How Pat McGovern built a billion-dollar
publishing company while screwing up.
In 2019, Glenn Rifkin wrote what amounts to an authorized biography of my former boss, Pat McGovern, founder of International Data Group. Rifkin explains how Pat got into the computer market; how he came to understand that computers would be changing the world; and his determination to serve the new industry. The book focuses on ten “leadership lessons” that Pat tried to live by, and pass on.
But Future Forward almost never mentions any of Pat’s shortcomings, bad decisions or failures. To me, these things – and how he succeeded in spite of them – are the real story, with the most important lessons.
This is my own personal recollection of some of those shortcomings, bad decisions and failures – with a couple of idiosyncrasies thrown in – based on 20-plus years of working for, and with, “PJM” as we often called him. I know my memory is imperfect and others will remember it differently. I have no argument with them. This is simply the way I remember it.
I had a love/hate relationship with Pat. There were many parts of him I truly admired, parts I liked, and parts that drove me nuts. He was a typical entrepreneur in many ways – driven, stubborn, determined – but he was not typical in other ways. He had some unusual strengths.
Perhaps the most important one was that he was innately gender and color blind, as well as being almost completely free of most prejudices. In the very beginning he had two top managers (Jim Peacock and Walter Boyd), who were openly gay, almost unheard of at that time (early 70s). There were many other gay people on staff as well. Women were paid the same as men, and Pat was OK with women being promoted into management and sales positions. IDG was the second company in Massachusetts to offer health insurance to same-sex couples.
IDG explored the possibility of hiring people of color, but there were very few in the lily-white world of publishing, and those efforts were not successful.
IDG’s acceptance of women and gays attracted highly competent people who weren’t welcome, or weren’t comfortable, at companies where the “good old boy” network ruled. IDG was a meritocracy, full of competent, well rewarded people.
PJM was also willing to share the wealth with his employees, and created an Employee Stock Ownership Plan (ESOP) which gave everyone a piece of the pie. This was a great retention device. Hard to leave for a competitor who does not have such an incentive. The ESOP allowed me to retire at 55 and live a comfortable life. I will always be grateful for that.
The secret to IDG’s success, in my opinion, despite its mistakes and shortcomings is a combination of resilience, persistence and competence. IDG’s people were unusually competent compared to other places I had worked (including large companies, small companies, private companies, public companies, and government agencies/military.) Staffed with, and led by, competent people; with a founder willing to stick with a product that isn’t doing as well as it should; and ready to change quickly when necessary; IDG was able to overcome its bad decisions, shortcomings and failures.
Pat was an idiosyncratic entrepreneur.
Another thing about Pat that impressed me was that he was much less full of himself than most of the entrepreneurs I knew anything about. He made self-deprecatory jokes and laughed when others made fun of him.
For example, at one company function I wrote a slide show fairy tale about the Prince, the Frog and the Toad which made fun of the fact that both Pat and his COO Walter Boyd, wore hair pieces. I got into a huge frog costume, and presented the fairy tale to an audience of maybe 400 employees and guests, while Pat and Walter roared. I never would have been allowed to do that at any other company where I worked.
Often when I was in a group of business people, I found that the ambitious people would talk only to people on the same level—or higher. Not Pat. He’d talk to anyone who wanted to talk to him. And he always treated you like an equal. He deserves great credit for these things.
Pat was an inveterate traveler. He wanted to visit every member country in the UN before he retired. But he always flew coach. IDG would not pay for Business Class or First Class for anyone, and Pat wanted to abide by the same rules he set up for his employees. On even the longest flights, this over 6-foot, large man would cram himself into the middle seat in coach, take out a stack of magazines and read for hours.
One time we were in court in Manhattan. When the case ended (we won), Pat and I jumped into a cab and headed for LaGuardia. I had a return ticket on a shuttle flight to Boston that left on the half hour, 45 minutes later. Pat thought we could make a plane that left on the hour, 15-minutes later.
I thought he was nuts, but he told the driver where to go, and when we got there he was out of the cab like a jack rabbit and running into the terminal with me following. He knew exactly where the gate was, and we arrived as they were closing the doors.
“Wait!” he shouted, and they held the door. He went to the desk; reached into his pocket and pulled out a wad of tickets. He flipped through them, mumbling “New York to Boston” until he came across a ticket. It was $49. He handed it to the attendant.
I pulled out my $149 ticket, handed it to the attendant, and we went down the jetway.
“Pat, how does this work?” I said. “You just paid $149 to fly me to Boston, yet your trip is only $49.”
He replied that whenever he went anywhere, he would add a city to the trip, usually at a very low rate. He would save these tickets for a situation like this.
“If you arrive at the last minute, they don’t have time to ask questions, so they take whatever you give them.”
Pat had a powerful vision of the future.
Perhaps Pat’s most impressive strength was his vision. He agreed with the futurist who said,
“The history of the United States
can be written in three words:
Farmer, Laborer, Clerk. “
When our country was formed, most people worked in agriculture. Not long after the Constitution was signed, we moved into the industrial age, where manufacturing was dominant. And in 1951, when the first commercial computer, the Univac 1, was delivered to the US Census bureau, we entered the Information Age.
Looking back, you might think “DUH. Who didn’t know that computers would be taking over the planet?” But, in fact, as computers got smaller and faster in the 60s and 70s, there were very few experts and pundits who didn’t dismiss the smaller machines. They were often seen as toys.
Digital Equipment Corporation (DEC) produced the first computer selling for less than $100,000, and they were afraid to call it a computer lest customers accuse them of puffery. So, they called it a Programmed Data Processor (PDP) and kept making it cheaper. These were the first minicomputers and they made Digital second only to IBM, for a while.
Some years later, computers that cost less than $10,000 were developed. They were “microcomputers” – and at that point even Digital founder and famous entrepreneur, Ken Olson got off the train. “I doubt we’ll ever get to the point where every desk will have a computer,” I recall him saying.
Pat was different. I remember talking to him, beer in hand, at a reception, about BYTE magazine, the first magazine for “microcomputers.” It was for sale, but neither of us thought it was worth the $4 million they were asking – for very different reasons.
It is very expensive to get 150,000 people to become your regular customers, and I thought BYTE’s 150,000 paid circulation was worth the $4 million asking price. But, like most people involved with computers in those days, I thought microcomputers were basically a toy, like Ham Radios. (The company that was selling BYTE also published CQ magazine for amateur radio hobbyists.) I agreed with the pundit who said that microcomputer owners were happier when their computers weren’t working than when they were.
Pat was one of the few who knew better. His research division, International Data Corporation, would later calculate that:
”If the auto industry had done
what the computer industry has done
in the last 30 years, a Rolls Royce
would cost $2.50 and get 2 million miles a gallon.”
If that had happened in the auto industry, we might not have global warming.
It did happen in the computer industry, and the results have been dramatic. The next step is (AI) artificial intelligence. I swear Pat knew all that in 1968, and when BYTE magazine became available in 1979, he wanted it.
But, while Pat had a good idea where computers were going, he never really grasped the intricacies of paid circulation. He said, “They want $4 million and they’re barely breaking even.” He had little appreciation of the cost of acquiring 150,000 paying customers.
BYTE went to another publishing company, McGraw-Hill, publisher of Business Week, for more than the asking price. And it turned profitable within a couple of months. A year later, it was “obscenely profitable” to quote the president of the McGraw-Hill division that bought it. Not buying BYTE probably cost IDG $50 million.
We can put that into the mistake column.
Launch vs buy.
Over the years, Pat was offered well over a hundred opportunities to buy, or invest in, publications. He almost always turned them down, often for good reasons, sometimes for bad. Perhaps the biggest such publication was Inc. Magazine.
In the mid 70s, Bernie Goldhirsh, a fellow MIT Alumnus, and founder of Sail Magazine, invited Pat to lunch, where he asked if IDG would partner with him in a new magazine he was planning to create to serve small businesses.
Pat was interested, and discussed the idea with several of us. He was concerned that we had no experience with the type of editorial that would be interesting to small businesses. At that time, small businesses did not use computers.
I agreed with Pat, and added my concern, which was that building circulation would require more investment than we were likely to make if we wanted to do paid circulation.
Pat told Bernie no thanks, wishing him well. And well he did. Bernie launched Inc. in 1979, using, as I recall, a blend of paid and controlled (free) circulation. He created an excellent publication and in 2000 sold out for a reported $200 million.
It’s hard not to see that as a mistake. But one thing that I wondered about at the time, and did not mention to Pat, was the likelihood that two driven entrepreneurs could have been able to cooperate through good times and bad. I doubted they could. We might have ended up in court.
Vision is good, but you need a cash cow.
Much of what any entrepreneur does will fail. You have only so many bites of the apple. You need to create a product that throws off enough cash to cover your losses – a “cash cow” – as soon as possible.
An Wang, founder of Wang Computing, said that three of his first five products failed. But the second one, introduced in 1965, was a hit. It was the first desk calculator that used logarithms, so it was capable of calculating annuities and mortgage tables.
Seven years and a few failures later, Wang Computing invented word processing as we know it today. This was Wang’s home run. At its peak, Wang was a $3 billion company.
However, even that cash cow was not enough to prevent Wang from going under when desktop computers took over the word processing function.
In 1967, Pat’s first company, International Data Corporation, (IDC) was covering its costs with its data base and market research, but it was no cash cow. To give IDC a boost, he said, Pat wanted to create a newspaper for computer users. This would help IDG maintain and build its data base of computer sites. And Computerworld was launched.
IDC “gifted” 15,000 subscriptions to the data processing professionals on its data base for the new tabloid newspaper, creating a paid circulation publication in a market where the existing publications offered free subscriptions to qualified buyers. This was called “controlled circulation.”
The new publication was a last-minute decision and not well planned. They started with the idea that it would be the only weekly newspaper in a field of monthly magazines. The design and printing of the first issue was so pressured that they used a “zero” instead of one of the “Os” in the banner. That did not get fixed until a reader wrote in to complain several years later.
For years thereafter all of IDC’s questionnaires went out with the Computerworld name. But those of us who worked at Computerworld never saw the survey results. This was an early consequence of Pat’s obsession with a decentralized structure. Pat made IDC and Computerworld separate companies. They had no incentive to cooperate, and mostly they didn’t.
Computerworld struggles, then succeeds, wildly.
Pat turned out to be a dedicated and competent publisher. He hired a controversial editor (Alan Taylor), with whom he would later clash, and let him run Computerworld’s editorial.
Most “trade journals,” as specialized business publications are called, were written by and for people working in an industry. The same companies that advertise are also the readers. There were about 5,000 of them in the United States when Computerworld was launched in 1967. It was different. Its readers were users and buyers of software and hardware from the computer industry. They weren’t in the industry. They were its customers. They needed good, relatively objective information.
Taylor gave it to them, and he was not afraid of controversy. Advertisers were often not happy with the editorial content and complaints were common, along with threats to stop advertising. To Pat’s great credit, he didn’t cave in to the pressure. I don’t remember any time when Pat backed off. No editor ever stormed into my office to tell me he had been directed to kill or rewrite a story.
Three years after its start. Computerworld had a very good year. The sales force and managers celebrated with a trip to Acapulco, ignoring a growing recession. While they were away a new Treasurer, Bill Murphy, came aboard and was shocked to see revenues dropping like a rock. He thought this job change was the biggest mistake of his life. He called Pat in Mexico and told him to come home immediately. He couldn’t afford the hotel bill. Pat ignored him.
The company nearly went out of business. A last-minute loan from First National Bank, and a 20% reduction in payroll saved their butt. There were layoffs, and when that wasn’t enough, Pat let the editorial staff vote on whether to cut payroll an additional 20% by laying off staff or reducing everyone’s pay and hours by 20%. They chose to share the pain and appreciated being given that leeway.
It was four years before Computerworld got back to where it had been in 1970. Then it took off. According to a newsletter called the Gallagher Report, Computerworld became the biggest trade publication in America, measured by ad revenue, in the late 70s.
A huge chunk of Computerworld’s gross revenue would turn into profit. Once revenue exceeds the considerable costs of editorial, printing and mailing, additional ad pages are very profitable. About 80% of additional ad revenue drops to the bottom line. Also, as the only weekly newspaper, Computerworld became a valuable recruitment tool in a growing industry. By the end of the decade, Computerworld was generating roughly $75 million in gross profit (what they call today, EBITDA), adjusted for inflation…Pat had his cash cow.
Entrepreneurs are seldom good managers, but they need good managers to succeed.
Entrepreneurs usually don’t respect managing skill, and managers know entrepreneurs usually can’t manage. But to create a successful company, you need both.
Pat once told me that if he had known in advance how much trouble any of his products would be after he launched them, he would never have started any of them. I thought to myself, “And if you didn’t have Walter to take over, they would all have failed.”
Walter Boyd, a jockey-sized gay man with a penchant for lyric opera was Pat’s manager of IDG’s publishing division. He started when there was just one publication, Computerworld, and now there are nearly 100. That would not have happened without him. (For the record, I am a charter member of his fan club.)
Pat and Walter were a bit like a married couple. They would fight tooth and nail, but once it was over, they presented a united front.
On one occasion (I was told by someone who should know), Pat, Walter and IDG’s Treasurer, Bill Murphy, went to New Hampshire. IDG had two publishing divisions in Peterborough, both among Pat’s infrequent purchases. After the meetings, they went to the home of one of the division managers, Debra Weatherbee, to discuss the request of the other division manager, Wayne Green, for more investment in his division.
Pat wanted to make the investment. Walter did not. Murphy was non-committal.
Debra went to the kitchen to get coffee; and when she opened the door to return, she saw Walter in a threatening posture yelling at Pat (who was maybe a foot taller and 100 pounds heavier) with Murphy trying to separate them. She turned around and went back into the kitchen.
Apparently, Walter and Pat often duked it out, verbally, in Walter’s office after hours. While they fought hard, they stuck together. At some level, Pat knew how much he needed Walter. It was his single best decision, in my opinion.
The foreign strategy that Pat drove, and Walter executed, was to go into a country and start a computer publication (magazine or tabloid) in the local language. That would often be the first computer publication in the country. It would almost certainly be the only foreign-owned publication in the local language. (More than 70 countries now have IDG publications.)
Pat had been working on foreign publications since long before Computerworld. In the early 60s, he got on a plane to Beijing and when it landed he asked to be taken to Fourth Ministry Machine Building, the government department in charge of Information Technology. He had no appointment, no correspondence, and no local reference. He never got out of the airport. He was lucky they didn’t detain him.
Years later, IDG became the first foreign company to publish a newspaper in China, although IDG was allowed to own only 49%.
IDG learned quickly that things are always different in foreign countries. Different from the U.S. and different from each other. In China, for example you don’t get to control your subscriber list. Only the Post Office knows your subscribers’ names and addresses.
In Russia, years later, when we launched PC World, the Russian editors didn’t like the ads in the first issue, so they rewrote them. We had to explain how capitalism works and reprint the issue.
Negotiations are another problem. They always reflect the local culture. My favorite story about that comes from one of Computerworld’s Editors, Drake Lundell. He had studied Chinese in college so Pat took him along to China for contract negotiations.
Drake said the meetings were very formal. Every time either side would speak, they would start with flowery language.
“We are so pleased to be creating this new publication. To have our firms join in joint production for the future……etc.” all of which had to be translated, before they got to the point.
After one such long lead-in, Pat turned to Drake and said,
“What do you think they want?”
“I think they want more money.”
“I think you’re right.”
Pat then turned to the Chinese negotiators and after an especially long introduction (“We are so honored to be chosen by your group to partner in providing crucial information to the people who create and operate your IT systems, and pleased by the auspicious way this partnership was born, etc.), said “No.”
China is an exception, but most of these deals were small. I remember looking at a proposal for Data News, a computer publication that would serve Brazilian IT professionals. Brazil is not a small country and the numbers on page after page were big. Finally, I got to the bottom line. I took the figure in Cruzeiros and applied the exchange rate. The total initial investment was around $50,000.
“Why am I even reading this?” I thought. “Write the guy a check.”
Our second foreign publication was in Germany (Japan was first). Computerwoche. It was quickly a huge success, and threw off enough money to cover the others for years. It was our international cash cow.
We used to say that Pat would go into a country, set up a publication, then leave it unsupervised until Walter came in and cleaned up the inevitable mess.
Pat and Walter had completely different management styles. Pat was obtuse, often absent, and hated to give orders.
Pat used to say that he liked to hire competent people and let them have their head. What he actually did was argue with you until you decided he was right.
If you challenged him on an issue, he wouldn’t override you. He tried to sell you on his idea. He wanted you to come to the same conclusion he had. I used to think “Pat, you own the joint. Just tell me what you want. I’ll get it done.” But no, Pat would keep talking until you agreed with him, which eventually you would do, so you could go home that night.
This stubborn attitude took us into court more than once. In one case, we had hired a media buyer to buy time in ten local markets so we could place a TV program on computers that we had started to produce.
The contract we signed was complicated. Three different graphs defined the buyer’s duties and what they would get paid. The buyer thought we owed him for all three. I thought we owed him for paragraphs one and three. Pat thought we owed them only for paragraph two.
The media buyer sued. Our lawyer tried to talk Pat into settling, saying the legal fees for a court case would exceed any judgment. Pat said no, go to court. We did and the judge set a number that Pat didn’t like. He wouldn’t pay. (I don’t remember the numbers but the total under dispute was around $30,000. Chump change, really.)
A couple of months later a sheriff’s deputy came to the office and presented a court order to our long-suffering controller, Ted Bloom, who had started in the IDC mail room when he was in high school and worked his way up. Ted was one of the many quiet, competent people who made IDG what it is. As I told his wife when he died not long ago, Ted was always part of the solution, never part of the problem.
Ted took the court order into Pat’s office and asked for Pat’s OK to pay the invoice. Pat started to explain to Ted why we really didn’t owe the money. Ted finally interrupted him.
“Pat, I am sure you’re right, and this is not fair; but the problem is that if I don’t pay this guy with the badge, he wants one of us to go with him, and I’m busy tonight,” Not waiting for Pat to say anything, he went back to his own office and wrote a check.
Working for a “straight shooter.”
Walter was very different. He was clear and direct. No bullshit. He was clear about where you had leeway and where you did not. We used to say that some things were “JFDI” (Just Fucking Do It.”) Without using those words, Walter would let you know what was JFDI and what was subject to your discretion.
Also, Walter listened. He looked for facts. He was willing to adjust when things weren’t working.
One day we had a meeting scheduled to discuss starting a new publication in the United States, Computer Business News. All the top managers at Computerworld were there, but Walter was late. Someone heard that he might have been in an auto accident.
That started a discussion. “Who would like to take over if Walter were gone?”
The answer was no one. We could see how stressful it was for Walter to deal with Pat, and none of us wanted to be in that position. We were all grateful that Walter would do the job. And he did it so well.
We also worried about Pat. He loved to take chances. I remember a front-page picture in the Boston Globe showing a hole made by an artillery shell in the fifth-floor corner suite in the hotel in Lebanon where Pat had a reservation for later in the week. Normally that wouldn’t stop him, but this time it did.
One day I was talking to someone in my office and they asked where Pat was. I said, “Who knows. He’s always traveling. Might be in Karachi!”
The next day I got a postcard from Pat from Karachi. His plane to China had stopped there for 24 hours with engine trouble.
It may sound as if I am damning Walter with faint praise, but I’m not. He was an incredibly good manager. Every successful company needs straight shooters, and having someone to offset Pat’s energy-consuming machinations was crucial to IDG’s success.
Part of that straight shooting included knowing where you stood. There were inevitably people whom Walter did not like, and they usually knew it. But if they did their job competently, they were safe. And they knew that, too.
Pat was the opposite.
Pat’s dark side.
I called it Pat’s paranoia. He would suddenly come to the conclusion that he was being had, or let down, by someone. And he would respond with an irrational attack. I saw it first-hand in my attempts to launch a book business. Pat had always wanted to be in the book business in one way or another. And I was recruited to the task.
Our first try came in 1972, when we had a traveling computer trade show, the Computer Caravan, that visited 10 cities in 11 weeks. Pat wanted a booth to sell computer books. Making that happen without losing a lot of money turned out to be very difficult. Computer books were in the same class as text books and the markup was about half of what you would get selling regular books.
When I started ordering books, I found that book publishers were not interested in selling books to me. They didn’t know the company. The idea of selling books at a trade show was foreign to them. And they wanted us to provide complete credit references. McGraw-Hill was the worst and I never did get a book out of them.
But I found someone in the business who had contacts, and they got the publishers to send me enough titles to make a decent presentation. Pat assigned a woman from Germany to run the bookstore in a booth. She was smart and efficient, but she knew nothing about computers. We sold a fair number of books, but it was clear that to make any real money we would have to become publishers.
In order to facilitate that I contracted with the man who had helped me buy books for the Caravan. He had been selling books successfully in Advertising Age for years, and was certain he and his partner could do the same for us.
They set up a “bookstore” in three of our US publications. A full-page ad (e.g. “Introducing Computerworld Books”) would list maybe 30 titles. Orders would go to the consultants who would fulfill them and collect. They would take their percentage and send us a check.
The plan was that we would generate enough money by selling other’s books that we could then publish our own books; and we had started to talk to successful authors about writing something for us. They were glad to talk to us because they would love to be featured in an ad in Computerworld every week.
Then Pat called. Without getting into the gory details, Pat had decided that our consultants were using free advertising in IDG publications to build their own businesses. He was quite upset.
I told Pat that the consultants’ names were nowhere in any ads, only the publication’s name appeared, so I didn’t see how the ads helped them directly. And, I told him that they could easily be fired.
Get rid of them, Pat ordered, and I shut the book business down. This was Pat’s dark side at work.
This paranoia extended into personnel matters. Pat would sour on people, usually top managers, often for no discernible reason. Suddenly you were out.
I had seen this dark side early in my career at IDG. My boss, the ad sales manager, was a nice guy. Our advertisers liked him. His sales people liked him. But Pat had soured on him, and Walter had me run a blind ad to find a replacement. In a few weeks he was gone.
That was an unpleasant experience.
And it happened many times. I was there 17 years and I know of at least half a dozen cases in my division alone.
The one I am most familiar with involved the publisher of one of our knock-off monthly publications. We’ll call the publisher “Jim.” Pat wanted to take the publication weekly, and Jim disagreed, thinking the costs would not be supported by advertising. Pat then decided that Jim should be let go, and at monthly review meetings he kept telling Jim’s boss (and my boss) Lee Vidmer, to replace him.
Lee defended Jim, saying he had met his numbers. That went on for several months. Pat wouldn’t order Lee to do it, but he expected that she would. Finally, Walter called Lee into his office and told her that Pat would replace her if she didn’t replace Jim.
So, she let Jim go, and the first thing he did was to call Pat, who acted surprised and invited Jim to breakfast where he told him that it had been Lee’s decision and he didn’t like to override his managers.
Later that day, I was in Jim’s office and he spoke angrily about Lee. I was furious. I actually stood up on his desk, looked down at him, and said,
“Lee risked her job to save yours, and if you leave here blaming her, I will be furious! She doesn’t deserve that.”
He said he believed me, but I don’t think he did.
Pat’s devotion to complete decentralization was expensive.
Pat was totally dedicated to having a decentralized organization. Every division had its own board of directors and every publication competed with other publications in the IDG stable competed for readers or advertisers.
I was of two minds on this structure. On the one hand, I could see some healthy consequences of pushing the decisions down to the people directly involved. In centralized companies like Cahners Publishing, the president’s office would often dictate important decisions like rate increases, usually using the same percentage for all publications. This made the publishers nuts. Not all markets are the same. One size does not fit all.
On the other hand, small decentralized divisions had no clout in the marketplace, and often competed with each other in damaging ways.
I was directly involved in this way of doing business. My division, with less than 50 people, offered circulation and advertising promotional services as well as market research to IDG publications in the U.S. None of them was required to use our services. I had to pitch them to get their business.
My pitch cited two advantages. One was that we knew the business better than any outside ad agency or market research firm. The other was that we were cheaper. (We had a sign on our wall, “We do work good, fast and cheap. Pick any two.”)
I did not have to make a profit. I only had to cover my costs, and IDG didn’t fully load my cost structure.
This was an unusual situation for publishing promotion departments. And it made us work harder and smarter. If I couldn’t get enough business from IDG divisions, I had to lay people off. And my income would go down.
Fortunately, enough divisions elected to use our services that we broke even every year.
IDG’s CFO, Bill Murphy, led the charge to greater centralization. And he had some successes, but not many.
The major problems of decentralization are lack of clout in the marketplace and internal competition instead of cooperation. There are only so many printers capable of cranking out hundreds of thousands of magazines or newspapers on a tight schedule. (They are mostly in the mid-west thanks to postal regulations.) When a multi-title publisher contracts for printing with one of these companies, they pay less (often a lot less), and they go to the top of the list.
In return for the lowest price possible, the multi-title publisher sets the printer up for the year, covering all their costs. Then a single publication comes in the door. Thoughts of profit enter the printer’s head. And the one-off publisher pays a lot more. You wonder what the printers thought when one IDG publication would ask for a bid in the morning and another would ask for the same thing in the afternoon, while neither knew the other one called.
It’s the same with paper. Magazines and newspaper use massive amounts of paper and ink (one especially large issue of Computerworld used two tons of ink). Single publications usually let the printer buy it since they have no leverage with paper suppliers, and the printer marks it up.
IDG didn’t set up a centralized paper buying service for many years but when they did, they saved millions. They never did centralize print buying, so far as I know, and now both functions are irrelevant.
Both IDG and Cahners published a newspaper for users of Digital Equipment Corporation (DEC) computers. Cahners had more than 30 publications to print and mail. IDG had maybe 10 in the U.S., but each one did its own negotiating. The Cahners publication spent about 20% less on printing and production.
An egregious example of damaging competition occurred in US ad sales for foreign countries. The European division of an international corporation with headquarters in the US would buy space in one of our European publications and the foreign publication sales office in the US would go to corporate headquarters in the US and tell them that if they moved the sale to the US headquarters and took it out of the hands of the European office, regulations allowed them to avoid the Value Added Tax (VAT), saving as much as 20%.
If the US HQ went along with this, and some did, the European offices of both the client and the publication would be furious.
This was not good for IDG.
Snatching defeat from the jaws of victory: “For Dummies.”
IDG had roughly eight successful publications in the United States, including MacWorld and PC World, which had a million paid subscribers. But when people ask where I worked, their eyes go glassy until I mention that IDG created the “For Dummies” series of books. Then their eyes light up.
When Pat closed down my in-publication bookstore, book publishing was off the table for a while. I was fired (Pat said he had nothing to do with it, but it looked a lot like what happened to “Jim”) before I could come up with something else. Then, in 1991, the publisher of one of our mostly unsuccessful US publications, InfoWorld, brought in a man named John Kilcullen. He had book publishing experience and sold Pat on trying again.
The idea for the “For Dummies” books was developed, I am told, at a brainstorming session and presented to the IDG Board, where it was greeted with skepticism. “Nobody will buy a book written for dummies,” was one comment.
Rebuffed by the IDG board, Kilcullen’s people dummied up some covers and brought them to book buyers at Borders and Barnes and Noble. “Would you buy a book with a title like that?” they were asked. The answer was a resounding “yes.”
Given this research, Pat decided to practice what he preached and let Kilcullen make the decision. ”Books For Dummies” was born. DOS for Dummies was first off the press. It was a big hit. It quickly sold more than 100,000 copies. Its successor was Windows for Dummies, the best-selling “For Dummies” book ever. 15 million copies.
“…For Dummies” was a winner, and thousands of titles have been published here and abroad. There are 340 titles in English listed at “Goodreads.” (That doesn’t include titles in foreign languages. The best-selling foreign language book is L’Histoire de France Pour Les Nuls at 400,000 copies.)
This should have become IDG’s biggest cash cow, and I bet that’s what Pat was thinking. Instead it became an example of the downside of decentralization. Kilcullen originally reported to Jonathan Sacks, publisher of Infoworld, (which took five years to break even and was a net loser over its lifetime.) Jonathan might have been a moderating influence on Kilcullen, but when things started to go well, Kilcullen was given his head.
First, he decided to create his own warehousing and distribution system, functions most smaller publishers farm out to save money. This cut the margin on IDG Books.
Then he insisted on going public, and after a successful IPO (I bought 700 shares of the new issue), he went out and paid too much for Cliff Notes study guides, Betty Crocker Cookbooks and Frommer’s travel guides, borrowing heavily to do so. He also launched HungryMinds.com, the online learning site.
These acquisitions overextended IDG books, and burdened it with debt. It began to lose money. Then came the NASDAQ crash of the late 90s.
Instead of growing rapidly, sales dropped 25% in the third quarter of 2001. The “Hungry Minds” (they changed the name when they went public) stock price dropped in half.
Now, instead of being part of the solution. Hungry Minds became part of the problem.
Meanwhile, nearby, IDG’s publication The Standard, was heading into bankruptcy court. As Associated Press characterized it, “Bulging with snazzy ads proclaiming how the technology industry would change the world, The Standard became a benchmark for the dot-com industry, as it covered the rise of unprofitable Internet companies that became Wall Street darlings.”
In 2000 The Standard grossed $140 million, expanded rapidly, hired hundreds, and signed a long-term lease for enough space to accommodate more than 600 workers. In 2001, the dot.com bubble burst and the company saw an astonishing 70% drop in revenue, to $40 million.
It was not known at the time, but when the overextensions at Hungry Minds and The Standard met the massive reductions in revenue that affected all IDG publications, the entire company almost went under. “It was a close call,” I was told.
To recover, IDG was forced to sell Hungry Minds to John Wiley and Sons. Wiley assumed more than $90 million in debt (for most of its existence, IDG had little or no debt), and gave IDG $90 million in cash. I lost about 40% of my investment.
In the last financial report I received from IDG Books it said that Kilcullen, the president, was being paid $800,000 a year and the CFO was getting $400,000. Both had extensive stock options, which ended up being worthless.
I wanted to call Pat up and say “Pat, I would have wrecked the company for $250,000.”
Public vs Private.
The first computers for business (The Univac I) went to the Census Bureau in the early ‘50s. They cost millions of dollars, used tubes, not transistors; were water cooled, and had only 24k of memory. The cheap watch on my wrist has more than that.
After the Census Bureau came the insurance companies and banks. My first job out of college in 1964 was as a management trainee at John Hancock Life Insurance, and my first assignment was in programming, where I learned to program the Univac II and the IBM 1401.
There were three large publishers of trade journals at the time, Cahners, McGraw Hill and Penton. Cahners and McGraw-Hill covered many different markets. And they tried to keep up with new markets as they emerged. Penton was not interested, keeping its focus on heavy duty manufacturing, like steel.
Cahners and McGraw-Hill made an effort to be players in the computer market, which was so big it would eventually support 40 or 50 publications. They tried to break into it by buying publications that entrepreneurs had launched (Byte, Data Communications), but the three key players in the market, IDG, Ziff and CMP, refused to sell them anything significant.
When I tried to help Cahners get into the computer market after being fired by IDG, I understood the problem. Cahners and McGraw-Hill were public companies. IDG, Ziff and CMP were privately held.
As public companies, Cahners and McGraw-Hill had to worry about quarter-to-quarter earnings reports. This made it very difficult to launch magazines, and if they did launch, they could not give the new publication very long to be profitable. IDG, Ziff and CMP had no such constraints.
The Cahners compensation system made buying far more attractive to top managers. If the publishing division bought a magazine for, say, $25 million, his (and it was always a “he”) compensation plan would not be charged for the capital. To the top managers it looked like a gift. More profit coming in from day one. No charge for capital.
However, if they launched, every nickel came out of their budget. While I was at Cahners briefly in 1989, we tried to launch a biotech publication. We got the OK, found an excellent editor, hired staff, got ready to print the first issue, and at the last minute, got shut down.
“What happened?” we asked. We were told that the division president was not making his numbers, and by killing the publication at the moment he did, the charges were erased from his budget and he got his quarterly bonus.
Even a casual observer can see what has happened to biotech since 1989. Chances are that publication would have been a big winner.
Launching is much more complicated, and a lot more risky, than buying. IDG launched maybe 15 publications in the US in the 50 years after Computerworld was launched. Some of them, like Infoworld, were kept alive for years despite lack of success. There were maybe two cash cows in there (Computerworld and PC World), and a couple that made some solid returns (CIO was one), but most were break even at best.
What he left behind.
I have often wondered what would have happened had the ghost of the future visited Pat while he was still a graduate student at MIT and told him what was going to happen. Would he have been surprised? Or would he have said “That’s what I’ve been thinking?” Would he have been discouraged by all the problems?
Over the years, I had many casual conversations with Pat, and I do not recall anything he may have said about his grand plan for IDG. I actually don’t think he had one, other than to make it an international company. His mantra, repeated thousands of times over the years, was that once IDG became a billion-dollar company, he would sail off into the sunset and let the employees run it.
No one I knew felt that Pat would ever leave the company, and he didn’t. But he did finally redirect his attention to a venture capital fund he founded to make investments in startups, primarily in China. From that point in, IDG’s profits were swept into the VC operation and US had no investment money. During this time IDG switched all of its US publications to digital formats. Print is dead.
I had many political conversations with Pat over the years, and his philosophy was much more liberal than most entrepreneurs. This philosophy led to the creation of a 21st century company, flexible, diverse, merit-based, international.
Other than IDG, Pat’s major accomplishment was the creation, with his wife, Lore Harp, of the McGovern Institute for Brain Research at MIT, his alma mater. One of their research targets is Parkinson’s Disease, which I contracted some 8 years ago. Maybe Pat will help me in death as he did in life.
Requiescat in Pacem.