Forbes Has the Yacht, Fortune the Prestige, but Spunky Business Week Is Coming On

Managing Editor Sheldon Zalaznick admits there was “blood on the floor” at Forbes magazine’s Greenwich Village headquarters after the Mike Milken cover story.

Forbes, the scrappy magazine owned by motorcycle riding, hot-air ballooning Malcolm S. Forbes, had been working for months on a piece comparing Michael R. Milken, a bond trader at the Drexel Burnham Lambert investment house, to legendary financier J. P. Morgan. Two years earlier, Forbes had run perhaps the best story to date on Milken, the money man behind many of the most daring recent corporate mergers. “We thought we owned the Milken story,” Forbes Editor James W. Michaels said.

Then one Friday last July, rival Business Week showed up with Milken on the cover--and its story compared Milken to Morgan. “That,” said Zalaznick, “was very disheartening.”

To make matters worse, Forbes has a policy of killing stories when beaten into print by a rival. But this time Forbes decided to run its story--minus the Morgan angle--and it poked fun at Business Week in an editor’s letter for “grandly” comparing Milken and Morgan, never allowing that it once had the same idea.

“It (the Milken story) was the best thing we had,” and it made points Business Week’s did not, said another Forbes editor privately. “We don’t have a big backlog.”

The episode says something about the derby being run these days by the three primary business magazines: Forbes, Business Week and Fortune. After more than a decade of giving ground to the competition, Business Week has become “the hot book,” in publishing parlance.

In the last three months, Business Week has run cover stories profiling Richard Rainwater, the little-known financial wizard (“the best kept secret in high finance”) behind the Bass family of Texas; reporting that the outside corporate director “may become an endangered species,” and exposing practices at Allegheny International that within days toppled management at that company.

The changes have yet to make much of a dent in the circulation and advertising war, but Business Week is optimistic that it is on the move. A week ago, it announced that, in a relatively poor year for magazines, it is increasing the circulation that it will guarantee advertisers next year by 15,000 to 790,000.

“I’m impressed,” Zalaznick said. “They are doing the right things.”

Forbes’ circulation of 727,235 has changed little for three years. “But we’re still paddling,” Chairman Malcolm S. Forbes said.

And Fortune, which tried to rejuvenate itself eight years ago by shifting from a monthly to a bi-weekly, named a new top editor last May in what many observers consider an attempt to steady the course of what was once the most elegant clipper in the Time Inc. fleet. Fortune is last in circulation at 641,621, though, like Business Week, it has roughly another 100,000 circulation for its international edition.

All this represents a decided shift in one of the last good street fights in American journalism. For the last 15 years, the quickest, leanest and meanest of the bunch was Forbes. Led by a small, quiet, bespectacled editor named Jim Michaels and a flamboyant chairman in Malcolm Forbes, the magazine went from gossipy investment sheet for the rich to clever master of the corporate expose. Notable examples have included pieces on Financial Corp. of America and First Jersey Securities.

Forbes’ hallmark has been stories heavy on financial analysis, laced with wry opinion and mercifully short.

The magazine probably has had more success taking on smaller companies than large ones, however, and some former writers complain that the magazine at times has seemed to protect certain large advertisers.

Since 1970, Forbes’ share of the advertising pages among the three magazines has grown to 33% from 18%, surpassing Fortune and rivaling Business Week, which publishes twice as often.

Business Week’s share in that time shrank to 37% from 59%, while Fortune, aided by the switch to a bi-weekly schedule, went to 29% from 23%.

During that period, Business Week seemed to help its own decline, matching Forbes’ spunk with an insistent grayness of design, coverage and prose. Business Week excelled at “megatrend” stories--such as the reindustrialization of America--or weekly news developments, but not at the corporate profile.

“Our focus,” a 1984 internal memo at Business Week would conclude, was “too narrow, too technical, too nitty-gritty.”

Parent McGraw-Hill viewed Business Week, executives now concede, as a “cash cow” to feed its far-flung publishing empire. Little was invested to face Forbes’ charge, and executives say relations between corporate and magazine management were sometimes chilly.

By the early 1980s, Business Week’s decline had McGraw-Hill alarmed. The magazine redesigned its graphics and started using four-color photos, but the changes were limited until 1984, when Business Week’s editor of 15 years, Lewis Young, abruptly resigned.

Concerns Noted in Memo

In his place McGraw Hill named 44-year-old Stephen B. Shepard, a former Newsweek senior editor who had come to Business Week two years earlier as Young’s second-in-command and had spearheaded many of the changes to that point.

A few weeks after taking over, Shepard sent a private memo to his publisher, a copy of which was obtained by The Times. “Business Week’s circulation is suffering rather badly,” it said. “Our overall renewal rate has slipped,” and attempts to right the problems have proven unsuccessful.

“There are many reasons for our circulation problems,” including improved competition, the memo continued. “But we believe the main reason is that the editorial product is not good enough to sustain a 780,000 circulation at reasonable cost.”

Shepard acted quickly. He already had put four-color pages into the magazine. Now he instituted bylines, resurrected a people section, doubled the number of pages that go to press late to allow for more current news, moved deadlines up to allow for more editing and, above all, launched a campaign to improve the writing.

Shepard made noise with his first issue. The cover story, irreverently headlined “OOPS,” noted how several companies lavishly praised in the best-selling book “In Search of Excellence” had gone awry.

The fight was on. Shepard wanted to hire a new assistant managing editor. He got one from Forbes: Paul Sturm. Forbes countered by taking out an ad in the New York Times in February, 1985, quoting Shepard as telling his staff, “We want to make Business Week more like Forbes.” Shepard angrily denied ever uttering such words.

‘Genius at Covers’

Yet Shepard is incorporating many of Michaels’ lessons--focusing on people, writing for executives and investors, writing shorter, emphasizing graphics and trying always to advance a story with a fresh angle.

Shepard’s “a genius at covers” said one high-ranking financial editor at a national newspaper. But some stories, he said, seem overwrought. A story called “The Casino Society” that said high-risk stock market trading had tilted America “away from investment toward speculation” was one example, the editor said. “It was a clever phrase that nicely captured an idea others aready had written about, but they bent the story out of shape to fit” the phrase.

Others wonder whether some Business Week coverage--several mention high technology as an example--wasn’t more substantive under the formidably solid style of Lewis Young.

That is even a concern inside Business Week. When Shepard earlier this year asked for staff suggestions on the new Business Week, one of the top four concerns, according to a recent internal memo obtained by The Times, was “that the magazine’s substance has been sacrificed in a new emphasis on style.” It should be noted, however, that another concern was that the magazine had not changed enough.

Shepard denies the charge of style over substance. “The ‘Casino Society’ raised a very important issue,” Shepard said, “and that headline has become part of the language now.”

More Investigative Stories

And few dispute that the magazine is better written, better looking and better edited than before. It even has succeeded on occasion in the area it once lacked most: the corporate expose. In August, a three-month Business Week investigation uncovered “questionable business practices” by management at Allegheny International, the Pittsburgh conglomerate. A week later Allegheny management resigned.

“That,” one Forbes veteran said, “was once our kind of story.”

Adds Zalaznick: “They are taking more stories away from us. We are killing more stories.”

So far, Business Week’s editorial changes have not translated into more advertising. In a down year for national magazines, Forbes is faring the best among the three, the number of advertising pages run down 7.8% from last year through September, while Business Week is down 11.9% and Fortune 15.8%.

One reason is Malcolm Forbes’ sly hustle--an extravagantly public persona that mixes a 19th-Century gentleman’s club proprietor with a motorcycle riding good-time boy and a bit of Professor Harold Hill, the charming, scheming traveling salesman of “The Music Man.”

Two or three days a week Forbes has corporate chieftains to off-the-record lunches. Two nights a week his staff runs his 126-foot yacht, the Highlander, for advertisers, complete with lobster, drinks and bagpipes.

And the weekend guest list for the Highlander from September through November includes no fewer than 428 chief executives whom Forbes is taking to Army football games or around the Eastern coastline. Forbes refused to have them named, but many are some of the best-known executives in America.

Trouble Competing

Make no mistake. These trips are not strictly social; they help sell advertising. “If you’ve got a story to tell, having the opportunity to talk to the boss helps you make your point,” Forbes said.

And before the Highlander reaches dock, said a veteran ad salesman for one competitor, “Malcolm never forgets to ask for the (advertising) order.”

On that front, the revitalized Business Week has had trouble competing.

Shepard insists that time will show that the magazine’s editorial improvements will boost circulation, which in turn will boost advertising. He points to the circulation increase announced last week for next year as a sign, and officials say October will prove the second-biggest month in advertising revenue in the magazine’s history.

However, in circulation, too, Malcolm Forbes has made life difficult, Business Week circulation director Kitty Williams frankly admits.

Forbes alerts advertisers to the subtleties of circulation through ad campaigns that thumb his nose at the competition, she said. “To get subscribers, Business Week and Fortune offer expensive items like phones, desktop calculators, watches, travel alarm clocks and cameras,” one ad said. “Who knows what they’ll roll out next.”

Forbes offers no gifts for subscribing other than sending some reprints of the magazine.

Forbes’ ads also talk about “arrears,” the publishing term for continuing to send subscribers the magazine after their subscriptions have expired.

According to audited statistics, Business Week in 1982 had 69,000 subscriptions in arrears worldwide, nearly 10% of its circulation. Fortune had roughly 11,000 subscriptions in arrears, about 2% of its circulation.

Forbes has none.

So far this year, Business Week has succeeded in lowering arrears to 20,000 from 38,000 in 1985. This may have come at a cost, however. With fewer arrears, the circulation as of June 30 this year was down 7,000 from the same time a year ago, though month to month the circulation is more consistent.

And despite Forbes’ charges to the contrary, Business Week has reduced arrears so far without increasing its use of so-called “premiums”--those free gifts offered to subscribers. Premiums were paid with 25% of new subscriptions, lower than last year and about the same as in 1984.

Forbes, meanwhile, has questions of its own to face, perhaps the most important being succession. Michaels is widely credited for Forbes’ editorial success, but he is now 65 and Zalaznick, once the heir apparent, is 58.

Crucial to Malcolm Forbes

Some think that if the magazine has slipped, the reason is that it has grown so large that Michaels no longer edits all of the copy.

The succession question seems crucial to Malcolm Forbes, 67, who gave his son Steve 51% of the company years ago to avoid a ruinous squabble among offspring for control. Younger son Christopher (Kip) Forbes will someday run the advertising side, and Robert Forbes runs the real estate holdings.

Will Forbes suffer without Malcolm as its flamboyant symbol? Some think with Forbes well established, the hustling style of Malcolm may be less necessary in the future.

More pressing questions may exist at Fortune, once the epitome of quality and elegance in financial journalism. When starting the magazine in 1930, Time founder Henry Luce staffed it with the likes of poet and playwright Archibald MacLeish and, later, economist John Kenneth Galbraith.

Fortune is “the magazine of the big story,” Managing Editor Marshall Loeb explained. “We’re prepared to go into the length and depth (that) stories deserve,” with a premium on writing.

Loeb cites as examples a recent cover on high technology that ran 28 pages, a piece on the Rockefeller family (“the longest story we’ve done in the modern history of Fortune”) and a story about computer software designer Bill Gates taking his company, Microsoft, public--in which the reporters spent five months inside the company.

As newspaper business sections--along with Forbes and Business Week--have improved, however, some financial journalists say it has become harder for Fortune to find stories not already done in depth elsewhere. That is one reason Fortune changed from a monthly to a bi-weekly.

“Fortune is in a kind of twilight zone” between covering the news and doing the big story, said Chris Welles, a senior writer at Business Week.

Loeb concedes that he may have an image problem. “The magazine is often not given enough credit for being good.”

Younger Readership

He has tried to counter that by doing “road shows” for advertisers. A recent trip took him to 13 cities on two continents in 14 days.

One message on the tour is that Fortune’s readership is younger and includes more women than the competition; hence, two recent covers dealt with whether parents should leave children an inheritance and why women are leaving the workplace to have families.

All three of the primary business magazines also must compete now with “niche books” such as Inc., Financial World, Barron’s and Venture, as well as the national edition of the New York Times, the Wall Street Journal, improved business coverage from large metropolitan newspapers and a rise in regional publications, such as California Business and Executive in California.

They not only make it tougher to come up with original stories, they also mean, in Business Week Publisher Jack Patten’s words, that “there are more people at the dining room table” hungry for the limited pool of national advertising dollars.

And the real threat in the grudge match, Michaels said, is probably some business magazine yet unborn. “I keep thinking ‘whose going to come out of left field really breaking new ground?’ ”