The Essence Of A Breakup

When Ed Lewis and Clarence Smith cut a deal with AOL Time Warner two years ago, they were offered the promise of fresh capital and new markets for the leading black women's magazine. Little did they know it would mean the split of a 32-year-old business partnership and a fight for the soul of an institution.

Scorched by the summer heat, hundreds of thousands of African Americans pour into New Orleans. For them, it is part of an annual Independence Day ritual in which they engage in three days of music, culture, and camaraderie. The event: the Essence Music Festival.

This year was different though. The participants of the mammoth event may have been oblivious to it, but a major behind-the-scenes player was missing. Absent was Clarence O. Smith, the visionary who gave birth to the festival eight years ago. He was the smooth-talking rainmaker who held myriad meetings with the top city officials and assembled a relentless sales force to snare millions in sponsorship dollars. And although the entrepreneur was key in organizing this year’s extravaganza — the most successful ever with an attendance of 223,000 — he was nowhere in sight.

Several days before the event, Smith, the man who helped build Essence into one of black America’s most recognized brands, became a man without a company. At the New York City headquarters of Essence Communications Partners (No. 25 on the BE INDUSTRIAL/SERVICE 100 list with gross sales of $144 million), Smith signed documents severing ties with a company he spent half his lifetime building. In effect, he was granting a divorce to Chairman and CEO Edward T. Lewis, his partner of 33 years, in what was considered one of the longest-running marriages in black business.

The press release issued by the company on June 28 stated that the 67-year-old “had been planning his resignation for some time and is currently making arrangements to pursue existing and new media projects outside of Essence.” But BE learned that Smith did not leave willingly, nor was his split with the company amicable. Inside sources say Smith was forced out of the company following a board vote. In an interview with BE, Lewis says: “We wanted him to retire, but he decided to resign. That’s all I can say on the matter.”

The move represents the latest jolt to the leading media entity targeted to black women since it entered into a historic partnership with Time Inc., the publishing arm of AOL Time Warner. When Smith and Lewis closed the deal in 2000, Time Inc. walked away with a 49% ownership stake, while Essence gained the opportunity to align itself with a multimedia octopus that has tentacles in publishing, cable, and interactive media. With the capital and resources to expand the brand, the two partners asserted at the time that Essence could be a mainstream media powerhouse.

But the deal is proving to exemplify the challenges inherent in a strategic alliance between a revered African American institution and a sprawling corporate leviathan. Over the past two years, Essence has benefited from the partnership through a reduction in production costs, increased exposure, and counsel from the editorial and business staffs of Fortune, Money, America Online, and other entities under the AOL Time Warner umbrella. But the joint venture has also fueled management turmoil, cultural conflicts, and, as evidenced by Smith’s exit, boardroom intrigue.

Moreover, inside

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