AND IN THIS CORNER, IDG'S PAT McGOVERN
Patrick J. McGovern already had built a modest fortune from publishing computer trade magazines and was dabbling in venture capital in 1981 when he came across Masayoshi Son. The young entrepreneur was trying to launch a software-distribution business out of a cramped Tokyo office furnished with a couple of crates. Son struck McGovern as a kindred spirit, but the American figured Japan wasn't ready for an ``energetic chap'' like Son and passed on the chance to back the startup.
Fifteen years later, Son's Softbank Corp. has emerged as the biggest and best-financed competitor to McGovern's Boston-based International Data Group. Their rivalry, which includes trade shows and market research (Softbank's Ziff-Davis unit owns Computer Intelligence Inc.) is most visible in the battle for readers and advertisers in the computer press. Son's Ziff-Davis Publishing Co. gets 39% of the ad revenues in the market, and IDG grabs 27% through Computerworld, InfoWorld, and 285 other titles.
It's an interesting matchup. The two are opposites in many ways. While Son is outgoing, McGovern is reserved. Son has dealt his way into the big leagues by loading up on debt and issuing equity, while McGovern has kept IDG private, funding new ventures with retained earnings. McGovern, 58, still owns 63% of the company he founded in 1964; a generous employee stock ownership plan owns 35%. He claims he has no debt and $150 million in the bank.
Instead of buying assets, McGovern has pursued global expansion, starting with international editions of his publications, from ComputerWorld Pakistan to PC World Myanmar. IDG is now the largest foreign publisher in China. Since 1990, overseas forays have helped IDG grow from $550 million to $1.4 billion in annual revenues, says McGovern.
Another hot growth area has been the ...for Dummies series, which began with DOS for Dummies in 1992 and now includes guides on everything from personal finance to sex. Dummies sales hit $112 million last year. IDG's trade-show business took in $126 million, and market researcher International Data Corp. added $130 million.
NOT RATTLED. Back when Son and many of today's other techno-visionaries were in diapers, McGovern grasped that computers would be a world-shaping force. As a biophysics student at Massachusetts Institute of Technology in the 1950s, McGovern earned pocket money writing and editing for Computers & Automation, an early computer magazine. He stayed on after graduation and became associate publisher.
The IDG empire got its start a couple of years later after a computer executive complained to him about the lack of solid information about customers in the new market. McGovern formed IDC and began gathering data on usage patterns and product preferences. In 1967, he launched ComputerWorld, a weekly aimed at corporate computer buyers. In 12 months, the publication went from 8 pages to 72 pages.
Both McGovern and Son see the Internet as their next battlefield. But while Son believes advertising will be his biggest moneymaker online, McGovern's plan is to charge subscriptions to Web sites and rake off a royalty of 8% to 10% on any sales they generate. While most of the $20 million IDG took in last year from online ventures came from ads, McGovern is convinced that, long-term, user fees will be where the money is. IDG's three Web-only publications: JavaWorld, Netscape World, and SunWorld, carry subscription prices of $9.95 a month and together total some 85,000 subscribers.
McGovern says he is not rattled by the rise of the high-profile Softbank empire. ``It hasn't affected the pace of what we're doing,'' he says. While Son talks of spending hundreds of millions on Net investments and generating half his profits from online ventures in a decade, McGovern is sticking to his tried-and-true pattern. IDG spent $40 million to fund online ventures in the past five years and will spend another $40 million over the next three. McGovern's modest goal is for Web publishing to bring in 15% of revenues by 2000.
Still, McGovern may have to do more than stick with his success formula. With Softbank expanding on all fronts, International Data Group could find itself surrounded.
By Paul C. Judge in Boston
Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.