The Industry Standard, which rose to such heights during the dot-com boom, came crashing down last week. It was the latest setback in what has been a calamitous year for business publishers.
Last Thursday, the three-year-old weekly suspended publication, effective immediately, according to a person familiar with the situation. Standard Media International, publisher of The Industry Standard, is expected to file for Chapter 11 bankruptcy protection, the source said. A search for a buyer, which began in earnest earlier this summer, has essentially been called off. The magazine’s Web site is continuing to operate with a skeletal staff.
Reed Phillips III, a managing partner with the media investment banking firm DeSilva & Phillips, said the magazine, one of the most prominent of the new economy titles, was hemorrhaging money and was unable to turn things around.
"They had the weekly frequency, which has a higher cost with it, and it was the [new economy] book mostly tied to the Internet," he said. "Nevertheless, I’m surprised because I thought they had deep pockets with [minority owner] IDG Corp."
Standard Media was projected to have $40 million in revenue this year, down from $140 million last year. Despite aggressive cost-cutting and layoffs, expenses have left the company in a $50 million hole.
With the economic slump that followed the dot-com and stock market crashes, both technology media companies and traditional b-to-b publishers have been re-evaluating their business portfolios. They’ve revamped publications, shaken up top management and made deep job cuts.
"I’ve talked to very senior-level management in tech companies and they believe the business will come back sometime next summer—and the advertising along with it," said Wilma Jordan, chairman of The Jordan Edmiston Group Inc., a New York-based media investment banking firm.
There’s no shortage of b-to-b media developments, in addition to those surrounding The Industry Standard, to watch heading into the fall:•Upside Media Inc.’s Upside remains in play, while Red Herring continues to deny rumors that it, too, is being shopped around. •A recent report released by Jordan Edmiston found publishing mergers and acquisitions were up 48% overall in the second quarter compared with the first. Although the number of b-to-b deals fell 30%, the report said the overall upward trend in M&A’s will continue in the second half of the year. •Personnel changes have been rife in recent weeks. Willis Stein & Partners last week fired publishing veteran Jim Dunning as chairman-CEO of Ziff Davis Media less than two years after it bankrolled Dunning’s $780 million purchase of the company. An executive search is under way to find a replacement. Ditto at Cahners Business Information, where Marc Teren was axed after less than 18 months as CEO. Gruner & Jahr USA quickly hired away publishing veteran Scott Crystal from Ziff Davis Media to be the new president-CEO of its Business Innovator Group. Crystal replaces David Carey, who bolted after less than six months to return to his post as publisher of The New Yorker. •The November launch of Optimize, a 70,000 circulation monthly from CMP Media Inc. aimed at C-level business technology executives will draw plenty of attention. "Companies are now starting to concentrate on things internally, so they get an added benefit [in the market] from how they improve technology on the inside," said Brian Gillooly, editor in chief of Optimize, referring to the magazine’s editorial mission. He said the initial response among advertisers has been "phenomenal in a market that’s been quite dismal."
Prior to suspending publication, The Industry Standard appeared to be angling for what rivals Business 2.0 and Fast Company have achieved—the backing of a deep-pocketed media company that could carry it through a rough economic patch. Time Inc. paid $68 million for Business 2.0, while Gruner+Jahr USA paid about $550 million for Fast Company and Inc.
Said one ex-Industry Standard employee: "I didn’t get the feeling that Standard Media [executives] respected IDG. They looked upon IDG as the ugly mother-in-law and felt they had to lose the IDG tag in order to be more mainstream."
The Industry Standard recently underwent a redesign and emphasized more consumer-oriented business coverage, such as the demise of Web grocer WebVan and the scramble among online companies to net the digital rights to NBA games.
The changes divided the media-buying community. One media buyer, who asked to remain anonymous, said the redesign landed in the marketplace with a veritable thud. "There was no reason to redesign because [it was] still trying to build brand awareness," she said.
In recent interview interviews conducted before The Industry Standard ceased publication, many of the top b-to-b advertisers said they would stick with the publication despite its financial woes. Drew Burke, North American media director for IBM Corp., said: "We’re here, Hewlett-Packard is here and Microsoft is here, which speaks to the well-established companies still supporting this brand as a marketing vehicle. The best evidence that it’s not a viable publication for marketing is when you don’t see any IBM ads."
Kerry Baker, director-corporate advertising at Unisys Corp., said The Industry Standard enabled the e-business consultancy to push its brand beyond A-list books such as The Wall Street Journal and Business Week.
All of the Big 3 tech publishers have been bruised by the dot-com crash. In the first half of the year ad pages for IDG dropped 52% while ad revenue fell 44%, according to Adscope Inc. Ziff Davis Media Inc.’s ad pages were off 39%, with ad revenues down 31%. Both ad pages and ad revenue for CMP Media were off 25%.
Alan May, exec VP- managing director of the San Francisco office of Mediacom Communications Corp, whose clients include Oracle Corp., said his tech clients "are concerned about the volatility in the marketplace but haven’t come out and said, ‘We’re not to [run ads] in such and such a book.’ " Although May said there probably aren’t enough ad dollars for more than three or four titles, a "few large technology purchases can turn things around."
While tech publishers wait for a turnaround in the economy, some traditional b-to-b publishers are looking to turn things around internally.
VNU Communications Inc.’s U.S. subsidiary, VNU USA, has made changes in its management following the departure of John Wickersham, as head of VNU’s Bill Communications. Wickersham’s exit was quickly followed by a restructuring of VNU USA.
The new structure, announced by Michael Marchesano, who recently took over as president-CEO of VNU Business Media, is made up of the Marketing/Media Retail division, including the Adweek Magazine Group; the Travel, Performance, Real Estate/Design and Food Service division; and the Entertainment division. Marchesano and Howard Lander, COO of VNU Business Media, also created a new office of the president to develop the company’s long-term strategies. John Babcock, who led VNU’s BPI unit, is aiding in the transition but will be leaving the company. The Bill and BPI units are now part of VNU USA, of which Gerry Hobbs remains chairman-CEO.
The VNU USA management changes were brought on because Wickersham is tied to print and was less than enamored by the Web, according to industry executives. "Ink is in his veins," said one insider.
Cahners Business Media, meanwhile, fired Marc Teren as CEO because he was too much of a Web guy, or not enough, depending on whom you ask.
"People were totally fed up with Teren.," said one industry observer. "It was an extreme case of [Cahners’ parent] Reed Elsevier plc dropping the ball. If you really want someone to devise an entire Web strategy, do you go to someone who just ran Washington Post Newsweek Interactive?"
The observer added that Reed is imposing unrealistic revenue and profit projections on Cahners of up to 8% and 15%, respectively. "Guys on the inside are telling me [the projections] are not going to happen, so within the next 12 to 15 months you may see a path leading to a sale of Cahners," he said.
The CEO of Reed’s b-to-b group, Gerard van de Aast, will be interim CEO of Cahners until a replacement is found. Jeff Greisch, president of Cahners’ Manufacturing and Electronics Division, is said to be in line to take over.