Q&A: Key3Media chairman on Comdex financial woes

When Comdex/Fall 2002 kicked off last night in Las Vegas, Fredric Rosen, chairman and CEO of Key3Media Group Inc., noted the tough year the high-tech industry has been experiencing.

Key3Media produces, manages and promotes Comdex and several other technology conferences. Last week, the Los Angeles-based company reported a net loss of $315.7 million for the third quarter and said it's exploring a number of options, including a restructuring, sale or bankruptcy protection.

This year, Comdex officials expect attendance to match last year's 125,000, but said the number of exhibitors is down to 1,100. In its heyday, Comdex attracted more than 200,000 attendees and more than 2,000 exhibitors. Rosen spoke Friday with Computerworld about Comdex's challenges.

Q: Many of the two dozen IT professionals Computerworld queried last week about Comdex said that they prefer smaller, more focused shows and that they have less need for a broad show such as Comdex. Any thoughts on that?
A:
This is an industry that's very disparate. There are 125,000 people who went to Comdex last year. There are approximately 125,000 people who will come to Comdex this year. That is the largest audience that any IT trade show gathers in North America.
A horizontal trade show is like network television. Not everybody watches, but it's the largest aggregator of audience that exists. ... The [network television] audience is a third of what it was 20 years ago. The [networks] charge more for their ads than they did 20 years ago because, ultimately, it's the quality of the audience.
The exhibitors who come get the quality. It's the best quality B2B audience that exists in this space. And here's my point: Face-to-face marketing is not going away. Face-to-face marketing on verticals does not have the same impact as face-to-face marketing on horizontals. ... You want the women's channel or you want sports TV, you go to cable. You want large-scale broadcasts, you go to the networks. It's no different in trade shows.
So the fact that some people don't go -- I'm sorry they don't. But in the end, it's the people who do go that count. And the press would rather focus on the negative instead of the positive.
I'll give you a perfect example. Everybody writes which companies don't go to Comdex, but none of you write that every major IT company is in Las Vegas that week. They may not be on the floor, but they're in the hotels.

Q: IBM, for instance, told us they won't have a booth at Comdex.
A:
IBM prides itself and says, "We don't go to Comdex." Well if you don't go to Comdex, why do you register 300 people? Why do you take hotel suites? You come for the audience Comdex brings. Comdex is the magnet.

Q: Is that what's causing the financial difficulties -- the fact that vendors such as IBM aren't supporting the show by renting space on the exhibition floor?
A:
Here's the real issue, and try to understand this in terms of large horizontal shows. First of all, when Key3 spun off from Ziff Davis, it was saddled with $400 million worth of debt. The day we spun off in August of 2000, there was $400 million in debt in this company. OK? Now when you had 2,400 companies coming to Comdex, and the telecom space and networking space for N+I [Networld+Interop] was strong, and Seybold was strong, you could handle the debt. And in the year 2000, you had almost $300 million in revenue and $100 million in EBITDA [earnings before interest, taxes, depreciation and amortization].
Large horizontal trade shows count on length and breadth. So in 2000, we had 2,400 companies come to Comdex. If 1,000 companies don't come to Comdex this year -- because this year, we'll have about 1,100 -- and you multiply that by 500 feet, that's half a million feet.
We would love IBM to come, but the fact that IBM doesn't come is not going to make or break us. And people have to write that. In other words, I am tired -- and I don't mind being quoted -- I am tired of listening to IBM saying they're proud of the fact they don't come to Comdex. Then what are they doing in Las Vegas? And you can quote me. I want you to quote me. I'm tired of the hypocrisy of people in this industry saying they don't come to Comdex because it's not relevant -- and then they're all in Las Vegas.

Q: To what do you attribute the huge drop in attendance over the past couple of years?
A:
Economy and travel. ... People think the trade show is bigger than the industry it serves. It's not illogical to assume that tech companies are sending fewer people. So the fact that we're at 125,000 people instead of 200,000 is a reflection of the state of the tech industry.
You go up to a booth. You say, "How many people did you bring this year?" They go, "Twenty." 'How many people did you bring last year?' They go, "Forty." And then they look at you and say, "How come attendance is down?" Hello.

Q: Do you think Comdex is also a victim, to some degree, of the fact that people have many more ways to get information? Lots of people told me that their key vendors are willing to travel to their companies now, and they can look up information on the Internet.
A:
It is fashionable to bash large, horizontal trade shows, OK? The fact of the matter is that when the whole industry suffers, we suffer.

Q: So do you see the past two years as an aberration rather than a trend?
A:
What I see is that technology is coming to grips with the fact that it is subject to the same cycles every other industry is subject to. If you go back and read all the articles that were written, everybody talks about tech, the New Economy, we'd never go through this in one cycle. And guess what? There was no New Economy. It's New Economy/old economy; it's the same economy.

Q: The bad economy coupled with a disaster that nobody could have predicted clearly had an effect on Comdex. Do you have any concerns that people may rethink their need to have a presence at Comdex? Does the drop in attendance represent a permanent trend or a blip on the radar screen?
A:
It's a cycle. When the world comes back, Comdex will come back. And the fact of the matter is, if Comdex doesn't come back, there'll be somebody else that'll come back. The very essence is you need a gathering point. Human beings are tribal. Technology without purpose is meaningless. Technology, unless you can use it on a mass consumption, doesn't do any good. We find that people invent things. But unless they're adapted by the vast majority of people, they sit in labs or they don't have any scale.
Look at the executives who come. Senior executives of every company are all in Las Vegas that week. If I said, "Next year, Comdex is going to disappear," then another event would happen, and they'd all show up for that.

Q: Do you think Comdex is at risk?
A:
You've got all these little faceless consultants who go to companies and say, "Oh, I can save you money. Don't go on the floor at Comdex. Rent a hotel suite, and then you can bifurcate the audience." And then they're happy to tell journalists like you, "Oh, we don't come to Comdex because we don't like the audience."
But at some point when you drain the river far enough, the riverbed goes dry. So the challenge we have is to bring everybody back to the center and bring everybody back to the center because Comdex is a magnet for the audience.

Q: So you think your greatest challenge is re-attracting the technology vendors out of those hotel suites and into the exhibition hall?
A:
Sure, and then you'll see all the IT guys who say they don't come, they'll all come back. But the fact is I defy you to tell me any show in North America that draws the audience we do -- 70% to 80% of the top 100 exhibitors come back every year.

Q: So you're saying the problem is not the big vendors, such as IBM and Oracle Corp., which aren't exhibiting. It's the midsize-to-small vendors that are the problem.
A:
That's right.

Q: Do you think the technology vendors aren't throwing enough support behind an important show?
A:
Yeah, I do. I think these people forget what community is, and I think companies like Microsoft are really good, and Samsung and Intel. ... The fact of the matter is we all need to go back to community. This is a group that to a certain extent lives in isolation.

Q: What are the odds we'll see Comdex next year?
A:
100%.

Q: What are the odds we'll see more attendees and more exhibitors next year?
A:
It depends on the state of the industry.

Q: Do you think there will be a solution for your current woes?
A:
In going through a restructuring, you own great brands. Brands survive problems. The problem this company has today is that it has too much debt that it inherited.

Q: What do you think the most likely scenario will be?
A:
Talk to me in about 60 days.




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