Ziff-Davis, Inc

views updated

ZIFF-DAVIS, INC.

Before the company was dismantled and its separate businesses sold off, Ziff-Davis Inc. reached its target audience of techies through three media: print, cable TV, and the Internet. The company's magazine publishing business produced a range of computer and technologically oriented magazines for the business and consumer market. Ziff-Davis's online service ZDNet went live on the Internet in 1995, and its cable TV channel ZDTV was launched in May 1998. The company also operated Ziff-Davis Events, which produced trade shows and expositions—the best known of which is Comdex—and had other interests.

Ziff-Davis Inc., also known as Ziff-Davis Publishing Co. and a subsidiary of Ziff Communications, went public in 1998. For many years the company was a private business owned by the Ziff family and published a wide range of magazines. In the mid-1980s it sold off 24 off its trade and consumer magazines to CBS Inc. and to Rupert Murdoch to focus on computer, technology, and interactive gaming magazines. In 1994 the company launched two new titles, Computer Life and Family PC. In October 1994 Ziff-Davis Publishing was sold to buyout specialist Forst-mann Litle and Co. for $1.4 billion. A little more than a year later, in December 1995, Japanese software giant Softbank Corp. acquired Ziff-Davis for $2.1 billion. Both of these transactions had the effect of burdening the company with a heavy load of debt.

In 1998 turned out to be a difficult year for the company financially, despite the fact that it went public in May. It shut down three of its titles—Equip, Internet Business, and Windows Pro —and laid off 350 workers, or 10 percent of its U.S. workforce. Parent company Softbank, pursuing an Internet-based strategy, started dismantling Ziff-Davis's assets and selling off pieces of the company that were not related to the Internet. ZDTV eventually went to Paul Allen's Vulcan Ventures and was renamed TechTV. The magazine publishing business was sold in a management buyout backed by venture capital firm Willis Stein & Partners for $780 million in December 1999, and resulted in the creation of Ziff Davis Media, Inc. Even the company's computer and technology portal ZDNet was sold to rival CNET in July 2000 for $1.6 billion.

MAGAZINE PUBLISHING BUSINESS BECOMES ZIFF DAVIS MEDIA, INC.

In December 1999 publishing turnaround expert James D. Dunning, Jr., and Chicago-based venture capital firm Willis Stein & Partners agreed to purchase Ziff-Davis Publishing for $780 million. The deal included more than 80 computer industry publications, including PC Magazine, PC Week, and Yahoo! Internet Life. Dunning and Willis Stein had previously been successful in turning around magazine publisher Petersen Publishing, selling it after two years for $1.5 billion in January 1999 after paying only $465 million for it. During Dunning's tenure at Petersen, the publisher launched 50 new titles.

At the time of the sale, ZDNet was still owned by Softbank, and Ziff-Davis's magazines were supplying content to the Internet portal. Under existing agreements, ZDNet owned the exclusive online rights to those magazines' content through 2003. For new magazines, through, Ziff Davis Media would control the Web sites. After ZDNet was acquired by rival CNET in October 2000, Ziff Davis Media sought to regain the rights to the online content of its magazines and negotiated an agreement to regain those rights as of March 1, 2002.

New publishing initiatives planned by Ziff Davis Media for 2000 included the relaunch of PC Computing as Ziff-Davis Smart Business for the New Economy and a new travel magazine co-branded with Microsoft's online travel site Expedia.com. Music technology was another area in which the company hoped to publish. Later in 2000 the company launched The Net Economy, a monthly magazine targeted at business and technology managers at companies that provide network-based services. It also changed the name of Sm@rt Reseller to Sm@rt Partner to better connect with its target audience of information technology (IT) supply chain vendors, systems integrators, and consultants.

In mid-2000 Ziff Davis Media sold its European magazines to Netherlands-based media conglomerate VNU. The ten titles included British, German, and French editions of such titles as IT Week, PC Magazine, PC Direct, and PC Gaming World, among others.

Ziff Davis Media continued with plans for new titles and new Web sites in 2001 in the face of declining advertising revenue. For its fiscal year ending March 31, 2001, the company reported a loss of $73.4 million on revenue of $440.5 million. In May it announced the launch of CIO Insight and then successfully defended the title against a copyright infringement suit from CIO Magazine publisher IDG (International Data Group). CIO Insight was aimed at senior-level technology executives and hoped to attract major business-to-business advertisers such as IBM Corp., Sun Microsystems Inc., and Oracle Corp. Later in the year the company announced the fall debut of Baseline, a new magazine whose content would cover Web-based solutions and focus on the bottom line in information technology. It began with a controlled circulation of 150,000 IT industry professionals.

In the online arena Ziff Davis Media had a three-year plan to create a variety of online sites that were more than replications of its magazines. It launched ZCast.tv, a streaming video news and analysis Web site, in February 2001. Content was taken from Ziff-Davis titles, including eWeek (formerly PC Week ) and PC Magazine. However, ZCast did not catch on and was closed at the end of July. In June the company launched ExtremeTech, a Web site that targeted IT professionals and computer enthusiasts with content based on PC Magazine.

In May 2001 Ziff Davis Media announced it would lay off 50 employees, or about 5 percent of its workforce. In July the company also folded its Family PC magazine. The decline in tech advertising was even more pronounced in 2001 than in 2000. For the first half of 2001 Ziff-Davis's ad pages were down 39 percent compared to the same period in 2000, and its ad revenue for the period was down 31 percent. Even though Ziff Davis Media received an additional $70 million from its venture capital backers, its SEC filings indicated that the company would have a difficult year financially. In August Dunning was fired as chairman, president, and CEO. Ziff-Davis subsequently folded its Internet unit as an independent operation and planned to fold its Web properties back into the company's print operations. The relaunch of InteractiveWeek.com went ahead as planned in September. In October Robert Callahan, former president of ABC's Broadcast Group, was named chairman, president, and CEO of Ziff Davis Media.

As of late 2001, Ziff Davis Media's 12 magazines included four titles devoted to interactive gaming (Computer Gaming World, Official U.S. PlayStation Magazine, GameNow, and Electronic Gaming Monthly ); along with business-to-business publications Ziff Davis Smart Business, eWeek, Interactive Week, Smart Partner, The Net Economy, and CIO Insight. Its leading consumer publications Yahoo! Internet Life and PC Magazine each had a paid circulation of more than 1 million.

COMPUTER AND TECHNICAL PORTAL, ZDNET

Before it was acquired by CNET, ZDNet was Ziff-Davis's online service and Internet portal. It was launched in 1995 and hosted electronic editions of Ziff-Davis's magazines. It began accepting advertising in April 1995. For 1996 ZDNet had revenue of $10.2 million. With its high-quality technical news and information, ZDNet was often ranked as the top news, information, and entertainment site on the Internet. In 1997 technology media company CMP Media launched a competing site, TechWeb. For the next two years, ZDNet's revenue increased, from $32.2 million in 1997 to $56.1 million in 1998, but it failed to turn a profit. Parent company Ziff-Davis decided to spin off ZDNet as a separate company in 1999 and offer it as a tracking stock.

When ZDNet was spun off from Ziff-Davis at the end of March 1999, it was losing money and contributing about 2 percent of its parent company's revenue. ZDNet's initial public offering raised $190 million, which Ziff-Davis planned to use to pay down its debt. Following the IPO, Ziff-Davis retained an 83 percent ownership interest in ZDNet.

Later in 1999 ZDNet debuted its redesigned Web site, which made it easier for users to navigate the 60 Web sites in its network. The portal's more than 30 channel headings were consolidated under 10 categories. ZDNet, which featured software downloads as well as news and information, had nearly 500 advertisers. When competing portal CNET launched a $100 million advertising campaign, ZDNet responded with its own $25 million branding campaign that launched on December 30, 1999.

With parent company Ziff-Davis shedding its other business units in 1999, it was decided to eliminate ZDNet's tracking stock in early 2000 and revive it as ordinary common stock. Through a technical merger with a newly formed subsidiary, Ziff-Davis would emerge as the surviving company and adopt the ZDNet name. All of this appeared to be a preliminary move to the mid-2000 sale of ZDNet to its much larger rival, CNET, for $1.6 billion. Following CNET's acquisition of ZDNet, CNET continued to operate ZDNet as a separate brand. According to CNET, CNET and ZDNet had 16.6 million monthly unique users and reached 22 percent of all Internet users. Before the acquisition, Media Metrix figures for January 2000 showed that ZDNet had more than 10 million unique visitors while its ad campaign was running, compared to 9.5 million for CNET. Internationally, ZDNet had syndicated operations in 23 countries and was accessible in 15 languages. Toward the end of 2000 it established an office in Miami, Florida, as a base for expansion into Latin America.

COMPUTER CABLE CHANNEL, ZDTV

Ziff-Davis launched ZDTV, a cable channel devoted to computers and technology, on May 11, 1998, with six hours of programming that were repeated to fill a 24-hour broadcast schedule. As a result of Ziff-Davis's own IPO in April 1998, ZDTV was in fact owned by Ziff-Davis's parent company, Softbank. During its first year of operation ZDTV extended its reach by signing carriage agreements with major cable and satellite TV operators, including TCI and DirecTV.

In November 1998 Microsoft co-founder Paul Allen, through his company Vulcan Ventures, acquired a controlling 33 percent interest in ZDTV for $54 million. That same year Allen acquired cable system operators Charter Communications for $4.5 billion and Marcus Communications for nearly $3 billion. A year later Vulcan Ventures acquired Ziff-Davis's remaining 64 percent interest in ZDTV for $204.8 million, with ZDTV executives owning the remaining small percentage of the cable channel.

ZDTV prospered under Allen's ownership. It had about 8.5 million subscribers as of November 1998. ZDTV launched a national branding campaign in mid-1999. At the time it was producing about 30 hours of original programming per week and was on the air 24 hours a day. By November 1999 ZDTV was available in more than 14 million homes. In August 2000 ZDTV was renamed TechTV and added new programs. Through new carriage agreements with AT&T, Time Warner, and Charter Communications, ZDTV reached more than 20 million cable TV subscribers.