July 27, 2011

Staff Picks: World of the News

By: 800-CEO-READ @ 8:56 PM – Filed under: Management & Workplace Culture

I've been fascinated watching the phone-hacking scandal surrounding NewsCorp and the Murdoch family. It's not because I have strong views about Murdoch himself (though I do), but because I absolutely love newspapers and I'm fascinated by the news business. The very first amendment of our constitution gave us a free press, and that fundamental right has created what has become an institution whose business model has been in almost constant flux since its inception. Even before the internet came in with it's disruptive innovations and changed the game of news, the nuts and bolts of the business behind the news were constantly turning, being changed, building new platforms, larger structures.

Today, I'd like to pull two quotes from two books that discuss the seismic shifts that have rocked the news business, and have therefore affected the news itself. The first is a story from Alex S. Jones's 2009 book, Losing the News, about the shift that newspapers in this country went through over the last 40 years from being largely family owned to being gobbled up by chains and larger media conglomerates.

The [Fort Worth] Star-Telegram, with a circulation of more than 200,000, is roughly the 45th largest newspaper in America, smaller than Denver or Kansas City but larger than Cincinnati and Richmond. It is of a size that has made it highly profitable for many decades, and it competes effectively with the Dallas Morning News, its much larger neighbor. The paper was family-owned until 1974, when the Carter family sold to Capital Cities Communications. Cap City acquired ABC and was then itself bought by Disney, which had no interest in newspapers and sold the Star-Telegram to the Knight Ridder newspaper chain in 1997. In 2006, disgruntled shareholders, unhappy with Knight Ridder's bottom line forced the sale of the company, and, in a burst of optimism, McClatchy Newspapers purchased several of the papers, including the Star-Telegram. McClatchy is considered probably the most public-spirited and news-oriented newspaper chain in the nation, and has a reputation for of being satisfied with profit margins that are somewhat below those demanded by the industry's most avaricious chains. The papers purchased by McClatchy were considered to be in safe hands in what was already a difficult time.

But McClatchy's purchase of the newspapers, with its huge attendant debt, has proved to be a bottom-line disaster for the company. The flight of advertisers to the Internet was compounded by the general malaise created by the recession, and 2007 brought the second-worst decline in newspaper advertising in half a century. For many papers, 2008 was worse. Withe McClatchy stock plumetting, the company pulled the plug on spending.

The quote I pulled above leaves out the main character in Jones's story of the Star-Telegram, Mr. Rex Seline. Seline was a newspaper "lifer," who had worked his way around the country and through the business to become the executive business editor, and eventually managing editor for all the news, at the aforementioned paper. When "the company pulled the plug on spending," Rex was out of a job along with 25 percent of his newsroom. It's a story we've heard all too many times, and at almost every publication. Regardless of what you think of Rupert Murdoch (and I'm sure you think something), this has not been the story at his publications. He is in a unique position of not needing to make any profit on his newspaper properties, and has been expanding staff and foreign bureaus when everyone else is cutting them back.

In the introduction to The Deal From Hell, released last month by PublicAffairs, James O'Shea tells of how one man, Tribune Company CEO Charles Brumback, almost averted a crisis by pulling together the "big boys" in an online news network, how most of those companies went the way of media consolidation and buyouts instead, and how three "little guys" fundamentally undercut the traditional newspaper model by taking aspect. The introduction covers all of that in a narrative built around the story of how Charles Brumback's successor as Tribune Company CEO, John Madigan, ended up buying the Times Mirror Company, which included the Los Angels Times—the largest merger in the history of American journalism.

In the early 1990s, Brumback had tried to interest big publishers in the New Century Network, a consortium of America's top-nine newspaper companies that would create a national news and information network online, for which customers would pay. In return, the customer would have access to a full-range of national newspaper content and services online. But industry leaders tried to ignore the Internet, fearing it would cause disproportionate damage to their existing business. Their internecine squabbles eventually destroyed the New Century initiative. Cindy Sease, a Sioux City classified ad director who also chaired the NAA's Classified Ad Federation, warned the publishers, "When we are up against huge software industry giants, we need to band together as an industry and stop worrying about knocking one another off."

As it happened, the threat posed to newspapers by software giants like Microsoft would pale in comparison to newspapers by software giants like Microsoft would pale in comparison to the one leveled by the little guy, a digital sniper working in an apartment, armed with little more than a dream and a computer. The industry's lock on lucrative classified ad markets allowed papers to charge $50 to $100 for a one-inch ad that would run once or twice a week. Even as Madigan and Willes sat down for what Willes thought would be a casual chat, a mere five hundred miles up the California coast, Craig Newmark, an ex-computer programmer from Charles Schwab & Co., filed papers to register craigslist as a small for-profit Internet company that would revolutionize classified advertising with free online ads.

Meanwhile, two young Stanford University graduate students an hour plane ride away had just finished solving an equation with 500 million variables and 3 billion terms. Using banks of computers, Sergey Brin and Larry Page created an algorithm called PageRank, which they housed in a start-up company they eventually called Google. Two months after Madigan and Willes met, Brin and Page announced initial public funding.

In a small Hollywood apartment, an untrained D student who worked in a gift shop at a CBS studio was gaining traction for a conservative news-aggregation site that would become a potent weapon in the cultural wars against the so-called mainstream media. Matt Drudge rooted through studio trash cans and collected gossip to cobble together a wide range of political and entertainment industry tidbits that he published on the Internet. He created the "Drudge Report," a gossipy, sloppy brand of journalism that would help undermine traditional journalistic standards and put organizations like the Tribune and Times Mirror at a disadvantage for their adherence to diligent reporting.

As most of you probably know, the merger, like the McClathy purchase of the Fort Worth Star-Telegram and other papers, did not end so well. I used to worry about the consolidation of news media, and I still am, but now I'm also worried about it's very survival. Maybe, like The Economist recently wrote, the news is heading Back to the coffee house, with its smaller publications, circulations, and more partisan tendencies. And who knows, maybe that's not a bad thing. The discourse in this country is certainly ugly right now, but it can't be any worse than our founding father's dirty campaigns, and we got through that.