February 2003

Will Sheldon Adelson sink the show he founded?

The show that put the trade show industry on the business and financial pages faces speculation about its future and competition from its creator. Proving yet again that COMDEX is still the show to watch.

By Danica Vasos and Elizabeth Ingram

It’s a true rags-to-riches story of a man and his trade show. Sheldon Adelson grew up in the poor Dorchester neighborhood of Boston. His father drove a taxi, and his mother ran a knitting store. As a kid, he sold newspapers on street corners and owned his own business by age 16. After a tour of duty in the U.S. Army, he worked as a mortgage broker, investment adviser and financial consultant.

Adelson eventually established a company, the Interface Group, to launch technology shows. While on his way home from one of those shows in April 1979, he was reading a new newspaper for the computer industry and recognized what appeared to be an emerging market. Less than six months later, Adelson started the Computer Dealers Exposition (COMDEX) to bring computer manufacturers and resellers together. The first show attracted 4,000 attendees and 160 exhibitors. 

Eighteen years later, the show had grown to 212,000 attendees and 2,480 exhibitors in 1.38 million square feet of space and had secured its position as the largest U.S. computer trade show. Adelson sold COMDEX in 1995 and went on to build the 3,036-suite Venetian Resort-Hotel-Casino in 1999. Today Adelson serves as Chairman of the Board of Las Vegas Sands Inc., the parent company of The Venetian. But the story doesn’t end there. 

After peaking in 1997, COMDEX started a slide that has left it at 125,000 attendees with about 1,000 exhibitors in 500,000 square feet. Still a large show, but nowhere near where it was in its glory days. 

Can this mighty show be resurrected? Not if the founder gets his way. With hisnoncompete expired, Adelson is planning a new show, to be held the same week as COMDEX, at the Sands, just two miles from the Las Vegas Convention Center, where COMDEX is held. However, Adelson says “compete” isn’t the proper word to use when comparing his show with COMDEX. “There’s really not much left to compete with because the show’s reputation doesn’t make it fertile ground for competition,” he says. “The only thing they have of substance is the name I built.”

COMDEX is arguably one of the best-known shows in the world, and Adelson was one of the driving forces behind that success. But, with the show dramatically declining — 41 percent fewer attendees, nearly 60 percent fewer exhibitors and nearly 64 percent less exhibit space — will Adelson win the battle? Find out what has transpired over the show’s 24-year history to bring it to the height of the trade show universe and ultimately to where it is today. 

COMDEX explodes onto the scene

When Adelson launched COMDEX, the computer market was virtually untapped. There were a few shows, including the National Computer Conference, focused on mainframes. The PC market was about to explode, and undoubtedly, Adelson was in the right place at the right time. That first show, held in the MGM Grand hotel, featured such products as Durango desktop systems and DEC DataSystem minis and hosted sessions on reseller-vendor relations and prospecting for customers. 

COMDEX grew quickly and secured its niche by focusing on distribution, a new concept for the computer industry. By 1981, the show had grown to 24,000 attendees, and the following year, 1,000 exhibitors maxed out the available space at the Las Vegas Convention Center. Many IT players credit Adelson with building the mass distribution computer dealer network, and he was named one of the 25 most influential executives in the computer industry by Computer Reseller News.

“The computer industry was growing with the same furor as the dot-com boom,” says Lewis Shomer, who was Vice President of Marketing and Sales for COMDEX in 1983 and 1984. “There was a plethora of computers available, and people were becoming millionaires overnight. And there were hundreds of small companies that manufactured peripheral equipment and devices for those systems.” 

Exhibitors began building bigger, more elaborate booths. A mainstay at European shows like CeBIT, double-decker booths made their American debut at COMDEX. And bigger booths meant increased business for I&D companies and general service contractors. The successful event started a domino effect. 

Adelson also innovated another practice that’s standard for most shows — the priority point system that rewards exhibitors for their loyalty to the show and their booth size. These points became so coveted that when a merger or acquisition occurred, the booth assignment order was part of the deal, Shomer says. 

By 1984, the show was attracting 81,000 attendees, and COMDEX was added to the U.S. Department of Commerce Foreign Buyer Program in 1987. COMDEX was also attracting more and more press attention, and many say COMDEX put the trade show industry on the business and financial pages. “We had more press than the Super Bowl,” says Jason Chudnofsky, who joined Adelson as President of the Trade Show Division of the Interface Group in 1987 and is now Vice Chairman and COO of Key3Media Group, COMDEX’s current owner.

Attendance hit 110,000 in 1988. And in 1989, Adelson and his partners bought the Sands Hotel and Casino in Las Vegas. The following year, they built the Sands Expo & Convention Center, one of the largest privately owned U.S. convention centers, and the show moved to the new venue. 

By 1995, COMDEX had grown phenomenally, filling multiple venues with 210,000 attendees. Profit margins soared, reaching 75 percent. “Many events used COMDEX as a guide for how to grow a show,” Chudnofsky says.

Cashing out

In 1995, Adelson sold COMDEX and 16 other computer-related expositions and conferences for a record $864 million to Softbank Corp., Japan’s largest distributor of computer hardware, peripherals and systems, and a major Japanese publisher of computer-related magazines and books. Softbank first ventured into the exposition industry in 1994 when it purchased ZD Expos — producers of NetWorld+ Interop, Seybold Seminars, Digital World and Windows Solutions — for $202 million.

The show continued to thrive under the new owner, thanks in part to a renewed focus on customer service, says William R. Sell, Director of COMDEX from 1995 to 2001. In addition, the large Japanese corporation modernized the show’s infrastructure — adding voice mail, e-mail, database management software and more. “It was revolutionary because all this information became available. Customers suddenly felt overloved because show management was following up in ways they never had before,” Sell says. The show peaked in 1997, with nearly 212,000 attendees, 1.38 million square feet of exhibit space and 2,480 exhibitors. 

Softbank also continued to grow, acquiring Ziff-Davis Publishing — which included several magazines, a cable channel and a market research group — for $1.8 billion in 1996. With annual revenues of $1.153 billion in 1997, the company had established itself as a technology publishing and trade show powerhouse. But according to insiders, Softbank management focused on these other business units instead of COMDEX, which may have lead to declines. 

In 1998, the show dropped to 206,000 attendees in 1.38 million square feet, and it fell to 200,000 attendees and 1.16 million square feet in 1999, coinciding with the burst of the dot-com bubble, which hit both the trade show and publishing sides of the business hard. In addition, according to Adelson, the problem compounded when COMDEX didn’t assimilate the technology hot spots, such as the Internet, wireless technology and the evolution of computerization into the consumer side.

The following year brought yet another management and ownership change. After a year of trying to sell the company, COMDEX was eventually spun off to Ziff-Davis shareholders as a public company, Key3Media Group Inc., with Fredric Rosen, an industry outsider who led the consortium of private investors that created the buyout, at the helm. “The event and our customers were back as the top focus,” says Sell. “Fred had a can-do attitude. His goal was to bring COMDEX back to more than 1 million square feet.” 

The show enjoyed a bit of a resurgence in 2000, growing to more than 211,000 attendees and 1.19 million square feet. Adelson has a different opinion about this change of ownership. “The coup de gras of the show was executed by bringing in Fred Rosen,” he says. Rosen’s management style was honed from years of working as President and CEO of Ticketmaster. Some in the industry say it was a mistake to allow someone with noexperience in the show industry to oversee COMDEX.

But Key3 started off strong, with almost $300 million in revenue and $100 million in EBITDA in 2000. Unfortunately, it was also saddled with $400 million in debt from its spin-off from Ziff-Davis. 

The economy stalled in the summer of 2001, and the terrorist attacks of Sept. 11 further damaged the show, bringing it to 125,000 attendees and 1,685 exhibitors. In an effort to cut losses, in October 2002, Key3 cancelled several of its regional events, including COMDEX shows in Chicago, Montreal and Vancouver, as well as a combined COMDEX/Networld+ Interop show in Atlanta.

Can COMDEX be saved?

The crux of the crises at COMDEX lies in two areas. Undoubtedly, the spending downturn in the technology arena has hit the show hard. In addition, the show is simply expensive.

Over the past three years, businesses have been trimming their technology budgets. And, in 2003, two-thirds of the Chief Information Officers surveyed by Goldman Sachs expected budget tightening on hardware and software purchases. As a result, technology companies might not meet first quarter and 2003 earnings estimates, and stock prices could drop, resulting in further tightening of the corporate marketing budgets.

With a rate per square foot of $59.95 for 2003, COMDEX costs more than most computer shows, which charge a median rate of $31 per square foot, according to “EXPO’s Industry Profile” (January 2002). Instead of spending nearly $600,000 for 10,000 square feet of space at COMDEX 2002, for example, Sony Electronics pulled out of the show altogether, choosing instead to host its own event in Japan (see “Corporate Shows: Friend or Foe?” in the November/December 2002 issue of EXPO). In addition, a number of major players — including Cisco Systems, Intel, Apple Computer, Gateway and LG Electronics — didn’t exhibit in 2002.

To give Key3 credit, the company pulled out some big guns. Microsoft Chairman Bill Gates gave the keynote address, and the company bought 28,000 square feet of space on the show floor. Hewlett-Packard’s Carly Fiorina, Sun Microsystem’s Scott McNealy and Peter Chernin from Fox Corp. also spoke at the event. HP took 7,000 square feet of space. 

“Considering the environment, I think 2002 was a very good show,” says Michael Millikin, Senior Vice President of COMDEX Worldwide. He points to the fact that companies enjoyed several years of unfettered purchasing, and now they’ve got a backlog of unused software.

It didn’t help that, on Nov. 14, just days before the 2002 show, Key3 released its third quarter financial results. For the first nine months of 2002, the company suffered a net loss of $686.2 million. EBITDA was a negative $299.6 million. The company also announced that it probably wouldn’t make the $15 million interest payment on its debt that was due Dec. 16 and said it might have to file for Chapter 11 bankruptcy protection.

However, Millikin is encouraged that COMDEX drew as many attendees in 2002 as it did in 2001. “The feedback that we got from exhibitors was that it was a better audience than it has been in a long time,” he says.

BenQ, a Taiwanese projector and plasma manufacturer, exhibited at COMDEX for the first time in 2002, and overall, they were pleased with the event. “COMDEX was key for us to establish BenQ as a major player in the industry for both brand recognition to current customers and future customers, as well as the media,” says Ralph Tang, President of BenQ. However, uncertainty exists even among dedicated exhibitors about this year’s show. When asked if they would return in 2003, Tang said, “As long as the rumors of the demise of COMDEX are not true.”

Rumors and speculation

Meanwhile, Chudnofsky says work continues on the 2003 event. “We’re a tenacious and proactive group that will make sure this event continues,” he says. However, Adelson believes the show is floundering. “My estimate is they probably don’t have 50,000 to 100,000 net square feet sold, contracted and deposited,” he says. Most companies are likely holding off committing money to the show with Key3 on the verge of bankruptcy. And, since operating income is the bread and butter of any show, experts question how the show can go forward in 2003.

Key3 says they’re working to solidify COMDEX’s position in the industry. “With the rapid development of technology and the blurring over the past several years as some technology has gone into the consumer arena, we’ve had some perceptual issues about what COMDEX is,” Millikin says. So, their goal is to crystallize the focus at COMDEX on the B2B market and corporate IT and further consolidate their position.
Millikin predicts corporate spending on IT will increase and says many sectors, such as network storage, are healthy. COMDEX plans to draw back exhibitors who bought hospitality suites instead of exhibiting last year, but they’re operating on a case-by-case basis. “For some exhibitors, it’s appropriate to have meeting rooms. For others, we may be able to offer education on the show floor or speaking opportunities,” says Millikin. “It’s a mistake for us and exhibitors just to look at participation in the show as booth space.”

Adelson thinks the show needs an infusion of fresh blood if it’s to succeed. Referring to Rosen, he says, “There’s an axiom that says that the guy who ran a company into the ground isn’t the one who’s going to revitalize it.” 

Speculation does indeed abound about the fate of COMDEX and Key3 and its ownership and management. In December, after Key3 failed to make its debt payment, Bahamas-based Triax Holding Ltd. purchased all of Softbank’s more than 36.7 million shares of common stock in Key3 — for $2. This purchase gives Triax 53.55 percent of Key3’s common stock and 40.74 of the company’s total voting power. Attempts to discover the owners of Triax failed.

This may prove to be the perfect environment for Adelson to launch the show “that will replace what COMDEX should have arrived at” if he were still running it. “In order to adapt to the ever-changing needs of an industry, you have to talk to your exhibitors and know what’s going on,” he says. He says that’s where COMDEX went wrong, and where he’ll step in to pick up the pieces.

Danica Vasos is the Publisher of EXPO magazine. She can be reached at dvasos@expoweb.com. Elizabeth Ingram is the Editor-in-Chief of EXPO. She can be reached ateingram@expoweb.com.