Rumor Mill: Standard excuses
Details of CEO's disappearance uncover deep layer of dirt about magazine's demise.
"Did they send 27 subway conductors overboard with them?" my 12-year-old son Vermel wanted to know. "After all, the captain always goes down with the ship."
Not if you're Rich Marino--then you go to Hawaii. That's where The Industry Standard's second and final CEO, and one-time CNET Networks exec, was to be found at the time of the magazine's demise.
Newly unemployed Standard executives and rank-and-file employees alike griped about Marino's absence during this month's shutdown, complaining that their affable but distant chief didn't even say goodbye.
"What happened to Rich Marino?" wondered one employee. "Here's a company going down, and there's no CEO. He just vaporized into thin air. He resigned and flew off to Hawaii, without talking to anyone, the week before the company laid everyone off and (announced plans to file) for bankruptcy. That's pathetic."
But Skinformants closer to the action say Marino's departure was not as spontaneous as it looked, and the real story reveals deep layers of dirt behind the Standard's demise.
Marino's departure was part of a deal hammered out between Standard management and parent company IDG in late July and early August when the decision was made to sell the magazine. IDG Skinsiders say Standard Chairman John Battelle, who had been smiling and waving from the masthead since yielding power to Marino in March, agreed to see the magazine through its sale on one condition: Marino's disappearance.
Standard Skinsiders said there was a consensus that Marino had to go, but IDG Skinsiders maintained that the CEO's exit was Battelle's sine qua non for staying. Indeed, Battelle and fellow execs wrote to board members, in an e-mail seen by the Rumor Mill, the following ultimatum:
"As employees of the company and speaking for management, minus Rich, we restate and amend our requirements, which we believe are in the best interest of shareholders, creditors, management, employees, and the company:
Condition #2:
"That Rich Marino exit the business, and a leadership team of John (Battelle), (Chief Operating Officer) Ann Marie (McGowan), and (Editorial Director) Jonathan (Weber) be appointed to an office of the CEO, responsible for running the plan and taking the company to sale.
"
As a source close to IDG described the demand: "It was a sort of a showdown, if you will, between Rich and John. Rich agreed to leave the company because he believed that John was the better representative to sell the company."
Battelle, reached by the Rumor Mill, dismissed talk of a "showdown" with Marino.
"The board asked me to get in front of the sale," Battelle said.
IDG referred questions about Marino to what's left of The Industry Standard. What's left of The Industry Standard referred questions back to IDG. By last Friday, there didn't appear to be very much left of The Standard at all, as two of its executives headed out to Martha's Vineyard, the New York telephones went dead, and the San Francisco phones went unanswered.
Marino, for his part, defended his stealth departure.
"My leaving was going to be a nonevent event," Marino told the Rumor Mill. "We were trying not to disrupt anything until they could announce the funding. We had agreed that we wouldn't go public, and that's what I did. It was a good faith effort on my part."
Partisans of IDG and The Standard have spent the week since the closure flinging blame at each other's camps.
Standard-bearers suspect IDG of exacting revenge on a company that refused to toe its buttoned-down, corporate line and believe IDG board members were looking for any excuse to pull the plug on its eccentric stepchild's life support.
"This was a bad marriage from the beginning," said one former Standard employee. "If you look at the titles, we were not a fit. They were a trade publishing company, and we were the sexiest title they had. From the get-go, there was a culture clash. Clearly it was a rocky, turbulent relationship."
Sources close to IDG dismissed the idea that lifestyle issues had anything to do with the closure, and countered that Battelle, Weber and McGowan torpedoed the magazine's last hope of survival when they turned down an incentives deal that would have set aside for employees 15 percent of the proceeds from The Standard's sale above $25 million.
Negotiations went from bad to worse when Marino's sales team came up with revised numbers showing that sales had dropped off an additional $1 million to $2 million for the first half of the year and that, rather than needing a $10 million bridge loan to make it through the year, the magazine would likely need more.
At this point, the term sheet for the bridge loan expired, and the company threw in the towel.
Standard management now finds itself on the defensive in the blame game.
"I'll take full responsibility for making decisions that created an infrastructure that was ultimately exposed by the retraction in the market--full responsibility for that," said Battelle. "But I left the company as CEO effectively in March, and I didn't have 83 percent of the voting control. IDG did."
Like so many adult children of parental abandonment, Standard-bearers are now wondering what they ultimately gained from IDG's guidance and involvement--particularly when it comes to the selection of IDG stalwart Marino.
While Standard employees and executives described Marino's tenure as "ineffective" at best, other observers note the dire straits the magazine was in when he took the helm.
"Rich walked into not such a great situation," recalled Trish Hayward, founder and managing director for Catalyst Strategies in Woodside, Calif., which was brought in between January and April to try to revive the flagging business.
"But he was the wrong guy at the wrong time. From my exposure he is more of a minder than a turnaround guy. Think of a guy who could go into a business that was doing pretty well and keep it moving, as opposed to a guy who needs to do a turnaround. He didn't act quickly enough to make a difference."
Marino defended his tenure at The Standard, which, he pointed out, lasted only four months, including three weeks at the end after his departure had been decided.
"We did a lot in three short months, I can assure you," said Marino. "We set up a common mission for the company, in editorial, sales and circulation. It was strongly perceived as an Internet economy book, and we showed that it was more than that.
"On the turnaround part of it, people can have their opinions, but my previous stint at IDG, with PC World, that was a growth opportunity. I didn't do it all myself--you never do. I guess people are entitled to their opinions. The three months or so that I was there, it was such a small segment. But we did put together a very good analysis of where the company was...There were some very positive things I would like to think I had something to do with."
By many accounts, IDG brought in Marino as a way of reining in what the parent saw as the dot-com excesses of its eccentric New Economy stepchild and mending their fractious relationship. By installing one of its own in the top spot, IDG figured it could turn things around.
The parent company is also rumored to have scraped together some spare change for Marino's severance. Rumored at half a million, it's said to be only a third of what he originally negotiated, and IDG is trying to keep the sum quiet as the rest of the crew is getting zilch.
Marino said the half million figure was wrong, but declined to say what, if anything, he did receive in severance.
Marino aside, having IDG as a parent company at times proved to be a mixed blessing, say Standard employees.
"We wanted to renegotiate our leases, and the landlords would say, 'You have IDG. Why should we renegotiate?'" recalled one. "It's such a double-edge sword to have that kind of backer. The parent company can be held responsible for your debts, but the backer says 'Why should I pay?' Everyone turns away from you."
Meanwhile, The Standard phone is ringing off the hook from potential buyers, including AOL Time Warner, Forbes, Conde Nast, Dow Jones--"the usual suspects," said a former Standard exec. Also taking a gander at the magazine are financing syndicates interested in buying the company's assets and restarting it.
Don't expect news of a sale to surface for another month while players wait for the Chapter 11 dust to settle.
Although the Web site and intellectual property may wind up selling, and a magazine may rise, Phoenix-like, from the ashes of the fire sale, Skinsiders say the magazine can live on in name only.
"Let's say Newsweek buys us and turns us into a weekly insert. So what?" said one former employee. "That has nothing to do with what we built over the last four years." I feel like I've been writing this week's column over the last four years. Help me get back on track with your rumors.