Have you ever bought a Mega Millions or Powerball ticket? Even if you’re not a gambler per se, when the lottery jackpots reach historic amounts, people who don’t normally play come out in droves.
Who doesn’t want a chance to get rich quick?
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That’s also what companies like American Family Publisher and Publishers Clearing House (PCH) promised.
Publishers Clearing House was founded in 1953 as a direct-mail company that sold magazine subscriptions. Anyone who bought a magazine subscription was automatically entered into the company’s sweepstakes. People who didn’t purchase magazines could also fill out a form for an entry (thereby making the contest a sweepstakes rather than a lottery).
Some of the prizes were substantial: cars, vacations, and cash awards of up to $1 million.
Over the years, the company paid out more than $618 million worth of prizes and was also known for being philanthropic, donating tens of millions to various veterans’ causes and children’s hospitals.
The Publishers Clearing House Prize Patrol was known to show up at an unsuspecting winner’s house with a large check in hand.
Image Source: Getty Images
As the magazine industry tanked, so did the sweepstakes companies
Magazine publishers loved PCH because the company helped them get massive numbers of subscribers. The more subscribers a magazine had, the more the publisher could charge for ads.
Of course, the magazine world is not what it used to be. Hundreds of magazines have stopped publishing print editions or gone out of business altogether over the last dozen years. Advertising revenue for print publications dropped from a peak of around $20 billion in 2007 to just $2.3 billion in 2023, according to Bloomberg. That’s a decline of more than 70%.
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It makes sense that a business built on selling magazine subscriptions would have some trouble staying afloat.
Even though PCH expanded into online games and e-commerce, it was not enough to sustain the business.
In 2023, the company was hurt further after losing a lawsuit filed by the Federal Trade Commission. PCH paid $18.5 million to customers who believed they were harmed by the company’s misleading claims.
Publishers Clearing House bankruptcy jeopardizes consumer data
On May 1, Publishers Clearing House LLC filed a motion with the U.S. Bankruptcy Court for the Southern District of New York, seeking court approval to sell all or substantially all of its assets as part of its Chapter 11 bankruptcy proceedings.
Publishers Clearing House proposed an auction as a way to preserve its intellectual property and perhaps save the brand while maximizing the amount creditors can recover.
Related: Bankrupt consumer brand’s business puts consumers at risk
PCH is working with the investment bank SSG Advisors, and while the company doesn’t yet have a lead buyer that will set the starting bid for others (a concept also known as a “stalking horse bidder”), it hopes to soon.
In order to keep the business running for the time being, PCH got a loan from Prestige Capital Finance, LLC, which also has first claim to any PCH assets. PCH assets include intellectual property, an extensive customer database, and brand recognition.
Also at issue with the sale of PCH: What to do with customer data. Over the years, the company has collected personal data from millions of people, so the company has requested a consumer privacy ombudsman be involved in the process. The ombudsman will ensure customer data is handled legally and ethically during the sale process.
The company and potential bidders must also contend with how to pay out current obligations to sweepstakes winners — some cash prizes are doled out over decades.
The company filed for Chapter 11 protection on April 9; the bidding deadline is set for June 13 and auction is scheduled for June 17.
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