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Wired Frays 

An editor is not hired; three key players flit away; layoffs begin

Wednesday, Nov 19 1997
The Voice of the Digital Revolution has been sounding muffled lately -- unless you listen to its friendly translators, who say its troops are reorganized and finally ready to conquer the world. Unfortunately, fiscal and managerial reality suggests otherwise.

San Francisco-based Wired Ventures has been stumbling financially since last year's much hyped, but finally disastrous attempt at an initial stock offering. That aborted stock sale was followed this summer by the resignation -- apparently under pressure -- of founder Louis Rossetto as CEO. (He remains chairman of the firm's board of directors and editor and publisher of its flagship publication, Wired magazine.)

If one believes mainstream media reports, that turmoil is ancient history. In recent weeks, the magazine-cum-multimedia empire has been portrayed as taking prudent steps to tighten its financial belt, and to create editorial stability at Wired.

But there is more to the story: After years of free -- even wild -- spending, Wired Ventures is being forced by its investors to make radical budget cuts. Those cuts took human form this week, as Wired began a hefty round of staff layoffs. In recent months, Wired magazine has experienced an exodus of top editors. And the person reported to be a leading choice to manage the magazine's day-to-day editorial affairs apparently either is turning down, or won't be offered, the job.

That candidate is Jack Shafer, the deputy editor of Microsoft's Slate online magazine and, as such, right-hand man to noted political journalist Michael Kinsley. (Shafer also is a former editor of SF Weekly.) The position is managing editor, the third-highest post on Wired's masthead, but the top job in its newsroom. It was vacated in September by John Battelle, an original Wired staffer; since then, Senior Editor Pete Leyden has held the position. But the quest for a permanent replacement continues.

And, it seems, that quest will continue to continue. No one in a position to know will confirm, for the record, that Shafer is out of the hunt. But one inside source who requests anonymity says Shafer -- who earned his image as a headstrong writer and editor during his years at the Washington City Paper -- will not get the job, largely because he was viewed as someone who would have proved an ill fit with Rossetto, who continues to serve as Wired's editor and publisher and carries his own reputation for firm will. "Jack was considered someone who can get it done," explains one insider. "[But] it would take a little more separation [from Rossetto] than there has always been around here."

Another source with knowledge of the situation did not directly confirm that Shafer would not be Wired's new managing editor, but suggested as much, saying that such a development would be "worth exploring."

When asked if it were true that he would not be hired for the Wired post, Shafer paused for nearly a minute before replying that "discussions between a job candidate and an employer are fairly confidential. So I'm sure you'll understand if I can't give you a detailed blow-by-blow." When asked if he had anything to add, he responded rather cryptically: "Whoever gets the job is a lucky devil."

Perhaps. But those same insiders say that Rossetto's hands-on approach (he still writes all the magazine's headlines) is going to make it difficult for Wired to fill the managing editor post.

The extended search for a new managing editor bodes badly for a magazine that, despite recent revenue gains, is saddled with the financial burden of carrying Wired Ventures' other, largely unprofitable operations. It also doesn't portend well in a public relations sense for a company whose problems have been broadly reported -- if not always put into context.

The Shafer story is a perfect example of the context shortage. Two prominent newspapers -- the New York Observer and the San Jose Mercury News -- leapt to report that he was a virtual shoo-in for the editor position, and by extension that Wired was moving to plug a major gap. No one, however, has reported a related and quite relevant story: that not one, or two, but three high-ranking editors have left the magazine in just under two months.

Battelle was the first to go, announcing his departure the day Rossetto stepped down as CEO. His former sidekick and replacement as editor during a previous leave of absence, Russ Mitchell, followed soon after. Finally, Features Editor Jim Daly left earlier this month. The official reasons? Each got an offer he couldn't refuse: Battelle to launch a new computer magazine for International Data Group Inc. (better known as IDG); Mitchell as a senior writer at U.S. News & World Report; and Daly as editor in chief of a new version of The Net magazine.

Is the exodus a coincidence? Wired insiders insist so. They note that the Internet's growth has made experienced technology journalists into valuable assets. But as one source admits, "Once offers came, people took them."

Wired's financial problems have been reported widely, but in one recent and notably egregious example, they were covered with a coat of gloss so thick, it practically obscured their severity.

That example was a Nov. 3 story in Business Week headlined "Can Wired Get Wired Again?" The article detailed Wired Ventures' fiscal woes and revealed that the company's investors "have been pressing for an end to the red ink." It went on to document the end of Wired's book and television divisions and of the English edition of Wired magazine, and described drastic cuts to its online ventures and staff.

Such public confirmation of the firm's fiscal problems would, one might think, make Wired executives uneasy. But when asked about the company's relationship with investors, one well-known Wired insider pointed to the Business Week story. And why not? That article's strangely timid tone left Rossetto -- who, as CEO, was responsible for a series of spectacularly failed stock offerings, a $325 million decline in the company's value, and tens of millions of dollars in losses -- looking like a model businessman.

To wit: Rossetto blamed the company's sinking value on the recent weak market in high-tech stocks -- bad luck, as he called it. Meanwhile, Business Week failed to mention that the first significant Internet stock offering to fail was Wired's, or that the Wired stock debacle probably helped kick-start the slumping stock performances that Rossetto complains of.

Instead of calling the company's frivolous spending what it was -- poor management -- the article describes Wired as "caught in the all-too familiar quandary faced by young, cocky up-starts: how to manage growth without overstretching resources."

Most glaring, however, is Business Week's transformation of investor-demanded retrenchment into a benevolent and mature act of fiscal responsibility by Rossetto. According to BW, Rossetto and co-founder Jane Metcalfe have been "listening" to investors who have long complained about Wired losses. "No longer is growth the company's mantra. Today, it's profit," the article asserts.

The changing of mantras apparently required significant layoffs that were under way this week, according to sources who requested anonymity. Those sources described the layoffs as large, but did not know precise details at press time Tuesday. A Wired spokesman said he could not confirm the reported layoffs.

It's absolutely confirmed, however, that Rossetto and his managers are, for perhaps the first time since the dawn of the digital age, responding to investor pressure and bothering themselves with the firm's bottom line.

For updates on this story, go digital:

About The Author

Steve Boland


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