March 28, 2024

Like Any Other Business?

According to an article in the Chicago Tribune on February 22, the Chicago billionaire Sam Zell, is quoted as saying that despite the public service role of journalism, “there is no difference” between running a newspaper and managing any other for-profit business. Well, it gives me great satisfaction to tell someone who is worth several billion dollars that he’s misinformed.
The biggest trouble with the newspaper industry today is that Wall Street and other investors feel the same way–that newspapers are just like other businesses and that the public service role of journalism is a subordinate issue to making a profit. Yes, newspapers are suffering from an erosion of circulation and advertising revenue as young people go to the Web for their news, and as ad revenue, especially classified ad dollars, migrate to the Web. This revenue erosion and its multi-layered fallout that is effecting journalism was well documented in the third PBS “Frontline” program titled “News War: What’s Happening to the News,” that aired on February 27.
The “News War” program included a segment on the problems the Los Angeles Times is having because of its ownership by the publicly held Tribune Company. Big investors want the LA Times to cut editorial staff and focus on local news. It was scary watching interviews with investors Charles Bobrinskoy, vice chairman of Ariel Capital Management, and Lauren Rich Fine, managing director of Merrill Lynch.
Bobrinskoy said, “They’ve got over 20 foreign bureaus, including Istanbul and Cairo. Nobody is reading the LA Times wanting to find out what’s happening in Istanbul, so it’s critical that the LA Times figure out what it is, which is a provider of local news about what’s going on in Southern California.” In other words, the big Wall Street investor wasn’t afraid to tell the editors how to run the newspaper and tell them what kind of stories are important. What would Bobrinskoy say if James O’Shea, the editor of the LA Times, or Bill Keller, the Editor of the NY Times, told him that he didn’t know how to manage his portfolio of investments, that he had too many high-tech stocks and was too heavy in junk bonds?
Lauren Rich Fine, said on the same “Frontline” program, “I don’t believe consumers are willing to pay for the distinction between good-quality journalism and bad-quality journalism…,” thus indicating that the LA Times should concentrate on local coverage and cut staff in international and national reporting. What arrogance, what a low opinion of newspaper readers. She’s obviously speaking from interviewing a sample of one—she’s reflecting her own inability to distinguish. She probably reads The NY Post and Page Six.
When Private Capital Management CEO, Bruce Sherman, badgered Knight Ridder into selling its newspaper chain to McClatchy, it was reported that Sherman was urging Knight Ridder to sell so that his investment fund could make its targeted return and he could then get his huge bonus. Some rumors were that the bonus would be over $300 million. So when Wall Street fund managers say they are looking out for their shareholders, the translation is, “I’m looking out after my multi-million dollar performance bonus and have to find anything even remotely believable to say to justify my actions, no matter how ridiculous or harmful.”
When “Frontline” reporters, or any reporters for that matter, interview anyone from Wall Street, they should ask for full disclosure of interviewees’ financial interests in the company or industry they are being asked about. So, “Frontline” should have asked Lauren Rich Fine, “What percent of the Tribune Company stock does your fund/company own?”, “What is your annual total compensation?”, “”How much money is at stake in your performance bonus if the Tribune Company stock goes up, say three points?” “How much is your fund up or down this year?”, and “How will the percentage it’s up or down effect your bonus?” Then, when Fine says something silly about the LA Times or any company in which her fund and/or firm own stock, we’ll know how to evaluate what she says.
It’s obvious Fine wasn’t up on 35 years of scholarly research on the positive relationship between newspaper quality and profit. Esther Thorson and Murali Mantrala recently completed a study that will be published in the April issue of the Journal of Marketing. Thorson said of the study, “The most important finding is that newspapers are under-spending in the newsroom and over-spending in circulation and advertising. If you invest more in the newsroom, do you make more money? The answer is yes. If you lower the amount of money spent in the newsroom, then pretty soon the news product becomes so bad that you begin to lose money.”
But what would Fine or Bobrinskoy or any Wall Street investor know about the facts and reality of the newspaper business or, more importantly, about public service or being a public trust when their personal bonuses are at stake? The next time I see “Frontline” or any news report quoting any of these creeps, I want better reporting. I want full disclosure—I want to know what’s really at stake for the investors and corporate executives being interviewed. After all, I know what’s at stake when courageous journalists like Dean Baquet, ex-editor of the LA Times, speak out and tell the truth—their jobs, not million-dollar bonuses, are at stake.