Ziff Communications Company
Ziff Communications Company
Sales: $925 million
SICs: 2721 Periodicals; 2731 Book Publishing; 2741
Ziff Communications Company was a major force in American magazine publishing for more than 65 years. The company initially prospered through the publication of specialty consumer magazines, then branched out into business niche publications. After selling 24 of these titles at the peak of their popularity in two separate 1985 deals for more than $700 million, Ziff Communications successfully refocused itself on the burgeoning computer magazine niche, including such landmark titles as PC Magazine. The company also diversified into computer trade shows and exhibits through its Ziff–Davis Exhibitions subsidiary, database and CD–ROM publishing through the acquisition of Information Access Company and other companies, and the emerging online publishing realm with Ziffnet and the Interchange Online Network. With the family owners wishing to pursue other interests, the company was sold in 1994 in four separate deals totaling more than $2 billion.
Although the name Ziff Communications Company was not used until much later, the company was effectively founded in 1927—initially as Popular Aviation Company, becoming Ziff–Davis Publishing Company shortly thereafter. Founded by majority partner William B. Ziff, World War I flyer, author, and lecturer, and minority partner Bernard Davis, the company launched a line of hobby and leisure magazines with Popular Aviation (still published today as Aviation). During the early years, the company grew at a tremendous rate (32 times its initial size in its first ten years), publishing a combination of reference, trade, and juvenile books; “pulp” magazines such as Amazing Stories, Air Adventures, Mammoth Detective, Mammoth Mystery, and Mammoth Western; and specialty consumer magazines such as Modern Bride, Popular Aviation, Popular Electronics, and Radio News. Although the company was successful with most of its various publishing ventures, William Ziff never devoted his full attention to the business, preferring to focus on his writing, flying, and other interests, so Davis effectively handled day–to–day operations. By the early 1950s, the company was losing money.
When Ziff died of a heart attack in 1953, his share in the company passed to his son, William B. Ziff, Jr., then 24 and a student of philosophy. He surprised his family by deciding to give up his promising academic career to run Ziff–Davis. Unlike his father, he immediately immersed himself in the business, buying out Davis in 1956. He concentrated on expanding the company’s specialty consumer line by aggressively acquiring additional niche magazines. His timing was perfect in that the arrival of television as the medium for mass communication spelled the downturn for general–interest magazines like Life and Saturday Evening Post. Ziff s response to television was to focus on publications that were tightly focused on narrow topics, giving readers specialized information they could obtain nowhere else and providing advertisers an audience tailored for their products. Over the next 30 years, Ziff–Davis acquired such titles as Car and Driver, Popular Mechanics, Psychology Today, and Stereo Review, identifying each as the market leader in its particular field or one that Ziff–Davis could move into that position.
Meanwhile Ziff recognized another lucrative area for growth through the acquisition of what Newsweek called “obscure but highly profitable trade publications.” Similar to Ziff s consumer titles, these business journals were each targeted at a narrow audience, primarily people in the travel and aviation industries for whom the titles became must–reading. The titles included Business & Commercial Aviation, Hotel & Travel Index, Travel Weekly, World Aviation Directory, and the flagship of the group, Meetings & Conventions, which by 1983 generated $12 million in annual revenues.
In 1969 Ziff formed the Ziff Communications Company and made Ziff–Davis one of its divisions. At this time, he transferred ownership through trust funds to his three sons, who held a 90 percent interest, and three nephews, who held the remaining 10 percent. Ziff himself remained in firm control of the company throughout this period as chairman, with a hands–on management style criticized by some insiders and outside observers as autocratic but difficult to question given the company’s continued profitability.
Besides innovation in developing special interest magazines, Ziff Communications also pioneered in its approaches to market research and advertising. Through heavy expenditures on market research, the company gathered detailed profiles of who was reading each magazine, the content they sought, and the advertising to which they might respond. This data helped each editor tailor his or her magazine to the readership and enabled the advertising salespeople to precisely target potential clients. The market research data was also shared with the advertisers themselves to design campaigns in what was known as “consultative selling.” Another advertising innovation was offering clients discounts for placing the same ad in a group of related magazines. By 1984, these strategies had fueled the company’s continuing growth, with the group of Ziff consumer magazines alone posting estimated annual revenues of $140 million.
According to many observers, Ziff had become bored with the business and with his success when in the early 1980s he began to take Ziff Communications into new territory. In 1979 he spent $89 million to purchase Rust Craft Greeting Cards Incorporated for its six television stations, but within a few years he sold them for $100 million, saying that television was not the “turn–on” he had hoped for. A longer–lasting and eventually more successful foray was into a new area of specialty publishing: computer magazines. The initial titles in this line, such as PCjr, were developed in–house beginning in 1981, but Ziff soon returned to its acquisition strategy, most notably through the purchase of PC Magazine in 1982. The beginning years for these magazines were difficult, however, as the boom in the computer industry spawned a boom in the publication of specialty computer magazines. Although most of these titles were losing money in the early 1980s, the losses eventually represented an investment that was recouped many times over. Similarly, another new Ziff venture at this time was a “bleeding edge” 1980 acquisition of Information Access Company (IAC), a pioneer in electronic publishing and one of the first companies to produce databases on CD–ROM, including Magazine Index, National Newspaper Index, and Trade and Industry Index. IAC designed its InfoTrac workstations that accessed these databases to be user–friendly and offered full text on some of them, providing a competitive advantage over other indexes that offered only article abstracts.
Meanwhile, Ziff s consumer and business publications were reaching their peak of success. By 1984, many of these magazines were the circulation and/or revenue leaders in their respective markets. Car & Driver outpaced Road & Track, Popular Photography was the top choice for photographers, and Cycle lead Cycle World for motorcyclists. Annual revenue for the most part was increasing. For example, Car & Driver posted $33 million in revenue in 1983, a gain of 18.6 percent over the previous year. The business publications were in similarly strong positions as market leaders—with $12 million in 1983 revenue for Meetings & Conventions, an increase of 20.5 percent—and enjoyed particularly high margins. Many in the industry were surprised, then, by the October 1984 announcement that Ziff was placing 24 magazines up for sale, 12 in its consumer group and 12 in its business group. Rumors soon began to circulate that William Ziff, Jr., was becoming progressively more ill with prostate cancer and wished to simplify his estate and protect his family’s future. His three sons were 14, 18, and 20.
After much speculation about possible purchasers, receipt of a variety of bids (for the whole lot, for one group or the other, and for individual magazines), and estimates that Ziff would receive between $300 million and $750 million for all 24 titles, CBS Inc. announced on November 20, 1984, that it had reached agreement with Ziff to purchase the complete consumer group for $362.5 million, thought to be a record at the time for the sale of a group of magazines. The very next day, Rupert Murdoch announced that he had bought the entire business group for $350 million. Following these sales, Ziff Communications was essentially reduced to its computer magazines and IAC—none of which were offered in the auction, in part because their financial situations were less robust.
William Ziff, Jr., reduced his role in the operation of Ziff Communications for the next few years as he successfully battled against cancer. How closely the fortunes of the company were tied to his involvement is evident from the company’s struggles during these years: 1985 saw the company post a loss of $10 million on $100 million in revenue. With his cancer in remission, he returned to full–time leadership of the company in 1987 and oversaw a second application of the Ziff formula for special interest publishing, this time fueling a growth spurt through the computer magazines left out of the 1984 sale. Like the business niche publications so recently sold, the computing publications developed and acquired by Ziff targeted a specific audience needing help with their purchase decisions—buyers of personal computers in the business world. Such magazines as PC Magazine and MacUser thus focused tightly on product specifications, evaluations, and recommendations from the editors. Using similar market research and advertising techniques honed through the company’s decades of innovative magazine publishing, Ziff s line of computer magazines soon began to dominate the industry. By 1991, PC Magazine boasted a circulation of more than 800,000, more than $160 million in advertising revenue, and a ranking as the tenth–largest U.S. magazine.
There were some failures along the way as well. Contributing to them was the development of significant competitors in the computer magazine industry, notably International Data Group (IDG), publisher of InfoWorld and PC World, and CMP Publications, publisher of VAR Business and Windows Magazine. Ziff had acquired Government Computer News in 1986 and invested heavily in it, but finally surrendered to IDG and its competitive title when it sold the magazine to Cahners Publishing. Among Ziff s start–ups that failed were PCjr —one of the first Ziff computer magazines—and Corporate Computing. The latter was launched with great fanfare early in 1992 and positioned as the one magazine for executives needing to make computer purchases. To meet its objective, it had to cover all bases from personal computers to networks to mainframes. At the time, however, the business market was shifting toward personal computers and thus right back to the strength of Ziff s other magazines. Feeling that Corporate Computing was beginning to compete with the flagship PC Magazine, as well as PC Week, the company folded the title just over one year after launch, having invested $10 million in it.
With the increasing competition leading to a slowing of the growth in advertising revenue generated by the magazines, Ziff Communications reacted with three strategies. First, to lessen reliance on the U.S. market, Ziff launched an ambitious line of European computer magazines early in 1991. The second response was to move beyond the corporate computing world, said by some observers to be maturing, into home computing, which was viewed as the next big growth area. In another combination of organic and acquired growth, the company purchased Computer Gaming World and launched two new titles in 1994— Computer Life and Family PC, the latter in a joint venture with Walt Disney. The third area was a recommitment to electronic publishing through IAC and the development of online systems.
From the mid–1980s IAC had continued to expand, and by 1992 the company was the leader in full text with more than two million articles culled from more than one thousand sources. The sheer amount of information offered through the products spun out of its databases began about this time to run up against the limits of CD–ROM technology. One option—almost a stopgap measure—offered to large libraries having large enough mainframes was to mount the database directly on it for patrons to access via the terminals used to access the library’s catalog. The longer–term solution that IAC began to implement in 1993 was dubbed InfoTrac Central 2000 and allowed libraries to have their patrons access the IAC databases directly via the Internet.
IAC, whose strength had traditionally rested in the library market, now sought ways to achieve a longstanding goal of lessening the company’s dependence on its main market. It formed a new Consumer/Educational division to target the home market, and it increased its presence in the corporate market through acquisitions. In 1991 it acquired Predicasts Inc., whose databases included PROMT —a competitor of lAC’s Trade and Industry Index. In 1994 I AC acquired Sandpoint, which had developed a software application called Hoover designed to run on Lotus Notes, a group ware application that was becoming increasing popular with corporations. Hoover was an interface like InfoTrac, but a much more powerful one since it allowed a user to access information from many different types of platforms, from CD–ROMs to online systems to broadcast news sources (the name was derived from its being a vacuum cleaner for information). Users of Hoover would also find a system more flexible in the different ways it allowed users to access information. By 1994, there were 16,000 users of Hoover at 70 companies.
Further electronic publishing initiatives in the early 1990s were highlighted by the development of the Interchange Online Network. The company had successfully tested the online services market over several years with Ziffnet, which was an online extension of its computer magazines offered through such services as CompuServe and Prodigy. Interchange was designed as an online service of its own and promised to be the first one to fully implement a graphical–user interface (GUI). True to Ziff tradition, it was designed to be a special interest service as opposed to the existing general–interest services. The first interest area to be developed was, predictably, computers, but plans were made to develop areas including sports, health, and personal finance. Interchange would offer more than simply electronic text of magazines, adding such features as discussion groups, product information, and reference sources. As the Internet and the “information superhighway” became household names in the early 1990s, Interchange represented Ziff’s claim to its piece of the multi–billion dollar digital information market.
Late in 1993, as revenue for Ziff Communications approached $1 billion, William Ziff, Jr., announced that he was retiring as chairman of the company and would have only an advisory role in the future as chairman emeritus. Eric Hippeau, who had already been in charge of all operations except corporate finance as chairman and CEO of Ziff–Davis Publishing, now assumed full control of Ziff Communications as chairman. That an outsider was placed in charge of what had always been a family–run business was telling to some observers who predicted that the company would either be sold or go public, but such rumors were denied for several months, with Ziff pointing out that two of his sons and one nephew were vice presidents at the company. Nevertheless, within months, in June 1994, the company announced that it had hired Lazard Freres & Company to handle the sale of the company, seeking $2 billion or more. The decision to sell stemmed from William Ziff s sons wishes not to make the company their career. The two brothers who had been vice presidents at the company, Dirk and Robert, wished to invest the proceeds from the sale in their investment company, Ziff Brothers Investments. The third brother, Daniel, was a college student at this time.
At the time of the sale, the company was the unquestioned leader in computer magazine publishing and a leading electronic information provider through IAC. In 1994 the company expected a profit of $160 million on $950 million in revenue. Still, some observers thought that William Ziff was again selling out at a time when the company’s most prized possessions—the computer publications—were past their peak. Others, however, pointed to numbers showing that the business magazine group (all the U.S. computer magazines except those aimed at consumers) alone was expecting revenues of $505 million and $146 million in operating income in 1994. The figures did show that Ziff’s other units were either marginally profitable or losing money, in many cases from heavy investing in new ventures like the new consumer magazines and the Interchange system. In the end, these variances in the divisions, perhaps coupled with the enormity of the company, forced the sellers to accept a piecemeal sale rather than a sale of the whole company as they hoped for. First, the New York investment firm of Forstmann Little & Co. purchased Ziff–Davis Publishing Co.—the business and consumer computer magazines, the international magazine group, a market research division, and the Ziffnet online service—for $1.4 billion. Ziff–Davis Exhibitors, a unit that managed computer trade shows, was bought by Softbank of Japan for $202 million, and the Thomson Corporation, a huge Canadian publisher, purchased Information Access Company for $465 million. Finally, in December 1994 AT&T purchased the Interchange Online Network, at the time still undergoing final testing, for $50 million. All told, the sales totaled more than $2.1 billion.
While a final chapter was thus concluded in the fascinating history of Ziff Communications Company, the legacy of William Ziff, Jr., and his innovative approaches to magazine publishing and information distribution, were certain to continue to influence the operation of the now–scattered Ziff units. Ziff–Davis in particular seemed positioned to continue to follow the Ziff practice of special–interest publishing, as Forstmann Little said it would continue with the same management team, including chairman Eric Hippeau, and unaltered editorial content.
Carmody, Deirdre, “Forstmann to Acquire Ziff–Davis,” New York Times, October 28, 1994, pp. D1–D2.
Churbuck, David C, “Motivated Seller,” Forbes 400, October 17, 1994, pp. 350–54.
Fabrikant, Geraldine, “For a Ziff Sale, Spit and Polish and Good Timing,” New York Times, September 9, 1994, pp. D1–D2.
–––, “For Ziffs, Sale Is a Family Affair,” New York Times, June 10, 1994, pp. 37, 46.
Johnson, Bradlye, “Wm. Ziff Retires, but His Company Stays in Family,” Advertising Age, November 23, 1993, p. 22.
Kleinfield, N. R., “The Big Magazine Auction,” New York Times, November 16, 1994, pp. DI, D3.
–––, “CBS to Buy 12 of Ziff’s Magazines,” New York Times, November 21, 1984, pp. D1, D3.
Landler, Mark, “Auctioning off an Empire,” Business Week, June 27, 1994, p. 27.
Levison, Andrew, “Ziff–Davis: For Sale,” Online, September/October 1994, pp. 31–38.
Palmeri, Christopher, “‘The Idea that Print Is Dead Is Preposterous’,” Forbes, June 10, 1991, pp. 42–44.
Wayne, Leslie, “Murdoch Buys 12 Ziff Publications,” New York Times, November 22, 1984, pp. DI, D13.
“Ziff Announces New Online Service and Next–Generation Publishing Platform,” Business Wire, January 24, 1944.
—David E. Salamie