How We Started PC Magazine in 1981 with $150,000

by Cheryl Woodard, Updated March 2008 [PRINT VERSION]

This is the first issue of PC Magazine. It was created during the winter of 1981 and printed in January 1982, less than 5 months after the first IBM PCs were distributed to consumers.

When IBM announced its personal computer in August 1981, David Bunnell and I were working at the Osborne division of McGraw Hill publishing microcomputer books. David was editorial director and I was marketing and sales director. It was David's idea to create a magazine for IBM PC users.

Our editorial mission: The new IBM computer was to be an "open" machine - a box that would accept non-IBM parts and products. Not only the software, but also the hardware itself could come from other companies. This openness was a staggering opportunity for the computer industry. IBM could use its name and reputation in the business world to exponentially expand the total market for personal computers. And hundreds of smaller companies could ride into those new markets literally on the backs of IBM computers.

But the openness was likely to create confusion for computer users who would have to assemble dozens of products from different vendors to make a complete business computer system for themselves. So, our editorial mission for PC Magazine was to provide users with unbiased advice about choosing among all of the available products.

Wanting to appeal to people who were novice computer users but sophisticated business people, we had to be specific about the products but not too technical in our language. We had to be colorful and attractive - more like a smart business magazine than a drab, technical one. And we had to discuss how to use the products, not just iterating a long list of features.

Our advertising sales plan: We knew we'd have a strong base of potential advertisers if we could provide IBM-compatible hardware and software companies access to the new IBM PC users. Our advertising pages would grow as new products reached the market. But here was the challenge: we had to reach PC buyers while they were still actively buying products. If we got to readers a year after they bought their first PC, or even a few months, we'd miss that critical buying window that was so important to the prospective advertisers. So our circulation plan focused heavily on distributing single copies at computer stores and retail computer shows.

We found that advertisers needed lots of help understanding who their customers were going to be. The engineers creating new products did not know how to talk to the business executives who would buy them. We had to help advertisers develop ads that were free of jargon, but still capable of communicating the technical features of their products. For example, IBM was using Charlie Chaplan's "Little Tramp" figure to advertise their computer in general interest magazines like Business Week. We urged them to run something different in PC Magazine — something that would explain the features of the PC but in a "user-friendly" style. The suggestion almost backfired: while the agency was considering which ad to run with us, our printing deadline came and went. We held up the first issue, though, because of course it had to have an IBM ad in it.

We hadn't planned to spend so much time and trouble educating our advertisers. As events unfolded, it became clear that our relationships with advertisers would always take as much time and energy as every other task before us — combined.

Our Startup Strategy

David had a friend in New York who had an associate who wanted to finance the new magazine. We first sat down to discuss the idea in September of 1981. All of us wanted to be the first ones out the gate with an IBM PC magazine. So David and I started working on it full time in October 1981, and published our first issue in January 1982.

Our startup team included six people, counting the New York financier. The rest of us were in San Francisco. I was in charge of marketing and sales. There was also an editor, an art director, and a production director, plus David as publisher. David was the only one of us with any previous magazine experience.

We never prepared the kind of formal business plan that is normally used to raise money for new ventures. We already had our financial backing, and besides there wasn't time. But we did prepare a budget for the first year. We planned to publish bimonthly and to sell about 300 ad pages in the first year with an audience of about 50,000 readers at year's end. There was no point doing direct mail - since the computer was brand new, its users would not find their way onto mailing lists for some time. Instead, we planned to put issues of the magazine wherever the computer itself was on display. So we planned to print tens of thousands of extra copies loaded with subscription ads and we developed an aggressive single copy sales program.

We had two pieces of good luck right away. First, IBM agreed to run an ad in our first issue. Other advertisers were eager to follow IBM's lead. Second, Byte magazine agreed to run our subscription ads. Nearly all of our first subscribers came from those Byte ads.

We created an eight-page, four-color "preview issue" describing our plans for PC Magazine. Editors and contributors were pictured and profiled. The subscription offer was also a drawing for a computer.

We distributed the brochure at two trade shows, one that was a show for computer dealers and one attended by individual computer enthusiasts. We rented lists of computer retail outlets and did a mailing that brought in several hundred outlets willing to carry the first issue. We also telephoned computer dealers and got them to order issues, sight unseen.

We sent the brochure and a rate card to all of the advertisers in existing computer magazines. It was a primitive promotion program, but it worked. We had 36 ad pages in our first issue, which was 96 pages long plus the cover.

Success Nearly Killed Us

The IBM PC was an immediate hit, and we were instantly overwhelmed by it's success. There were so many more products than we had anticipated! The entire industry was running on overtime getting their products to market. We sold more ad pages in our first three issues than we'd budgeted for the entire year. What a disaster!

Our worst problem was cash. Subscriptions were pouring in, each with a check enclosed. But the big money - from advertisers - was trickling in 60 days or more after the issues hit the street. Printing bills came due before the ad revenues reached us. Worse, we out grew our original printer and had to switch to a new one with the third issue. Neither of our printers was willing to give us any special credit terms because we were an upstart company with no track record whatsoever. Both demanded full payment of the printing bill before they would release the issues. Ouch!

Our slow-growth budget also created a lot of stress and strain with our New York investor. He was particularly upset at our growing overhead. He was reluctant to advance extra cash despite the obvious need for it. Too late, David and I realized that we might have paired up with the wrong person. Perhaps he didn't have the resources he'd claimed. We didn't know. And the distance between us made it hard to clear up the confusion.

Getting Help

We were scrambling to keep up with the accelerating demand for editorial material. Looking back on those times, we joke that if you could walk and talk at the same time, we would have hired you to write product reviews for PC Magazine. One fellow we profiled in the first issue (Andrew Fluegelman) became a contributor with the third issue.

And we needed help in every other area, too: production, subscriber services, ad sales, dealer sales, accounting. Looking for people we could trust, we hired people we knew and assigned them tasks many had never done before. David's wife, Jacqueline Poitier took charge of the art and production process. My sister, Sarah Woodard became our accounting manager. Her husband, Bill Cox, took charge of computer store sales. David's cleaning lady joined the office staff. My former secretary, Niki Stranz and the drummer of her rock band, Mark Doss, worked in advertising sales. Most of these odd matches proved successful. The staff was loyal and incredibly hard-working. I worried constantly, though, that we would fail and our families and friends would fail with us. The pressure on me and David was immense.

All those people needed telephones and a place to work. We outgrew David's house after the first issue. By the third issue, we had rented four separate spaces on Irving Street in San Francisco: two apartments, a basement office space and an off-season H&R Block Tax office. There were no affordable fax machines, no voice mail, and no e-mail in those days. Worse, none of our telephones were linked together, so we hired a kid to run up and down the street distributing phone messages and mail. One day she called in sick and we discovered a cache of mail she had stuffed in the bottom of a closet rather than sorting and distributing it!

Advertising orders flooded in and we decided to go monthly with the fourth issue. We sold over 130 ad pages for that issue alone.

Every one of our original vendors and administrative systems was overwhelmed right away. At 148 pages, our second issue was bigger than our printer's binding equipment could handle. We outgrew our fulfillment agent almost before we'd finished signing a contract. We were billing our hundreds of retail dealers and advertisers by hand. Staff were buying office supplies and equipment on their own credit cards. Stationary, sales brochures, and rate cards were being printed at a local quick print shop.

Getting More Money

After only six months, in March 1982, things came to a head with our investor. He told us that he wanted out - that he would not put any more money into the magazine. We didn't know if he just ran out of money, or if he was too scared to continue. Either way, we agreed to start looking for someone to buy him out.

Normally, selling your successful magazine would be a happy occasion. We certainly hoped that a bigger backer - one with publishing expertise and systems - would solve all of our pressing problems. We were eager to find a way out of our dilemma. But the selling process can be much harder than it seems.

From about May of 1982 until November, David and I spent nearly half of our time meeting with potential buyers. There were about a dozen of them, and each had a million questions. They wanted to see sales reports, financial analysis, cash flow projections. We were short on documentation, but we did our best to show them our situation.

David and I would spend the day (including dinner) with potential buyers and go to the office at night to review stacks of messages from the staff. I found consultants to help organize our subscriber services. I met with the ad sales team every morning in a local delicatessen and commuted to work with my sister so we could work out operations problems together. All of those wonderful people really kept the magazine together for us while we were so distracted with the financial situation.

In the end, we could not avoid a bad break with our investor: he chose one buyer and we chose another. A sale was made, but it was a messy one, and both sides immediately launched multi-million dollar law suits. I won't go into the legal details. But despite the lawsuits, the final results were positive for everyone.

Happy Endings

Ziff Davis bought PC Magazine, moved it to New York and went on to make it into one of the biggest magazine success stories of all time. Until the Internet displaced most print technology magazines, PC had over a million readers, is bi-weekly, and generated some $20 million in ad revenues with every issue. For a time, it was hugely profitable.

Pat McGovern hired David and me and about 45 of the original PC Magazine employees. With the support of McGovern's International Data Group (IDG), we founded a new company in San Francisco and created PC World, Macworld, Publish! and the Macworld Expo. McGovern took PC World and Macworld international, making more than 20 foreign editions of each. The Macworld Expo is the leading trade show for Macintosh computer users and his IDG Books division makes excellent use of the magazines' franchise.

David left IDG after about 6 years. He founded his own publishing venture and directs several others. He is a happy man.

I left IDG about a year later, and I'm happy, too. I wrote a book to help other people start good magazines without making some of our mistakes. You can read the book over a weekend, and if you're serious about publishing magazines, you can order it from Amazon right now. Or check your local library or retail bookstore. I also wrote a book for non-commercial publishers, Every Nonprofit's Guide to Publishing. I am currently a full-time business strategy consultant to magazine, web, niche and nonprofit publishers.

Many of PC Magazine's original employees turned that formative experience into successful publishing careers. Some are still working with PC World or Macworld. Some are successful writers or run their own businesses. Others have moved far away from publishing and computers both. All of them can still tell great stories about their time at PC Magazine.

Some of the biggest companies in the computer industry today started out with quarter-page black and white ads in PC Magazine. Like us, they started with minimal cash, a lot of luck, and a good idea.

Questions?

If you're thinking about starting your own magazine, maybe I can help. Feel free to email me. I'm happy to help other publishing entrepreneurs.