When Jim Dunning bought Petersen, no one expected him to turn a $1 billion profit. Now he's in charge at Ziff-Davis. Can he bring the computer titles back to life?
For once, James Dunning Jr. liked being invisible. With no suit, no tie, no entourage and no fanfare, the future owner of Ziff-Davis Media Inc. blended seamlessly into the crowd of revelers toasting PC Magazine's January redesign. After months in the spotlight, the charismatic publisher was content to take a back seat and imagine the possibilities.
But he didn't do so quietly. Like a proud parent, eyes flashing and fingers pointing, Dunning enthusiastically echoed the salient factoids from publisher Peter Longo's Powerpoint show. "PC Magazine reaches more online buyers than any publication ," Longo read from the
screen. "This is good!" Dunning said emphatically, tapping a reporter's notebook. "Write this down!" He breathlessly continued, speaking of plans to develop industry newsletters, to expanding PC Mag's computer labs, and future redesigns.
Has Jim Dunning gone geek? You bet. On a Nassau, Bahamas, beach, with stogie in hand, he and Chip Block, his longtime friend and business partner, brushed up on MPEG decoders and Zip drives. "I had to make sure I read the magazines I was buying," says Dunning. "That's what I do, I take my sack of what I've got to read, go away for three days and make sure I get it done."
While Adweek's Executive of the Year may be a student of the wired world, he has clearly mastered the art of the deal.
Having bought Petersen Companies in 1996 for $465 million, Dunning and Chicago-based private equity firm Willis Stein & Partners sold off the special-interest books in January to U.K. publisher Emap for $1.5 billion. In July, Dunning cobbled together subscription marketing firm USApubs.com. In December, he and Willis Stein agreed to buy Ziff-Davis, publisher of some 80 tech consumer and trade titles worldwide, including Yahoo! Internet Life and PC Week, for $780 million from majority owner Softbank Corp.
Critics of Dunning's pricey acquisitions now are silent. Again and again, he's proven his detractors wrong. Like a wild boar who seeks out truffles, Dunning successfully unearths revenue where none appeared to exist before, says Mike Perlis, Ziff-Davis Publishing president/CEO. Able to see and perfect, long before most, the magazine as a brand to be narrowly targeted and exploited, Dunning has made millionaires of many with his investments.
"You don't want to be sitting on the wall when he's walking through it," says Jeff Sine, Morgan Stanley Dean Witter's managing director, who helped take Petersen public and most recently sold Ziff to Dunning. "I'm sure there are people who are not big Jim Dunning fans, but you have to ask where they're coming from--ask anyone who's invested with him, and they're sure to be a Jim Dunning fan."
Generous and gregarious, and fully aware of his accomplishments, he takes equal pleasure in his success and the fortune of others under his wing. His team-spirit style also translates well onto the playing field. He spent years coaching American Legion baseball and youth hockey, and donated millions toward building New Canaan (Conn.) High School's state-of-sports complex, which was named after him, St. Luke's School's baseball and football "field of dreams," also in New Canaan, and the coaches' center at his alma mater, the University of Pennsylvania, dedicated in 1998 as the James D. Dunning Jr. Coaches' Center.
He dress is typically casual--grey sweater and black pants; his cars, a black blacked-out low-rider Tahoe SUV (customized with a humidor, among other goodies) and a black Mercedes S500, are both luxurious but not flashy. He lives the Manhattan media mogul life--comfortably--in tony Sutton Place, with an East River view.
But like any high-powered exec, Dunning is demanding--and exhausting. For the uninitiated, keeping up with him can be a mental workout. "He has an extraordinary ability to pump you up," says Perlis. "To make you feel both incredibly excited and slightly daunted by all the possibilities he represents."
Meanwhile, at Ziff-Davis' East Side offices in early February, Dunning is meeting with execs and plotting company strategy, exploring magazine redesigns, launches, and the company's big push online. Though Ziff shares a three-year licensing agreement with Softbank's ZD Net, Ziff-Davis will separately publish Web sites and roll out e-commerce ventures.
"The new mantra is to return Ziff-Davis to its rightful platform and position on top of the heap in the technology-content business," says Dunning. "I see us as multiplatform in the 21st century, which means that the content of Ziff-Davis will be delivered to the consumer and business community in whichever form they want to receive it." Dunning's strategy for Ziff will mirror that of Petersen, now called Emap USA, in which he and his team successfully transformed a loose-knit group of 72 magazines into a marketing-solutions juggernaut that now boasts more than 160 titles tied to a slew of events, TV shows, Web sites and various products.
So far, one top exec has resigned from Ziff-Davis. Perlis, Ziff-Davis' publishing president/CEO, announced he would leave the company in this month, but has agreed to take a seat on Ziff's board of directors. "My job was basically to manage the company through a period of dynamic change and restructuring and organization and ultimately sale, and that job will be done when the close takes place," says Perlis. "The skills and energy that are needed going forward are going to be very different, and Jim brings those in spades."
With the core Ziff team in place--Jim Spanfeller, executive vp/publishing director of the consumer magazine group, Jack Dolce, executive vp of business development and publishing strategy, and executive vp/general manager Tom McGrade--plans are proceeding at warp speed.
PC Computing will relaunch in May as Smart Business for the New Economy, a business book with a tech spin that will be competitive with Fortune and Forbes; late this summer, the as-yet-unnamed Expedia travel bimonthly will kick off with a 200,000 rate base. Scott Crystal, formerly a National Geographic Society exec, joined last week to become executive vp/publishing director, overseeing the relaunch of PC Computing as well as the kick-off of the Expedia title. Plans are also under way to roll out two controlled-circ titles by year-end, one a pure business trade book and the other a hybrid consumer-trade book to rival Fast Company and The Industry Standard. "Those magazines come up short in how they could influence their industry," says Dunning. "They're more involved in the pop side of our business We'll have the perspective of the industry, the implications of technology and its influences. That's the place and space for what I think is a new magazine."
Dunning has high expectations, and more energy than even most high-octane execs. "Mr. D.'s very gung-ho," notes Gus Chirigos, Dunning's longtime driver, who's been at his side since Dunning took over at Petersen. "He likes to see people get the job done and gets upset when you're just going through the motions."
Born in Spokane, Wash., Dunning, 52, is the only child of Mary, 88, a former schoolteacher, and James Dunning Sr., 89, a retired life insurance executive, who after retiring spent nearly 20 years providing financial planning for Episcopal priests. "My father got tremendous rewards in his career from working with people and developing their careers," says Dunning. "When I look back at what I've done, I'd like to feel I've at least done some of that."
At a young age, Dunning moved east, enrolling at Manhattan's prestigious Trinity School, and Deerfield Academy in Massachusetts. He also attended the University of Pennsylvania Wharton School, where, before graduating in 1970, he honed his two talents--playing sports and making money. At Wharton, the 5-foot 6-inch Dunning played varsity baseball and hockey. Dunning has always been driven. "Whatever it was, he wanted to do it well," says his mother. A knee injury kept him out of Vietnam.
While classmates studied business models, Dunning built his own. With partners, he started a student marketing company that sold national advertising across campuses that landed in calendars and on trash cans and book covers. "He just understood money in a way that most people simply don't," recalls Stephen Smith, editor of U.S. News & World Report, who had been a schoolmate of Dunning's since Trinity. "It has dimension and uses, a kind of physicality that can be used to build things. Jimmy has this capacity to visualize a business, to see how it can be reshaped and strengthened."
That student business developed into several after college, including a national sampling company that hit up Clairol and Procter & Gamble. But in a case of bad timing, Dunning and his partners also dipped into oil speculation in 1973. "We ended up losing a lot of money, we were screaming at each other," Dunning says. "The partnership blew apart."
Dunning took what little was left of the fledgling business and sold it to Publishers Clearing House. Soon after, he joined PCH's college marketing division, where the publishing bug bit him hard. "Magazines were a creative side of the media world, where people could be entrepreneurial," he says. "It was a place where creativity merged with business opportunity, and that appealed to me."
In 1977, a headhunter recruited Dunning for Jann Wenner's publishing company, Straight Arrow, now called Wenner Media, to become president/CFO of Rolling Stone. Rolling Stone at the time was a financial mess. "The design was to put discipline in the company, put a formal process in place that we could run the company by and then create a business strategy for circulation and advertising and editorial that would kick-start the business," says Dunning.
Simply put, "[Dunning] brought in budgeting and financial planning, which we really hadn't been doing," says Wenner, chuckling. "He's a very talented, very aggressive, hard charging guy and scrappy."
Having learned the fundamentals of publishing, Dunning left in 1982 to become president of CBS Twentieth Century, but when that joint venture fell apart, he joined Wall Street investment banking firm Thomson McKinnon Securities Inc. as svp/director of corporate finance. Then in 1984, Dunning became No. 2 exec of Ziff Communications, the predecessor of Ziff-Davis. He left two years later to seek a leveraged buyout.
Over the next decade, he found several, making healthy profits and confounding critics, who argued he had overpaid. In 1986, Dunning purchased a Long Island Yellow Pages publisher for $76 million, took the company public in 1987 and sold it to an investment group for $150 million a year later. In 1993, Dunning headed the team that bought Standard Rate & Data Service for $40 million from the estate of media mogul Robert Maxwell; he sold SRDS 15 months later to Dutch publisher VNU (parent company of BPI Communications' Adweek, Mediaweek and Brandweek) for $90 million. From 1992 to 1997, Dunning also served as chairman/CEO of TransWestern Publishing Company, an independent Yellow Pages publisher. TransWestern was sold to Thomas Lee & Co. for $300 million, nearly 10 times the amount of the initial investment.
"Jim is a visionary," says Avy Stein, managing partner of Willis Stein & Partners, whose company has collaborated with Dunning on five media deals. "We have other executives with whom we've had successful track records, but Jim is far and away our most successful."
"Jim has a way of looking at things," explains Block, who is vice chair of USApubs.com. "Sometimes through sheer force of will he achieves these things, and there aren't a lot of people who are comfortable with that, especially in this day and age when people want to cover their asses."
Dunning's biggest gamble came in Sept. 1996, when he, along with Willis Stein, former Hearst Magazines president and Rolling Stone publisher Claeys Bahrenburg, and Variety general manager Neal Vitale, acquired Petersen Publishing, publisher of men's niche magazines including Motor Trend, Hot Rod and Guns & Ammo, from owner Robert Petersen for $465 million. "Everybody said I had rocks in my head," recalls Dunning. Skeptics argued the group had paid too much, and there was little room to trim the company's debt.
Dunning and his team re-energized and retooled the company, for the most part by whittling away its operating costs while at the same time extending its brands via spinoffs, launches, events and other multimedia platforms. A year after its purchase, the company successfully went public. With a stock price of $17.50 per share, Petersen raised $141 million in equity.
But while the business continued to churn out revenue, Petersen's management team was in the midst of a longstanding bicoastal tug-of-war.
At Stein's insistence, an organizational and management psychology firm was brought in to quell the power struggle between president/COO Vitale, who operated out of the company's Los Angeles headquarters, and the New York-based Dunning, the company's chairman/CEO. In June 1998, Vitale left the company, and has since joined Aspen Marketing Group as president/CEO. Other exits quickly followed, including teen group president Amy Wilkins, now publisher of A&E's Biography magazine, and Sport division president Polly Perkins, now a marketing consultant.
"Jim is a very strong financial person," says Bahrenburg, an investor in several Web ventures. "But he very clearly does not understand any of the creative side of the business or the human element He approved excessive cost-cutting in staffing, book size and coloration."
"Jim is not a great manager," explains Block. "He is a great leader. There's a big difference. He's inspirational, he knows the business and he likes people, but he needs people around him who can understand and implement [his goals]."
Dunning admits he's far from perfect, but in a backhand sort of way. "My failures have been with people," he admits. "Picking the wrong horses for the jobs have been the biggest disappointments, because actually, that's really what gets me to work every day." There's nothing Dunning loves more than to watch rising stars shine. But just the same, when these execs flame out, Dunning is truly bummed.
Having grown Petersen to 172 magazines, created a dozen new TV shows, and developed a direct-marketing and e-commerce business with a database of 20 million consumers, Stein figured it was time to sell--much to Dunning's disappointment; he had hoped to grow it even further. In Jan. 1999, U.K. media giant Emap acquired Petersen for $1.5 billion, more than three times the amount Dunning's investment deal had paid two and a half years earlier.
But just as Dunning's investment reached new heights, he was hit with a personal crisis. His wife Patty, with whom he has two sons, James, 18, and David, 14, sued him for divorce. "It was totally a shock," he says with candor. "It was not what I was about."
Meanwhile, two key Petersen execs, Bahrenburg and James Guthrie, executive vp of Petersen's publishing division, left shortly after the deal closed. Dunning, however, stayed on to help out with Emap Petersen's transition.
In the months that followed, Dunning relinquished his role as president, handing it over to Tom Moloney, who had run Emap's U.K. consumer operations. Moloney worked closely with Dunning, who retained his role as chairman/CEO. "His job was to be the visionary," explains Moloney. "And he encouraged me to be the operator--that's the role he saw the two of us having."
Last year, the number of launches and acquisitions continued at a mind-boggling pace. Among the company's acquisitions were four General Media automotive titles, including Four Wheeler, and in May, Frank Hawley's Drag Racing School; in July, Emap announced the Feb. 2000 U.S. launch of its hugely popular men's book For Him Magazine; in August, Emap rolled out the million-circ NFL Insider.
But it is the success of the Gravity Games that Dunning is most proud of. In 1998, during a brainstorming session with a West Coast TV production team, Dunning and his Petersen crew talked about potential partnerships. "He smiled," recalls Justin McCormack, president of Emap USA Enterprises, its licensing division. "And with that classic Jim glint in his eye, he banged the table with his fist and said, 'I got it!' " From this obscure extreme-sports magazine called Gravity, Dunning conceptualized the sporting event. "I'd like something big," McCormack recalled Dunning saying. "I'd like a TV event and a real live event called Gravity Games." The TV partner Petersen ultimately scored was NBC Sports, which kicked in $15 million to promote the event. Last September, less than a year after that meeting, the first annual Gravity Games were held in Providence, R.I. More than 200,000 fans turned out to watch biking, skateboarding and motor-cross events that were aired the following month on NBC.
But all was not well at Emap following Dunning's departure in October. Ad revenues fell by 7 percent. There was little time to sell ads for the winter Gravity Games, held in January, and the festival took a $3 million hit. Automotive ads were down, and top automotive execs, including Motor Trend president Lee Kelly and group publisher Douglas Hamlin, left the company. Some half-dozen staffers from Emap's surfer and snowboard books also left. In all, nearly two dozen execs have either quit or been asked to leave Emap since January.
"I'm very disappointed in the fact that some of the tactics and strategies were quickly stopped," says Dunning.
A year after acquiring Petersen, Emap restructured into two divisions--Emap Metro, which includes FHM, Sport and Teen and Emap Petersen Active, which oversees titles such as Motor Trend and Skin Diver. Emap execs responsible for the Gravity Games, the automotive books and online ventures report directly to Emap USA CEO Tom Moloney.
After leaving Emap, Dunning set his sights on the acquisition of Ziff-Davis, which had been on the block since August. While publishers such as Primedia and Hearst expressed interest, Softbank in December accepted Dunning and Willis Stein's $780 million bid for Ziff-Davis Publications.
Though industry analysts concurred that the price was fair, some argued Ziff's new owners had their work cut out for them. Consolidation in the computer sector meant fewer advertisers; and the industry's shift away from hardware to the Internet meant its books had lost their edge. Business tech books now ruled. Fast Company and The Industry Standard have become the rage. And to make matters worse, even mainstream magazines, such as Newsweek and Business Week, are gaining share in tech and dot.com ads.
With the exception of Red Herring magazine, which Softbank held on to, Ziff-Davis titles fell 13 percent in ad revenue, to $584 million in 1999 over the prior year, and skidded 25 percent in ad pages, according to AdScope, a tech ad tracking service.
There was also the issue that the deal did not include Ziff-Davis' Internet arm, ZDNet, which was a likely factor in the final price. Instead of owning its own sites, Dunning inked a three-year (negotiated down from 10 years) Web licensing agreement with ZDNet.
Even investor Avy Stein initially had his doubts. "The concerns I had really centered around the fact that there were advertising declines in some of the big books," he says. "And the initial contract that we were supposed to sign with ZDNet was very, very limiting to the publishing group."
But Dunning says he sees ways around the challenges. Magazines are being repositioned, spun off and launched to focus more on tech business and the Web. Still, he stresses that "no magazine in the portfolio is losing money."
As for his Web strategy, the three-year ZDNet deal "gives us opportunity and space," he explains. "I can't [build a] dot.com business that quick. And we make money off our Internet relationship with ZDNet." Ziff-Davis Media, he adds, will build proprietary sites and strike licensing deals with other Web partners, such as the licensing agreement with Expedia.
"People look at ZD print and say, 'O.K., what do you have there really?' Well, you've got almost the same thing all over again that you had with Petersen," says McCormack, who was brought into Emap by Dunning three years ago. "You've got a strong enthusiast base, you've got people in the process of buying things who read these magazines and look to it for advice. In reality, he can replicate the Petersen model all over again."
One day last month, while standing next to a staffer in the elevator at Ziff-Davis, Dunning abruptly turned and asked, "Magazine? Department?" With a look of half-recognition, the stunned woman quickly responded, "PC Magazine, production." He then offered her his hand, smiled, and said, "Hi, I'm Jim Dunning." In the coming months, she and the Ziff-Davis staff will no doubt see and hear plenty from Jim Dunning.
"I think this is my swan song," he says. "I would really like to be part of establishing what Bill Ziff did here. I'd like to use his platform, his genius, many of the formulas for publishing I used at Petersen. My focus is getting the right people here to work, have the right structure and turn around and build great products, and ultimately package it out better than anybody else packages it out. That to me is a formula for success, and reward." n