INC.: What went wrong?
WHITTLE: We tried to do Nutshell in 20 cities, and itdidn't work. We had losses of something like $60,000 the second year. By the fifth year we had losses of $500,000.
INC.: That doesn't sound like much fun.
WHITTLE: In the first three years I would say it was a lot of fun. In the fourth and fifth years we had real serious problems, and it wasn't fun at all. A kind of battle fatigue set in. Then we discovered something called national advertising.
INC.: Are you saying that you'd been going after the wrong market?
WHITTLE: Yeah, we were trying to do it with local advertising, and we finally realized it wasn't working. We were losing money on every sale. So we decided to focus and train our guys to sell national accounts. And over a couple of years we built them up and got to break-even. That was a turning point. Then there was a second key event. One of our advertisers, Nissan, came to us and asked whether we could figure out a way to showcase them more than in a typical magazine, where they are just one of many advertisers. We said, "Well, maybe we could develop a magazine in which you are the only advertiser." We did it, and it worked. We quickly went, "Ah, there must be other ideas like this." So those two events really did it for us -- coming on line with national advertising and starting the single-advertiser magazines. We finally broke out into the clear.
INC.: How long had you been in business when this happened?
WHITTLE: Six or seven years. The business really began to work in 1977. We were a $5-million company, with $1 million in profits. We paid our debts, and a couple of the original people split. We went from five partners to three.
INC.: What happened to the other two?
WHITTLE: One of them spun off part of the business, a computer operation. The other retired.
INC.: Retired?
WHITTLE: Yeah, he was the chairman, sort of the financial man -- the adult of the group. He was four years older than me. He retired at 30, and he hasn't worked in business since then. We're still friends.
INC.: What does he do now?
WHITTLE: He's kind of a philosopher.
INC.: Makes for an interesting business card. So where did the company stand at this point, and where were you heading?
WHITTLE: Well, there was Moffitt and me and Ed Smith, with maybe 50 or 60 employees and five or six properties, all in the youth publishing business. The name of the company was 13-30, which was our target age group. We had some ideas about other publications we could do, but I don't think we had a real good sense of where we were going. We were late bloomers in terms of vision, which helps explain why we bought Esquire. It was totally off strategy, not that we realized it at the time.
INC.: How was it off strategy?
WHITTLE: Our magazines used unconventional distribution channels and weren't cluttered up with advertising. Esquire used conventional distribution and was a cluttered vehicle. I should add that, financially, buying it was one of the worst things we ever did.
INC.: So why did you buy it?
WHITTLE: We did it mainly because we were tired of hearing, "They don't do real magazines." Finally, we said, "OK, we'll show them. Let's play in the big leagues. We'll go do one of theirs." But it didn't make much sense in terms of the company, as we eventually grew to understand.
INC.: Well, you aren't the first to make that mistake. We see it happen over and over -- companies getting sidetracked by a need for respectability.
WHITTLE: It's an issue I've tried to deal with in this company. I mean, there are no industry awards for the businesses we're in, so how do you get peer approval or applause? I've said to people here, "Look, you're going to have to get your prestige in a different way. One part of being a pioneer is that you don't get immediate applause. You have to accept that. You have to delay gratification. One day people will applaud you as pioneers, but that will only happen after it's clear we've succeeded." I think it's important to talk to people about that, show them a light at the end of the tunnel. Otherwise, they'll find another way to get prestige, and one would be to turn us into a conventional operation, which would be a disaster for the business.
INC.: Was Esquire a disaster for 13-30?
WHITTLE: It came very, very close.
INC.: In what sense?
WHITTLE: In the literal sense. When we bought Esquire, it was losing $5 million to $6 million a year and -- unbeknownst to us -- trending downward. We had $3 million in the bank, our total resources as a company. We were making maybe $1.4 million a year. We said, "Hey, we've been through tougher times than this. We can get this thing in the black in a year." That was May 1979. Well, the $3 million was gone in a matter of months. Poof! By the end of October it was clear that Esquire's losses were accelerating, not declining. We could see we'd be completely broke by Christmas. Basically, we had three options. One, we could shut the magazine down, because nobody wanted to buy it. Two, we could go bankrupt, which was not a very interesting prospect. Three, we could arrange some other kind of financial situation that would allow us to dig ourselves out.
INC.: Hadn't you realized yet that you'd walked away from your core strategy?
WHITTLE: No. Anyway, we knew we'd be the laughingstock of the industry if we closed, and that wasn't something we were interested in. So we went to our British partners, Associated Newspapers, who were the previous owners. Under the terms
