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When CMP Media Inc. became a public company in 1997, it had enjoyed 26 years of uninterrupted sales growth, 22 years of profitability, and six consecutive years of rising operating income. After such steady growth, the company controlled the largest market share in U.S. high-technology ad pages. Its core business consisted of several print publications that served three key segments across the technology spectrum: the builders, sellers, and users of technology.
CMP's two controlled-circulation titles, EE Times and Electronic Buyers' News, became the top two titles in the original equipment manufacturer (OEM) sector and formed the company's OEM Group. These publications provided business and technology news to manufacturers, managers, engineers, designers, and purchasers of electronic systems and components, including computers, telecommunications equipment, semiconductors, software, peripherals, and related products.
Three periodicals--Computer Reseller News, VARBusiness, and Computer Retail Week--made up the Channel Group. They reached a wide range of technology resellers, including distributors, value-added resellers (VARs), retailers, systems integrators, dealers, consultants, computer superstores, mass merchandisers, warehouse clubs, consumer electronics retailers, and mail-order sellers. Computer Reseller News became the largest technology trade publication in the United States in terms of ad pages.
Several CMP periodicals served the needs of technology users and buyers, including InformationWeek, Network Computing, InternetWeek, and Windows Magazine. Audiences for these periodicals included end users of information systems, computer systems, personal computers, software, the Internet, and related products and services. Their readers included information systems executives, network communications and departmental applications managers, and Internet and intranet managers. In May 1998 CMP acquired Data Communications, LAN Times, tele.com, and Byte, from The McGraw-Hill Companies. Publication of Byte was suspended with the June 1998 issue. These periodicals served other technology buyers and became part of CMP's new Business Computing and Communications Group, a portfolio of publications that would reach the full spectrum of business information technology (IT) buyers.
In addition to its print publications, CMP Media offered a comprehensive menu of Internet sites through CMPnet. CMP Media was the fist media company to establish Internet sites for all of its publications in 1994 with the launch of TechWeb. In 1997 the company launched CMPnet (www.cmpnet.com) to provide a single point of access to all of CMP's Internet products, services, and utilities.
CMP Media was also active in conducting industry conferences and special events, custom publishing, research, software testing, and database marketing.
Company Origins with Electronic Buyers' News, 1971
Founded as CMP Publications Inc., the company's first publication, Electronic Buyers' News, was launched in 1971. The magazine targeted procurement managers, purchasing and financial professionals, and corporate executives in the electronic industry. Its editorial focus was to help its readers manage the risk of making product and sourcing decisions on a timely basis. The periodical was created by Gerard (Gerry) and Lilo Leeds, who produced the first issues out of their home in Great Neck, New York, on Long Island. They soon moved to offices in Manhasset, New York.
In 1972 a second publication, EE Times, was introduced for engineers and technical managers in the electronics industry. A weekly, EE Times covered business and technology news, analyzed key industry trends and developments, and included opinions from government and industry leaders.
New Publications Launched in the Mid-1980s
In 1982 Computer Reseller News, the company's first periodical aimed specifically at information technology sellers, was launched. The weekly's broad editorial coverage was aimed at all resellers, including dealers, distributors, value-added retailers (VARs), and value-added distributors (VADs). In addition to industry news, the publication included a wide range of product reviews, industry analyses, and training and development opportunities, among other topics.
Two additional audiences were targeted with the launch of CommunicationsWeek and Business Travel News in 1982. CommunicationsWeek was the first CMP periodical aimed at end-users of technology. Business Travel News was the company's first travel publication. It was begun by Michael Leeds, son of CMP's founders, who had just joined the company. After publishing Business Travel News for ten successful years, CMP sold its travel publishing unit to Miller Freeman to focus on the exploding technology market. CommunicationsWeek was relaunched in 1997 as InternetWeek to focus on buyers and end users of Internet-related technology.
A second publication for technology buyers, InformationWeek, was launched in 1985. In 1987 CMP started up a second publication for sellers of information technology called VARBusiness, which targeted value-added resellers (VARs).
Michael Leeds Takes Over Day-to-Day Operations in 1988
In 1988 Michael Leeds, the eldest son of the founders, took over day-to-day operations of the company. While continuing to serve on CMP's board of directors, Gerry and Lilo Leeds turned their attention to the nonprofit sector. They founded the nonprofit Institute for Community Development in 1990, which addressed the needs of students at risk of dropping out of school. By 1996 the Institute was providing aid for 1,000 students in school districts on Long Island and in New York City.
Under Michael Leeds's leadership CMP's revenues tripled between 1988 and 1996. He was also responsible for CMP's aggressive development of Internet products and services. In 1994 the company launched TechWeb, which put all of its print products online. Subsequently, CMP developed online products that were distinct from the company's print publications, and in 1997 CMP expanded its Web presence with the debut of CMPnet, a hub for all of the company's online products and services.
Sales Growth and New Publications in the Early 1990s
By 1992 CMP's revenues had grown to $218.2 million with income from operations amounting to $7.4 million. The company had successfully launched Computer Retail Week and Network Computing in 1990, and in 1991 CMP acquired Windows Magazine which was relaunched in 1992. In 1991 the first InformationWeek Conference was held as the company began diversifying into conferences and special events for the IT industry.
In 1992 CMP also began to develop a global brand under the leadership of Daniel Leeds, Michael Leeds's younger brother, who was named president of CMP's international business operations. Over the next several years publishing bases were established in Germany, France, and the United Kingdom. The company began serving IT markets outside the United States by establishing wholly owned and joint-venture publications serving the builders, sellers, and users of IT.
Established an Internet Presence in the Mid-1990s
In the fall of 1994 CMP established web sites for all of its publications at its TechWeb site. During the year the company opened a satellite office in Jericho, New York, for some of its publications and purchased the name "NetGuide" from a book packager. NetGuide Magazine was launched in December 1994 with a circulation of 200,000. A monthly, NetGuide Magazine was a consumer publication aimed at users of the Internet and online services. By the end of 1996 the magazine's circulation had grown by 63 percent, including a 32.2 percent increase in 1996. Its January 1997 ad revenues were up 76 percent over the same period in the previous year. Ad pages increased by 44.4 percent during 1996, making NetGuide Magazine the fastest-growing consumer technology publication tracked by the Computer Publishing and Advertising Report.
CMP's revenues for 1995 reached $382 million, with Computer Reseller News, CMP's top magazine for advertising revenue, grossing an estimated $90 million in ad revenue. The periodical's strong sales had helped support CMP's expansion into magazines with a broader audience base. CMP was developing a reputation for being ahead of its competitors; the company launched Windows before Ziff-Davis's Windows Sources; the consumer-oriented HomePC was started in 1994 before Family PC hit the market; and Network Computing came out before its competitor Corporate Computing. However, publishing consumer titles cost more than trade magazines aimed at professionals, and CMP was forced to suspend production of the money-losing Interactive Age in August 1995 after less than a year of publication.
Name Changed to CMP Media Inc. in 1996
During 1996 CMP Publications Inc. changed its name to CMP Media Inc. in order to emphasize the company's presence in the Internet and electronic media markets. However, not all of CMP's ventures in this area would be successful, and rapidly changing conditions resulted in many shifts in direction. CMP's TechWeb site, which contained online versions of the company's periodicals, was one of the most popular computer sites with $4.5 million in 1996 advertising revenues from 144 advertisers. Less successful was the company's consumer publication NetGuide--in spite of increased circulation and ad revenues--and the related Internet site Netguide Live.
NetGuide Live was introduced in August 1996, after CMP spent about $10 million developing the site, according to one source. At the beginning, about 200 people were employed on the project, including about 100 freelance writers working at home. However, with the site producing little advertising revenue, two rounds of layoffs in 1996 reduced NetGuide Live's staff to 64 employees. Editor-in-chief Dan Ruby left in September 1996, and with the staff relocated to different offices, NetGuide Live underwent a redesign to make it more accessible.
With many web sites failing, the troubled NetGuide Live was a familiar story among web publishers attempting to make money off of the Internet. In addition to searching the web, NetGuide Live listed live chat events each day, highlighted new sites, had lessons to improve Internet usage, and provided capsule reviews and ratings of more than 50,000 web sites. Explaining NetGuide Live's problems, Ruby said in Newsday that NetGuide Live "tried to throw too much stuff into one product and it made it hard to be clear what we were or what we were best at. A lot of Web producers made similar mistakes."
In February 1997 NetGuide Magazine acquired Online Access, which was launched in 1986 and became the computer industry's first Internet publication. Online Access's paid subscriber base would be added to NetGuide' s, further boosting the fast-growing publication's circulation. Just prior to its 1997 initial public offering (IPO), CMP announced it would stop publishing NetGuide with the August 1997 issue. Observers speculated that closing the magazine would improve CMP's financial performance, even though NetGuide's advertising revenue for the first five months of 1997 was up 76.6 percent over the previous year to $7 million, and the number of ad pages had increased 39 percent. NetGuide's circulation was 352,875, of which 285,608 was paid. The magazine had gone through four editors since its inception in 1994. Explaining the decision to stop publication, CMP said the closing "reflects rapid change in the market during the last two years." The company noted that the desktop and Internet markets had converged, "eliminating the need for a stand-alone monthly magazine exclusively targeting the Internet buyer."
Initial Public Offering in 1997
When CMP announced it was going public in 1997, it was the third largest computer magazine publisher behind Ziff-Davis Publishing and IDG (International Data Group). In its filing CMP revealed that the company's leading publications in terms of advertising revenue were its trade periodicals, while its consumer publications were not attracting as much advertising revenue and its Internet services were losing money.
On July 25, 1997, the first shares of CMP were offered to the public on the NASDAQ. The IPO was completed by July 30 and resulted in net proceeds to the company of approximately $84.7 million. Some 5.5 million shares of Class A common stock were sold at an offering price of $22 per share, of which 4.2 million were sold by the company and 1.25 million were sold by stockholders.
Upon completion of the IPO, Gerard and Lilo Leeds provided a gift of 200,000 shares of the new stock worth $4.4 million at the offering price to CMP employees, including some 400 editorial employees and 675 sales employees as well as a number of retirees. The amount of stock each employee received was based on length of service, with a five-year employee receiving 160 shares worth about $4,600. In addition, the Leeds gave $26 million in stock to charitable foundations.
Two classes of stock with different voting rights were created, and restrictions were placed on stock owned by the Leeds family in an attempt to maintain control and prevent an unwanted takeover. Class A Stock, which was sold to the public, had one vote per share, while Class B Stock, which was held by the Leeds family, had ten votes per share.
As the number three publisher in the fast-growing computer and electronics-related magazine publishing field, CMP quickly attracted the interest of analysts. The stock rose $2.88 on its first day of trading, and one analyst commented, "CMP deserves a premium (over shares of) traditional publishers because they're operating in a faster growing segment. New technology creates a need for new publications." Among technology-related companies, CMP was one of the few public companies that showed a profit.
Record Revenues and Profits in 1997
CMP achieved record revenues and profits in 1997. Sales rose 13.3 percent to $473.9 million, and adjusted net income increased to $19.8 million from $16.1 million the previous year. Operating income reached $39.3 million, up from $28.8 million in 1996. For the past five years, CMP's revenues had grown at a compounded annual rate of more than 16 percent, while adjusted operating income grew by 42 percent.
From 1993 to 1997 CMP Media was the only one of the top five technology media companies to increase its advertising pages every year. It was also the only one of the top five technology print publishers to hold a larger market share in 1997 (24.6 percent) than in 1993 (20.9 percent). CMP accounted for more than half of the entire growth of advertising pages in the U.S. technology publishing sector from 1993 to 1997. In 1997 it held the number one market share position in U.S. high-tech ad pages, with more than 40,000 ad pages.
During 1997 CMP continued to pursue its strategy for international growth by launching Computer Reseller News in France, acquiring two titles in the United Kingdom, and acquiring full ownership of the U.K. version of InformationWeek. In Germany, the company launched InformationWeek with its German joint-venture partner and acquired a 50 percent interest in three German networking publications. The company began to expand its reach by aggressively licensing its domestic editorial content, design, and titles to more than 25 foreign publishers with distribution in more than 60 countries. As part of its international growth strategy, CMP Media acquired a major international advertising representative firm and changed its name to CMP Worldwide Media Networks in 1996. By 1997 it represented 80 of the world's leading overseas high-technology publications, of which 40 percent were CMP-branded titles.
Internet-related revenues tripled in 1997, although this figure still represented only about five percent of the company's revenues in that year. In July 1997 the company launched CMPnet, which provided users with access to all of the company's Internet products, services, and utilities. CMPnet became the exclusive provider of computing and Internet content for Infoseek as well as the premier content provider for America Online's Computing Channel and Microsoft's IE4 Active Desktop Channel. It was also the first technology channel selected by PointCast Inc.
CMPnet sites included TechWeb, which provided daily news updates, expert analysis, hardware and software reports, and other features for corporate information-technology decision makers. TechWeb also contained the archives for all of CMP's publications. Another site, EDTN (Electronics Design, Technology, and News Network), was a joint-venture interactive Internet service that provided design information and other decision-support tools to electronics engineers. ChannelWEB was a subscription-only site that provided users with a customized news feed from CMP's channel publications. It included areas where vendors and resellers could exchange information, receive channel research, and learn more about industry issues, products, and technologies. In addition, there were several other technology-related sites that were part of CMPnet.
In addition to recognition as a rapidly growing company, CMP was also receiving kudos for being a good company to work for. It was named to Fortune magazine's first annual list of the "Best 100 Companies to Work For" in the United States. For the sixth time, Working Mother magazine named CMP one of the "Best 100 Companies for Working Mothers." The company had a nationally recognized child care center and provided an environment that allowed women to reach key management positions.
In April 1998 CMP Media sold HomePC to Imagine Media, Inc. With more than 500,000 readers monthly, HomePC was the largest PC consumer magazine in the United States. HomePC was a good fit for Imagine Media, which published several consumer-oriented computer periodicals such as boot, MacAddict, and PC Gamer. Publication of HomePC would be interrupted briefly and resume in September 1998. The sale of HomePC was part of CMP's strategy to focus on the business market rather than the consumer market. In 1997 HomePC's ad pages had slipped by 9.3 percent, although advertising revenues grew by a comparable percentage to $34.2 million. Begun in 1994, HomePC started with a circulation of 200,000 and grew to 500,000 by the time of its sale to Imagine Media.
CMP Media quickly added more publications by acquiring several computer and communications periodicals from the McGraw-Hill Companies in May 1998 for $28.6 million. These publications included Data Communications, LAN Times, tele.com, Byte, as well as an independent testing laboratory called NSTL (formerly National Software Testing Labs) which CMP planned to use to provide product and systems testing independently of its publishing operations. As part of the acquisition agreement, CMP Media and McGraw-Hill would have an ongoing relationship that would include cosponsoring technology conferences with McGraw-Hill's Business Week magazine. At the time of the acquisition, Michael Leeds said, "The addition of The McGraw-Hill Companies' titles to our own will enable us to offer our customers unparalleled access to every audience within the business computing market."
The McGraw-Hill acquisitions added an estimated 200,000 unduplicated qualified subscribers to CMP's base, which would now total 844,000 unduplicated qualified readers. Data Communications, LAN Times, and tele.com all served technology users, complementing CMP's InternetWeek, InformationWeek, and Windows Magazine in that segment. All of these publications would be included in CMP's new Business Computing and Communications Group, a portfolio of publications that would reach the full spectrum of business information technology buyers. CMP's new Business Computing and Communications Group was headed up by Jeffrey L. Strief, a CMP executive vice-president.
The end of an era for CMP came with the cessation of publication of Byte in June 1998. Founded in 1975, Byte was one of the most well-known names in computer publishing. Its readers were serious computer users, and the magazine dealt with a wide range of computer-related topics. At the time publication was suspended, the acquisition from McGraw-Hill was not fully completed, and neither McGraw-Hill nor CMP Media would take responsibility for shutting down the magazine, according to the Boston Globe. However, the periodical's advertising revenue had been declining for several years. CMP held out the possibility of relaunching the periodical at a later date.
CMP Media was now the number one publisher in the business computing and communications market with 1.22 million qualified subscribers--of which more than 900,000 were unduplicated--receiving its controlled circulation publications. In addition, there were 800,000 readers who subscribed to or purchased single copies of Windows Magazine, resulting in a total of more than two million professionals in information technology that advertisers could reach via CMP publications.
Layoffs and Lower Earnings, 1998
In July 1998 CMP Media laid off 50 people and announced it would not fill 35 vacant positions, thus reducing its workforce by 4.5 percent to 1,775 positions worldwide. In making the announcement, CMP noted that computer magazine advertising had softened in recent months. Among the factors contributing to fewer advertising pages were instability in the Asian markets, declining personal computer prices, and product delays. These factors also contributed to a decline in CMP's second quarter net income for 1998.
In the second half of 1998 CMP announced it would launch CRN Enterprise Partner, a newspaper supplement for systems integrators who work primarily with Fortune 1000 companies and other large organizations. CRN Enterprise Partner would join Computer Reseller News and related publications in CMP's Channel Group, whose publications were aimed at sellers of technology. Other CMP Channel Group products and services included the Channel Information Services research and consulting unit; ChannelWEB, the resellers-only virtual community; the CMP Channel Advocate Program; Channel Custom Publishing; and the XChange conference series.
Another new product launch was announced in August, with CMP partnering with the Education News and Entertainment Network (ENEN) to produce Electronics Industry News. The audio-based daily news service dedicated to the electronics industry, would be available over the Internet at either the ENEN web site or at RealNetwork's daily briefing web site.
As 1998 drew to a close CMP remained positioned to take advantage of changing trends and to reach new audiences and new markets in the IT industry. The company's expansion plans included acquisitions and new launches in the print arena as well as growth in international business. The company planned to expand its global presence through independent launches, joint ventures, and licensing of its flagship publications in different countries. CMP also strengthened its commitment to producing industry conferences and special events with the April 1998 acquisition of Kingbird Media Group LLC, which had produced IT conferences and events for 15 years.
CMP expected to achieve growth in Internet-related revenues by moving CMPnet and its subscription Internet services--ChannelWEB and EDTN&mdashøward profitability. One source predicted that online media spending would reach $4.3 billion by the year 2000. The projected growth of Internet commerce was expected to result in more business for the company, and CMP Media established its TechShopper site on CMPnet to take advantage of this trend.
Principal Operating Units: OEM Group; Channel Group; Business Computing and Communications Group; International Group; CMPnet; NSTL.