Burn Rate

by Michael Wolff

  Pathfinder’s editor, Jim Kinsella, who is ousted in late ’96 in a battle with Judson, is not replaced for several months. Sagan announces his intention to leave “to spend time with his family,” and it takes Pearlstine six months to fill Sagan’s job. Half of the job is given to Dan Okrent, a longtime Time editor—clearly a vote for Time values over cyberspace ambitions.

  Judson wages an all-out campaign for the other half of the job, but Pearlstine fails to make a choice.

  In some sense, it is only Judson who is playing the cyber game, who has truly embraced the model of instant strategies and daylong alliances and aggressive publicity (shouting often characterizes a wild marketplace). In fact, he is becoming increasingly annoying to people at Time.

  I run into Paul Sagan on the red-eye from San Francisco back to New York. Sagan, a tall, slightly wasted-looking man, has almost a Lincolnesque appearance of humor and homeliness.

  “He’s very energetic,” Sagan says about Judson.

  I don’t want to hear more. I don’t want him to tell me that Pearlstine isn’t going to give Judson the job. If I know that Judson isn’t going to get the job at Time, I might use that information to get him to run my company.

  The rat-a-tat-tat of cell phone calls from Machinist and Rubin unnerves me. They want to know Judson’s answer. For them, a yes from Judson—“I’m ready to join the team”—would be money in the bank. Value would be increased by their casting choice. Judson is bankable.

  But the issue is also, Can I deliver? It’s a performance test. Can I make it happen? Because if you can’t make it happen, if you can’t figure out what it takes, short of indictment, to make it happen, well, then maybe you’re not where our money belongs.

  I have known, however, all along that I’m going to fail at landing Judson—making him our Barksdale. Either because I don’t want to give up my starring role or because I don’t want to be responsible for Judson leaving Time for another uncertain world or because I don’t want to make it happen but, rather, want it to take a natural course.

  My ambivalence is perhaps not that different from Pearlstine’s and Sagan’s and Time’s. I’m tired of Internet time. I just want to hang out for a while and see what develops.

  Although I know what Judson’s answer will be, I’m grateful that I have nothing official to tell Machinist and Rubin. Not officially having bad news isn’t bad news. Even Internet time seems to stop, or appreciably slow down, when you’re waiting for the other shoe to drop.

  “You know,” Alison says, “you could really convince him if you wanted to.”

  “Are you saying—”

  “I’m not saying you don’t want to convince him. I’m just noticing that you seem just to be letting fate take its course.”

  “There’s no reason for me not to convince him. He stands just as great a chance of losing his job with us as he does with Time Warner. He has a better chance, I think, of keeping his job with us.”

  “Well, you have to do what you think is right.”

  “Or, I guess I should say, we have a better chance with him of not losing our jobs.”

  “Will this really get Machinist and Rubin excited again?”

  “For about another ten minutes.”

  “Then what’s the point?”

  “This is the Internet; a lot can happen in ten minutes.”

  Then I get the call from Judson. “I want to come over and talk to you,” he says.

  Well, this is certainly the gentlemanly way.

  “I can’t do it,” he says, arriving in my office.

  “I know.”

  “Do you want me to go through my thinking?”

  “No. I think I know it pretty well. Do you want me to make a last pitch? We can revisit the compensation discussion, too.”

  “No. The money is fine. That’s not the issue. I just have to go with where I think my shot is.”

  “Of course.” I tried to rally but, again, ambivalently. “This is my prediction: You may not come to work for us, but you won’t end up working for Pathfinder, either.”

  He wasn’t about to disagree.

  One of the fascinating things about this business, and one of the things that makes it almost impossible to predict, is that virtually any prediction you make is bound to come true.

  Chapter Six

  Something for Nothing

  “You better be prepared to get skinned,” said the factotum, subdued and businesslike on the cell phone (he on his, me on mine).

  “Excuse me?”

  “You’re out of cash. Unless you have someone else who wants to value you, you’re at the mercy of the newest money.”

  “I thought we had a deal with Jon.” I tried to remember the exact phrasing of his offer to invest another half million dollars.

  “Apparently we don’t. I don’t. Have you spoken to him?”

  “No, but—what does Bob say?” I was taking a break from a sales meeting where I was trying to rally the troops to go into the retail wars and sell our books about the Internet (now increasing at the rate of a new title every twenty days) to the nation’s bookstores. The sales meeting was not going as well as I had hoped. These fifty normal working stiffs had only the haziest notions of the what and where and why of the Internet. It was, I knew, imperative that I make them believe! The primacy of salesmen—the fact that nothing happens without salesmen who are willing to sell your product—is something else they don’t tell you about in college.

  “Bob isn’t going to say anything different. This is a banking situation. Unless there’s another option, Rubin’s new money will dictate the terms.”

  “But why? He’s never indicated he was unhappy. Why would he want to screw me?”

  “Well—”

  “Just because he can?”

  “He’s not going to want to pay more than he has to pay, obviously.”

  “Which means?”

  “You’re probably going to get squeezed.”

  “Badly?” I swallowed.

  “Until he thinks you’ll pop.”

  “I’m going to call Bob.”

  “You can always call Bob, of course.”

  I was confident that Machinist carried something in his back pocket, that “financial engineering” was as much a matter of personality as it was a matter of balance sheet. I called the Patricof office, but Machinist had just left for a rafting trip in France, bonding with the bankers in his Paris office.

  I called Alison, who was annoyed by my panic.

  “What do they mean you’re going to get squeezed?”

  “Well, it means . . . I don’t know. I guess it means—”

  “That we’re not in as good a position as we otherwise might be. But does it mean anything more than that?”

  “Not necessarily,” I admitted.

  “Okay, so we don’t know what’s going to happen. That’s what you’re telling me.”

  “Right.”

  “But you think we should assume the worst, although we don’t know what the worst is?”

  “Do you want to call the Patricof people?”

  I had a clear picture of her sour expression. She found the factotum’s inarticulateness, his inability or refusal to entertain an emotional nuance, more frustrating than I did.

  “I think I know what we have to do,” I said. “I don’t think we have an option—”

  “We haven’t begun to consider what the options are,” she interrupted.

  “I’m going to call our friends on Long Island.”

  Silence. Then: “You would do that?”

  “I think it’s time. I do.”

  The issues of raising money are broad at first: Is there anyone who will give you anything? And then increasingly complex and subtle: Among the field of bad and worse alternatives, whom will you choose? Or, more accurately, in front of which unhappy alternative will you get on your knees?

  I flew into La Guardia and headed out to Long Island for an impromptu meeting with CMP Media, a $500 million-a-year company that,
with Ziff-Davis and IDG, dominates the most lucrative area of the publishing industry today—computer magazines.

  CMP, whose headquarters housed a couple of thousand people, was in the bedroom community of Manhasset, at a purposeful distance from the glamour-pusses of Manhattan. CMP, which held the distinction of being the largest private company on Long Island (although it, too, would go public before this story is through), got started in the early 1970s and came to specialize in magazines for the travel business—free magazines for travel agents with advertisements from resorts, hotels, and airlines. By the late 1980s, by creating more free magazines, this time with ads for computer hardware and peripherals, the company became another of those improbable and outsized technology industry successes—more improbable, because it was not the success of young techno-geeks, but the success of an elderly Long Island couple, Gerry and Lilo Leeds.

  The magazine business has always maintained a hierarchy between consumer magazines, which emphasize editorial content, and trade magazines, which emphasize advertising matter. Successful (or prideful) journalists made their living from the former and dreaded a descent into the latter (you might have to go to work for Lab Rat magazine!). Almost no one I know in the mainstream publishing business ever gave a serious professional thought to trade magazines. Computer magazines changed that.

  As a young lawyer, Alison was approached in the early 1980s by a company called Ziff-Davis, which, I was of the vague impression, published comic books or off-brand men’s magazines (Gent, “Home of the D Cup,” perhaps). It turned out to publish a stable of magazines for the travel and aviation industries and other magazines for hobbyists and sporting enthusiasts. Against my strong advice—what would we say to our friends?—Alison went to work for Ziff-Davis and promptly helped it go on a buying spree of magazines about personal computers, including PC Magazine, bought for pocket change and now among the world’s most profitable magazines. (Alison sent in the Pinkertons to eject the existing staff, which then went on to start PC World for IDG, one of Ziff’s main competitors.)

  In 1984 Ziff sold its hobby and trade magazines for almost a billion dollars and ten years later sold its computer magazine properties for nearly $2 billion, making Bill Ziff the most successful man in the publishing business (and putting him among the top billionaires in the technology industry). These sales undermined many of the comfortable snobberies of the magazine business: that fashion, style, and attitude equal money and prestige.

  The Ziff formula was to create magazines specifically designed for buyers of particular products. Under this formula, the ads were often more interesting than the editorial matter. With the introduction of the PC in the early 1980s, you had an industry that needed to find a way to reach beyond the small circle of corporate buyers authorized to make big-ticket computer purchases to a new and vastly expanded customer base able to make the decision to spend a few thousand dollars on a PC and printer. The computer magazine was born and became the most successful area of the publishing industry, the main way that the computer industry communicated with its customers.

  But by 1994, particularly after the Ziff sale (Bill Ziff was legendary for selling at the top of a market), there was a sense among the three largest computer magazine publishers that the industry was in the throes of a powerful change, that growth in the office market had plateaued, and that the future was with the home user, with families, with women even. CMP launched Windows for the consumer market and followed it with HomePC. Ziff partnered with Disney on FamilyPC (the clonelike nature of computer magazine titles suggests their market share focus, reminiscent, in fact, of girlie magazines—Leg Scene, Leg Action, Leg World; when it comes to sex and computers, men buy the category, not the magazine). IDG went after the consumer with its Dummies book series.

  While each of these companies had a pronounced aversion to consumer publishing—from the high-maintenance writers you had to deal with, to the press attention you had to endure, to the lower profit margins you had to accept—they also, of course, had a hankering to make it big, truly big. Why not? They were in the computer business. And not just Bill Ziff big (although this was important because they were all keenly competitive with one another. It was not enough to make money; it had to be money that Bill Ziff would otherwise have made), but so big that they could transform their businesses from parochial precincts to household brands. That was the American way (and, perhaps more importantly, the Microsoft way).

  Of all the success models in the publishing business—Luce, Murdoch, Newhouse, Wenner, Hefner, Ziff—the most successful was Walter Annenberg, who created TV Guide and accomplished the most elusive goal in the publishing industry: a successful mass market magazine. Indeed, TV Guide became the most successful magazine of all time!

  The Internet was technology in a box through which would flow a cascade of services, entertainment, and information. That this experience would have little to do with television was tomorrow’s realization and angst. For now, in early ’94, the simple concept of a magazine that saw this new medium as being in need of a programming guide passed for genius. Mine, as it happened.

  We had moved out of our downtown space and into uptown offices at Fiftieth Street and Broadway, a formidable media address variously called the Hachette Building or Paramount Plaza (it housed Paramount, Showtime, NBC, MTV, Macmillan, and Hachette Magazines, which published scores of magazines, including JFK Jr.’s George), where Alison had a client with vast expanse willing to sublet us some space.

  Our elevator rides were filled with MTV gossip and whispers of Kennedy sightings.

  The setting was of great help as I tried to convince people that the Internet was, well, media—something not otherwise self-evident.

  It is important to remember that a really cool site on the Internet circa 1994 was one with a lot of documents or programs to download.

  Internet users, working in ASCII text and UNIX commands, were really very modest in their claims about the medium. The grandest metaphors had to do with community, with town meetings and bulletin boards. No one was saying that the Internet had anything to do with TV or entertainment. (Even if you could, why would you want to turn this into a medium that mimicked television? We already had television.)

  The notion that the Net was developing into some kind of organized carrier of entertainment, information, and service programming was, at best, a rhetorical excess. At worst, it was a delusion, but it was an important one because it could be communicated to people who had not been on the Internet. People could easily imagine a hopped-up, heated, tactile, multitasked, controllable version of what they already knew, which was television.

  The guide we envisioned—NetGuide—completed that metaphor, linking the Internet not only to television but to TV Guide.

  It was, therefore, extremely important, as we set out to convince the media community of the coming age of the Internet, that we discourage these people from actually wanting to see the Internet. We invented many diversionary tactics, including almost entirely made-up samples of what the Internet might look like one day, or what we thought people wanted it to look like.

  Soon, however, after our book NetGuide rose to the best-seller lists, Alberto Vitale, the much-feared chairman of Random House, the book’s publisher, began to ask probing questions about the Internet, which were referred to me. After many efforts to delay or cancel an inevitable demonstration, or to bring him to our office for a phony one (“Mr. Vitale will want the demonstration at Random House”), I was cornered. We had a new intern, a prep-school runaway whom we were housing in my mother-in-law’s apartment because of his UNIX talents, whom we sent over to connect Random House to the Internet. With Random House’s top brass shivering in a cold computer room (apparently, still under the impression they had to refrigerate these machines), we projected the Internet onto a movie-size screen (“Mr. Vitale doesn’t like to look at computer screens”), where it took a torrent of abuse under Vitale’s scrutiny.

  “Let me see something. I don’t see
anything. Is this what I’m going to see? Go to something else. How long will this take? What am I waiting for? How long has this been going on already? You must be joking. Who will have the time for this?”

  He wasn’t wrong. What he was seeing was not the experience so many people were starting to fantasize about. He was seeing, well, the real thing—text. A grubby kind of government-document-looking thing.

  The power and attraction of the Net required a fairly wild leap of the imagination.

  And yet the phone calls poured into our office, and the books flew off the bookstore shelves. You could feel the desire. There were Americans out there, American men in love with technology, down in their finished basements, booting up, seeing something in the green screens of cyberspace.

  In early 1994, as NetGuide rose, unexpectedly, up the best-seller lists, we quickly assembled a plan to turn NetGuide into a magazine and online service. Why not? TV Guide. NetGuide. Get it? Wow. We proposed, in our plan, to get the magazine off the ground for a half million dollars. We sent out our plan haphazardly—to TV Guide; to Time, Inc.; to the computer magazine publishers, Ziff, CMP, and IDG; and to Rolling Stone—curious to see who, if anyone, would respond.

  CMP’s penultimate executives were in our offices within twenty-four hours of receiving the plan. CMP was psychologically a long way from Manhattan and the culture of consumer publishing. Coming into the city from Long Island was not an easy trip for them. It was a journey fraught with calls from secretaries to check on the location of nearby parking garages and calls from car phones to report progress through traffic. The executives were more than an hour late, sweating and anxious by the time they arrived.

  Almost immediately, I had the sense—a sense that I would have throughout my sojourn in cyberspace—that there was a gulf between what I did and what the people on the other side of the table did, between what I understood and what they understood. (It was a culture clash, in part, between Manhattan and the rest of the country—a growing problem for me because the technology business is in the rest of the country—but also, I snobbishly sensed, between people in the product business and people in the idea business, between people who sold units or data and people who sold point of view.) I don’t doubt that within seconds we knew we were incompatible. At the same time, we had what they wanted, and I found myself enjoying the tyranny of the marketplace, sitting back and relaxing—and judging. I have touted enough projects and pipe dreams—good ideas and horrible ideas—to have spent a lot of time searching for that moment when a buyer’s needs and urgencies are greater than my own. The Internet offered me a vivid demonstration of such an appetite.