Cahners and Ziff: growth ahead? New joint venture paves the way for Cahners to boost acquisitions

Folio: The Magazine for Magazine Management, May, 1990 by Lisa I. Fried

NEWTON, MASS.-Cahners Publishing Company president Terry McDermott is the first to admit that publishing computer magazines is not for the faint of heart" or, for that matter, those without deep pockets. After all, about 400 magazines blanket the field, he says, and the near-daily changes in technology can turn planning into a guessing game for publishers.

Nevertheless, Cahners has plunged in, doubling its original total of two computer titles by entering into a joint venture with Ziff Communications Company, the parent of Ziff-Davis Publishing Company. And that's only the tip of the iceberg for McDermott, who says he won't be comfortable until he has six or seven computer niche magazines.

The partnership joined Ziff's Digital Review and Government Computer News with Cahners' Datamation and Systems Integration, all what McDermott considers well-defined niche books. The move gives Cahners day-to-day responsibility for the four.

While Cahners-Ziff Computer Publishing Associates has no specific plans to add magazines, the contract the two companies signed would allow it to do so. McDermott is actively looking to launch or acquire more niche computer magazines and plans to approach Ziff first.

Whether Ziff would be interested in more deals with Cahners was inconclusive at press time. According to Malcolm Morris, Ziff's vice president and general counsel, Ziff relinquished management of its two titles in order to concentrate on the PC and Macintosh markets served by its remaining six magazines.

As for linking the two companies in future deals, McDermott says, "We don't have anything in mind at this point." Further, chairman Bill Ziff is quite clear that he isn't interested in selling any of his magazines."

The company launched PC Magazine two years ago and runs MacWeek and Computer Shopper in a joint agreement with owner Patch Communications.

McDermott, meanwhile, is looking for more links with Ziff. "We certainly are hoping that if we want to launch strong niche properties, the partnership will do it together," he says. "Both the Ziff and Cahners names create a powerful perception in the marketplace, and we want to be involved with them [Ziff]." WiRing to go it alone

But, with or without Ziff, Cahners intends to make its mark in the field. in fact, McDermott is even showing a yen for the PC market, Ziff s milieu. "What we still don't have is a broad-based PC magazine, and ... if someone would like to sell us one at a reasonable price, we stand ready and able to" buy it, he says. Although he says he won't compete with Ziffs PC magazines, he is not prevented by law from doing so: The current partnership arrangement allows both companies to start other magazines individually or jointly, as long as they don't compete directly with the four Cahners-run titles.

"What we're trying to put together is not a duplicate of Ziff," McDermott explains, noting that Cahners is seeking out functional niche books, such as an application-specific PC title. Meanwhile, McDermott hopes to develop packaged ad deals and new strategies for the four joint venture magazines by midsummer. He also intends to increase the circulations and the frequencies of some of the titles. The four magazines combined represent a projected $50 million in gross advertising revenues and a circulation of 450,000. Currently, all but one of the four are profitable, according to McDermott, who expects to increase gross ad revenues by 8 to 10 percent this year.

The financial picture is different for each title. Twice-monthly Datamation, the largest ad revenue producer, brought in almost $18 million in gross ad revenue last year, a 3 percent decline from 1988, according to Communications Trends' Computer Publishing & Advertising Report. (McDermott expects flat ad pages but an increase in market share for this year.) As such, it's far behind weekly competitor Computerworld, whose gross ad revenue shot up to $56.4 million last year.

Digital Review, aimed at users of Digital Equipment's VAX systems, went weekly recently, and showed ad page and ad revenue gains in 1989, despite a soft market, according to the report.

Systems Integration drew the least ad revenue and saw ad pages and gross ad revenue drop in 1989, but so did competitor Computer Systems News, states the report.

Government Computer News lost ad pages while upping gross ad revenue by 7.2 percent last year.

CBS gets green light to sue Ziff

NEW YORK CITY-IN the midst of its new venture with Cahners Publishing Company, Ziff-Davis Publishing Company is facing renewed troubles on another front. The New York State Court of Appeals recently gave CBS Inc. the green light to continue its suit against Ziff-Davis.

The case revolves around CBS's 1985 purchase of 12 consumer magazines from Ziff-Davis for $362.5 million-at the time, the largest magazine deal ever and one in which some analysts felt CBS overpaid. Evidently, CBS agreed: Soon after, it accused Ziff-Davis of overstating the magazines' earnings by as much as $ 3.9 million.