worked.

He overestimated how long the craze for CB radios would last.

He launched a periodical for recreational vehicle owners just as gasoline shortages hit.

He couldn’t find enough readers for a magazine about go-karts.

“The trick in this business is not to hang on when it’s gone,” he said, having lost $100,000 in the 10 months his CB magazine was on stands.

Petersen supported his magazines in creative ways. He used special events, one of the first car shows on TV and the founding of a professional association for auto aftermarket product makers.

He also built the 300,000-square-foot Petersen Automotive Museum in Los Angeles, to which he and his wife, Margie, donated nearly 400 of their favorite vehicles and a substantial endowment.

“Los Angeles led the world in popularizing cars, and the museum is appropriately located in Miracle Mile, so-called because it was California’s first shopping district designed for cars,” said Gigi Carleton, Petersen’s executive assistant for four decades.

The couple invested in a variety of fields, from a restaurant (which she managed) and jet charter service (used by executives and celebrities) to making innovative cartridges (free of toxic lead) and acquiring real estate (eventually owning a 3,000-acre ranch).

Petersen Publishing had a hand in charitable fundraising, leading to the Margie & Robert E. Petersen Boys & Girls Club of Hollywood, says Carleton.

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Big Shot

Elliott, who was Petersen’s frequent hunting partner, said the boss knew how to delegate, allowing for the lifestyle he preached: “He hunted all over the world and is probably the only man ever to take a polar bear with a handgun. To say he was a firearms enthusiast is like saying Babe Ruth was a baseball player! Pete’s special skills enabled him to get his vocation and avocation confused — his work was his fun and his fun became his life.”

In “The Colt Engraving Book,” R.L. Wilson wrote about Petersen’s priceless collection of vintage guns. Many were donated to the National Rifle Association’s Firearms Museum in Fairfax, Va.

In 1984, Los Angeles held the Summer Olympics, and the city had no suitable venue for shooting sports. So Peter Ueberroth, president of the host committee, asked Petersen to create one. He did — on time for the Games.

By 1995, Petersen’s magazines had a circulation of 43 million, with sales reportedly at over $250 million a year and with net income hitting $40 million. The company sale the following year went to a group headed by a former Hearst publishing executive.

In 2006, the Los Angeles Business Journal estimated that Petersen’s net worth was $760 million. His high school principal’s prediction had been a little off the mark.

He died after a short, fierce battle against cancer.

Wilson said, “His story is a core saga of American entrepreneurialism, starting from nothing and coming to not only dominate his industry, but to be one of the few of us to fully live out our dreams.”

Elliott added: “Pete created a special world that he allowed the rest of us to enjoy with him, and his magazines helped make us better at the things we loved most. We got to come along for the ride, and what a ride it was!”

View more information: https://www.investors.com/news/management/leaders-and-success/pete-petersen-stacked-up-as-a-magazine-magnate/

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