Saturday Review's newly transplanted editorial staff of 75 had scarcely unpacked in San Francisco last October when the first of several financial tremors struck. Only after Charney and Veronia had gone back to the original investors for an additional $5 million did word filter down that the magazine had nearly folded while the staff was out apartment hunting.

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One afternoon last winter, Nicholas H. Charney, editor-in-chief and chairman of the board of Saturday Review Industries, invited his staff to a slide show. The topic was not the charms of San Francisco, though most present were certainly new to the area. “Nick decided we should learn something about the look and feel of magazines,” one senior editor recalls, “so he produced a sixth-grade audio-visual show. Don Wright, the art director, was at the back of the conference room running the projector. Nick was on a folding metal chair providing the voice-over.”

Charney went on for nearly three hours, discoursing on good graphics and bad graphics, contrasting “old” magazines with new. Look had died because it was hot with-it graphically, Charney told the audience, which included several former Look staffers. Other examples of yesterday’s magazines were ordered up: Harper's, Atlantic and The New Yorker, which would last perhaps another five years. The Newsweek alumni in the room, all imported at high salaries, were surprised to see a Newsweek cover flash on the screen. “Is that supposed to be there?” Charney inquired. Then came examples of “new magazines,” those with hot graphics: New York, Psychology Today, Ms. and Clear Creek. Somebody observed that Clear Creek had folded.

Charney next discussed the distinction between “linear” publications, those that use primarily words, and non-linear ones, which make heavy use of graphics. A magazine must be able to pass a “flip-test” on a newsstand, said Charney, explaining that the back of the book is key, because many flippers flip from back to front. “Never mind if we have anything to say,” an editor remembers thinking. “Can we stand up under the rigorous demands of flippership?” Executive editor Ron Kriss, just hired from Time. was shredding a napkin, absolutely silent.

It has been just over a year since Nick Charney descended on New York flashing charts and projections over lunches at Lutece, offering five-and six-hundred dollar weekly salaries and the good life in San Francisco. Charney and his partner, John Veronis, had sold Psychology Today and acquired Saturday Review. Norman Cousins was out; Charney was remaking the turgid weekly into four flashy monthlies—SR/Education, SR/Society, SR/Science and SR/Arts. And Charney was hiring. For editors who had reached the heights of corporate publishing while still in their thirties, here was a beady opportunity: a chance to drop out without dropping out. to launch a fresh national magazine without having to bootstrap it, long-term contracts, moving expenses, and for the higher echelons, stock options. “We were told," one emigre recalls, “don’t worry about advertising, we’re going to do it from house industries. You just put out the best magazine you know how.”

SR's newly transplanted editorial staff of 75 had scarcely unpacked in San Francisco last October when the first of several financial tremors struck. Only after Charney and Veronis had gone back to the original investors for an additional $5 million did word filter down that the magazine had nearly folded while the staff was out apartment hunting. At one point, SR was over a million dollars in debt to the printer, who was refusing to publish until the debt was paid. On Nov. 9, a memo assured the staff that the cash crisis was over, and urged everybody to “help us save money, large and small, where each of you can. We want to be sure that our resources go into people and editorial content, and not into avoidable delays, wastes, frills, and expenditures not central to our purpose...”

The authors of these sobering words had just dropped several hundred thousand dollars moving the editorial offices from New York to San Francisco, and were well into a second million converting first a firehouse, then a warehouse, into a suitable funky-mod headquarters for the new Saturday Review. The memo went on to explain, in case there were any doubts, that “Profit is an important, not a nasty, word. We are a very special business, a business with a highly public calling, and one about which we feel strongly. But we are a business...”

Quite so. The editor-in-chief and chairman of the board of Saturday Review-Industries habitually referred to his quadrumvirate of magazines as “the business." pronounced in three measured syllables, biz-i-ness, as if it might be a family dry-goods store At thirty-one, Nick Charney was still the wunderkind – breezily confident in the mystique of California living and his computers to solve all ills, volunteering charts, eager to share the secret of how he does it. In an interview before the four magazines collapsed, Charney, with no particular prompting, sketched a graph to demonstrate precisely how SR’s pre-tax profit would have increased to nearly $10 million by 1976. presto. "We have tried to take the unpredictability out of starting magazines," said Charney. “We are a group of young bright individuals. We’ve got one foot into tomorrow."

Like the fellow down the hall in the dorm who made a small fortune on the laundry-concession and wants to borrow a hundred dollars so he can move on to charter flights, Charney looks to the future. Charney’s boyish insecurity sometimes leads him to lean on weak or incompatible advisors and to dress up his talk and lifestyle with financial hyperbole. His is part owner of a ranch in Bolinas and is still trying to unload a $750,000 white elephant complete with grottos and artificial boulders left over from his days in Del Mar. “Nick is basically a promoter, and a brilliant one,” says an associate. "But he doesn’t know anything about managing a magazine.”

Charney and Veronis’ formula for remaking Saturday Review was an embellishment on several currently fashionable publishing axioms. First, this is the age of the specialty magazine. Second, monthlies produce a higher per-copy revenue than weeklies. Third, the subscriber should be a major source of direct income, not just a customer to attract advertisers. The new SR was to combine all three axioms (and others) into a neat equation: the general interest 1U weekly reborn as four specialized 50K-and-up monthlies. The cost, Charney explained, was a mere fraction of the expense for starting such a venture from scratch, because they were building on an established magazine and a base of 650,000 subscribers. Psychology Today, with its slick graphics and aggressive marketing, was a rough model. With PT and its merchandising spin-off, Communications/Research/Machines (CRM), Charney and Veronis had shown it was possible to use a magazine as a vehicle to sell not only advertising, but mailing lists and a whole array of ancillary products, like lab kits, film strips, games, travel packages and textbooks. As Veronis put it to Robert Stein for an article in New York early last year, “We don’t consider the reader as a $I2-a-year subscriber to a magazine, but as a potential $100-a-year customer in the magazine's field of interest for books, records, games, posters, video cassettes. conferences, school courses and other products and services.” Partner Charney insisted, however, that these spin-offs were never uppermost in his thoughts. The game plan was to put out four specialty magazines.

In short, Charney and Veronis were publishing a marketing formula. All that remained was to fill in some editorial content to accompany it. “This is the age of the specialty magazine, all right,” says Alfred Meyer, who recently quit as managing editor of SR/Science. “But successful specialty magazines usually bubble up because of some real interest. They are difficult to impose from above.” As long as the financial equation seemed to be working, Charney and Veronis let their newly acquired editors edit. The honeymoon ended with the emergency $5 million capital infusion last October. :

Actually, most of the money was used upalmost as soon as it came in: over a million to pay the printer, most of the rest on a massive, 18-million-piece mailing. Less than a million dollars was set aside to operate the magazines until this summer, when Charney and Veronis hoped the renewal cycle would revive the cash flow. By February, SR was out of cash again.

NEXT WEEK IN PART TWO: The ultimate demise of the Del Mar Whiz Kids.

Bob Kuttner recently returned to Washington as national editor of The Village Voice after six months in San Francisco as a reporter with public television station KQED.