Despite months of discussions, a failure to wring expected bridge funding from majority owner International Data Group eventually hamstrung Standard Media International’s attempts to resuscitate or find a buyer for its failing New Economy trade publication, The Industry Standard.
On Thursday news leaked out about its closure, after the board of directors of and investors in Standard Media International, sent an e-mail to employees which cited the need to “suspend publication of the magazine immediately and reorganize for a quick sale of assets.”
That sale will likely take place under the protection of a Chapter 11 bankruptcy filing, the e-mail said, although as of yet the company has not asked the courts for protection from creditors.
Chief operating officer Ann Marie McGowan will oversee the effort, maintaining a skeleton staff to keep the company running until a buyer is found. That staff will include some employees from editorial, who will maintain the company’s Web site.
Other members of the management team will serve as consultants to the company during this process as needed.
“The goal is to consummate an asset sale of the company, unencumbered by the current liabilities, that will allow the publication and its related services to continue serving its customers,” the e-mail said.
The company’s 180-odd employees are unlikely to receive severance, according to editorial director Jonathan Weber, although they will be allowed to keep certain company assets that they had in their possession, such as laptops and mobile phones.
After news of the suspension of publication began hitting major media outlets, magazine chairman John Battelle followed up with an e-mail to staffers.
In it, he said the company would hold bi-coastal meetings on Monday to explain the situation to staffers more fully, at which point they would officially be laid off. In addition to details of severance and similar issues, one subject likely to come up concerns the immediate events that led to the magazine’s shutdown.
According to the company, the magazine’s immediate demise came about not for lack of potential buyers, but rather as a result of the board of directors’ inability to come to a consensus on funding with majority owner International Data Group.
“Unfortunately the members of the board were unable to agree to terms which would have funded the company going forward, and we have been forced to suspend publication of the magazine immediately and reorganize for a quick sale of assets,” Battelle wrote. “Some of the press accounts say we could not find a buyer. Again, the truth is far more complicated.”
“We had two months of difficult discussion about financing,” Weber said. “We fully expected to get financing, and we’re very disappointed that that didn’t come to fruition. Essentially, we had not even started the sales process because we were anticipating bridge financing, … once we secured that bridge financing, we would begin the sales process with [financial advisors] Allen & Company. We never really got the opportunity to engage in that process.”
Spokespeople from Standard Media International and IDG did not return calls by press time.
In the e-mail to staffers, the board and investors also reflected on the longer-term causes that led The Standard — considered by many to be the authoritative print trade magazine on business in the Internet-age — to its abrupt conclusion this week.
The magazine had been one of a crop of high-profile business trade publications that sprung up in the mid-90s, specializing in forward-looking coverage of businesses as seen through the lens of new trends in technology — specifically, the Internet.
But with the April 2000 market correction and the subsequent shakeout of dot-com and high tech advertisers, The Standard and its competitors saw their once-hefty (literally) publications facing severe cash woes.
According to the Competitive Media Reporting and the Publisher’s Information Bureau, an industry association that tracks consumer magazine advertising, The Industry Standard saw July 2001 ad revenue fall 78.6 percent to about $2.6 million, down from $12 million the year before. Ad pages dropped 86 percent from 2000 numbers, according to the PIB.
Coupled with the downturn were expenses associated with a 600-person staff, increased lease obligations, and corporate infrastructure (such as accounting, IT and human resources) independent of majority owner IDG — all costs incurred during mid-2000, in expectation of being able to continue The Standard‘s profitable run, according to the e-mail from the board and investors.
Similarly, last year’s scrapped plans to go public also made a “substantial financial impact” on the company’s bottom lines.
“Managing a company through the contraction of 2001 rather than the expansion of 2000 proved to be extraordinarily difficult, however, given the context by which the company was planning its future,” said the board and investors in the e-mail.
Efforts to stem mounting expenses came in the form of layoffs in January and February of this year, but ultimately, even cuts into editorial and conference staffers weren’t enough.
“The severe market correction of 2001, coupled with these higher fixed expenses, led the company to consume all of the cash it received from its investors,” the message from the board and investors said. “With the IPO window now shut, the existing investors considered various methods of providing financing for the company, but could not conclude negotiations.”