The Audit

November 30, 2012 06:50 AM
Audit Notes: pyramid people, Disney and ABC, no USA Today paywall

Roddy Boyd digs into a diet-shake pyramid scheme
By Ryan Chittum
The investigative journalist Roddy Boyd has some excellent reporting on a multilevel marketing company (read: pyramid scheme) called ViSalus:

ViSalus is a multilevel marketing company that promises ordinary folks a shot at financial success based solely on their skill at building a sales group that essentially draws on personal social circles: A distributor must recruit customers (usually starting with friends, neighbors, relatives) who are asked to enroll still others as customers, who are then encouraged to bring in more new members to the sales group.

The Miami sales conference was designed to reinforce the secular theology of economic independence and self-help advocated by ViSalus — and other multilevel marketing enterprises. For 60 years, such companies have used their sales gatherings to dangle the prospect of a path away from corporate drudgery or limited means...

Yet the company’s prospectus shows that on average for the first six months of this year the typical customer spent $240 versus $1,286 by distributors. This seems odd if ViSalus is claiming its distributors are not required to buy products...

Perhaps ViSalus’ high churn rate can be explained by additional Southern Investigative Reporting Foundation analysis from data disclosed in the prospectus: This year through June, the typical distributor for ViSalus bought on average $1,286 in products but earned only $1,638 in commissions, netting $352.

These MLM schemes always end in tears, for everyone but those at the top. There are lots of dodgy smaller companies and far too few reporters like Boyd who know how to dig into them.

— There was yet another catastrophic workplace fire in South Asia, with 112 dead this time and eerie parallels yet again to the Triangle Shirtwaist Factory disaster of 1911.

The American companies exploiting cheap labor include Walmart, Sears, and Disney this time. ProPublica's Justin Elliott notices that Disney-owned ABC's report has an interesting couple of paragraphs:

Late Tuesday the Associated Press reported that Disney was also among the brands produced at the factory. For its original report on the factory fire, ABC News was told by a Disney representative that the company's third party supplier assured them none of their orders had been placed at the Tazreen factory.

"We extend our deepest sympathies to the families who have lost loved ones in this horrific tragedy," a Disney spokesperson said in response to the AP story. "Our records indicate that none of our licensees have been permitted to manufacture Disney-branded products in this facility for at least the last 12 months. We have been working collaboratively with governments, NGOs and other companies to address the issues associated with manufacturing in Bangladesh and we are committed to continuing these efforts."

Fortunately the Associated Press had boots on the ground in Dhaka to prove that Disney's statement to its news arm was false.

— USA Today publisher Larry Kramer says he's not planning a paywall for his paper anytime soon because it's not "unique enough," reports The Wrap.

He's right about that. USA Today is about the last paper I can imagine having a successful paywall. Setting up a meter to charge heavy readers who visit the website more than 15 or 20 times a month might enable them to get a few bucks while maintaining ad revenue. But I doubt the paper has a lot of those heavy readers online, and the ones it does have probably aren't intensely connected to the newspaper.

If you're going to charge people, you have to have something they need or want that you do best. And USA Today just doesn't.
November 30, 2012 12:41 AM
Hot air Rises Above on CNBC

An anchor pins a minor dip in stocks on the TV appearance of a minor politician
By Ryan Chittum
Rise Above, if you're among the 99.95 percent of the country who don't watch CNBC on a given day, is the network's campaign against the government for not putting "politics" aside to come to a budget agreement that's to the stock market's liking.

It's also an unlikely crusade, as I noted last week, from a news organization with some of the Fox-iest ~~journalists~~ TV personalities out there, leading lights like Joe Kernen, Rick Santelli, and Larry Kudlow.

Then there's Michelle Caruso-Cabrera, who took all of two minutes on Tuesday to expose the hollowness of her own network's shtick. Which is unsurprising since she's written a book, blurbed by her old boss Jack Welch, about how "the Democratic Party is out of control when it comes to spending and intrusive government programs" and in which her own book jacket says her "Democrats are portrayed as union-loving, tree-hugging activists, more concerned with making government big rather than effective" in its pages.

So what happens when Caruso-Cabrera has one of those union-y arborist types on? Democratic Congressman Raul Grijalva went on air on Tuesday to talk about the "fiscal cliff," (which is really an austerity slope, but you'd never know that from CNBC) and Caruso-Cabrera blamed his appearance for dragging down the entire $20 trillion stock market. Seriously:

Here's her quote, via Talking Points Memo:

Representative? You know what, as we’re talking the market is selling off once again,” she told Grijalva. “Every time members of Congress come on, and I’ve got to tell you sir, I think you’re contributing to the fears that we’re going off the fiscal cliff because it doesn’t sound like there’s any compromise in what you’re saying. Do you care that markets are selling off dramatically when it looks like you guys can’t come to a deal?”

Of course, it's nuts to think that Mr. Market was hanging on every word of an obscure member of Congress being lectured by some talking head on CNBC. But exposes a peculiar combination of ignorance, narcissism, and conventional wisdom that sums up Rise Above perfectly.

It's also a revealing look at the overall CNBC mindset: the primacy of "listening to the markets" combined with the overinflated self-importance of a TV anchor topped off with jaw-dropping misunderstandings of correlation and causation, noise and signal. You almost have to willfully misunderstand the unknowableness of the markets to be able to blab for hours a day on CNBC. Every 50 point move in the Dow has a narrative that can be turned into live TV drama at the expense of the truth.

There's another level of wrongness here too. Grijalva came on the air at 3:33 with the Dow at 12,908. When Caruso-Cabrera accused Grijalva of tanking the market four minutes later, the Dow was at 12,894. A 14 point move in four minutes is entirely unremarkable. But as Grijalva's segment ended, Caruso-Cabrera doubled down, saying "eighty points," as if the Dow had fallen that much in the time he was on air.

It was actually down 20 points in that time, and pinning that decline on the political views of a minor politician who happens to be on CNBC is just flat out of line.
November 29, 2012 06:50 AM
Audit Notes: WaPo on Avandia, giving away the store, plutocrats

Report shows how drug research is corrupted by corporate money
By Ryan Chittum
The Washington Post's Peter Whoriskey has another outstanding story in his series on the Avandia drug scandal at GlaxoSmithKline and what it says about the corruption of our system for testing the safety and efficacy of drugs.

Years ago, the government funded a larger share of such experiments. But since about the mid-1980s, research funding by pharmaceutical firms has exceeded what the National Institutes of Health spends. Last year, the industry spent $39 billion on research in the United States while NIH spent $31 billion.
The billions that the drug companies invest in such experiments help fund the world’s quest for cures. But their aim is not just public health. That money is also part of a high-risk quest for profits, and over the past decade corporate interference has repeatedly muddled the nation’s drug science, sometimes with potentially lethal consequences...

The odds of coming to a conclusion favorable to the industry are 3.6 times greater in research sponsored by the industry than in research sponsored by government and nonprofit groups, according to a published analysis by Justin Bekelman, a professor at the University of Pennsylvania, and colleagues.

Moreover, at the same time that companies have been funding a larger share of research, they have shifted the job of conducting trials away from nonprofit academic hospitals to for-profit “contract research organizations.” Critics say that with this change, corporate bias is less likely to be challenged.

As you can see from the example of Avandia, which caused some 27,000 heart attacks and deaths. Astonishing. Great work by the Post.

— Here's a feel-good story for your Audit reading, via the Star Tribune. A grocery store owner in Minnesota is retiring and selling his two stores to his 400 employees, at no cost to them:

On Jan. 1, Lueken's Village Foods, with two supermarkets in Bemidji and another in Wahpeton, N.D., will begin transferring ownership to its approximately 400 employees through an Employee Stock Ownership Program (ESOP).

Lueken said he had multiple offers to sell to large independent chains and might have gotten more money that way. But he and his family believe that selling to workers will be better for them, the business and this north-central Minnesota city of 13,000 people...

Employees say Lueken's decision, which won't require them to pay anything for their shares in the business, multiplied the high esteem they already held for their boss.

— Read this Ezra Klein conversation with Reuters's Chrystia Freeland, whose new book is called "The Plutocrats: The Rise of the New Global Super Rich and the Fall of Everyone Else.” Freeland:

There’s no one way of seeing the world, and different people are different, but for me, the most vivid statement of the royal jelly view came from Mikhail Khodorkovsky, who said if a man is not an oligarch, something is not right with him. The great thing about the Russians is they’ll say that kind of stuff directly. My suspicion is that’s a view quite a few of these people have...

Having said that, one thing I think is to what extent do you feel that the most important measure of value in society is accumulating a fortune. A lot of Americans think that’s really where it’s at. To get back to Romney, that’s where you get the belief that being successful in business qualifies you to be president. What’s interesting to me is that if you talk to the billionaires in other countries that have different social orders, you heard different views on this.

Yuri Millner, the Russian billionaire, set up a prize in theoretical physics where he gave three million bucks each to what he thought were the nine best theoretical physicists in the world. The reason he did that, he said, is that he thinks that the way our society allocates brainpower against work is not ideal. He thinks the work he does is kind of boring and humdrum and doesn’t make that much of a difference in the world but leads to these huge rewards, while in his view, the most defining and important work, the work that makes us human, is grappling with understanding the universe. George Soros will say that he thinks the most important human endeavor is to be a philosopher. You encounter that sentiment less often among the anglo saxons, because we’ve persuaded ourselves that the heroes of our social narrative our businesspeople.
November 28, 2012 06:50 AM
Audit Notes: FT’s Fairhead is out; BofA CEO stonewalls; Rent a Quote

But Pearson says the paper is not for sale.
By Ryan Chittum
FT Group CEO Rona Fairhead got denied the top job at Pearson and so is stepping down as chairman and CEO of its unit the FT Group, with a $1.8 million exit package. The Guardian's Nils Pratley asks a good question: "Why is Pearson paying Rona Fairhead to go?"

The New York Times reports that the new Pearson CEO visited the FT newsroom to tell journalists the paper is not for sale, as many had speculated.

Nobody mentions an uncomfortable item on Fairhead's résumé: Her chairmanship of HSBC's audit committee while the bank was laundering billions of dollars in Mexican druglord money. I wrote about that a couple of months ago:

So, the FT has to cover the HSBC scandal, while the CEO of its parent is on the board responsible for the bank’s oversight.

Not helping matters, Fairhead chaired the board’s Audit Committee, which at the time, was broadly responsible for making sure management’s internal controls were adequate. Those systems failed, and amidst several law-enforcement investigations into its anti-money laundering controls, the bank created a Risk Committee, which Fairhead heads.

— It's little remarked, but Rolling Stone's Matt Taibbi isn't just a withering polemicist; he's a damn good reporter too. Here he digs up testimony from Bank of America CEO Brian Moynihan from a fraud lawsuit brought against it by monoline insurer MBIA. Moynihan's memory is worse than Reagan's in Iran Contra.

Here's some of the transcript:

Q: By January 1st, 2010, when you became the CEO of Bank Of America, CFC - and I'm using the initials CFC, Countrywide Financial Corporation - itself was no longer engaged in any revenue-producing activities; is that right?

Moynihan: I wouldn't be the best person to ask about that because I don't know.

Taibbi:

There are no sound effects in the transcript, but you can almost hear an audible gasp at this response. Calamari presses Moynihan on his answer.
"Sir," he says, "you were CEO of Bank Of America in January, 2010, but you don't know what Countrywide Financial Corporation was doing at that time?"

In an impressive display of balls, Moynihan essentially replies that Bank of America is a big company, and it's unrealistic to ask the CEO to know about all of its parts, even the ones that are multi-billion-dollar suckholes about which the firm has been engaged in nearly constant litigation from the moment it acquired the company.

"We have several thousand legal entities," is how Moynihan puts it. "Exactly what subsidiary took place [sic] is not what you do as the CEO. That is [sic] other people's jobs to make sure."

— Inc. writes a puff piece on how one small businessman can get a lot of press coverage.

Drew Greenblatt is almost as much in demand as his products. His Marlin Steel Wire Products, a Baltimore-based manufacturer of precision engineered wire-baskets and sheet-metal fabrications, hit the Inc. 5000 list for the sixth time in 2012, with a three-year-growth rate of 33%. At the same time Marlin has been racking up sales, it's also been racking up attention. This year alone the company has been covered by dozens of media outlets, ranging from local and technical publications to The New York Times, NPR, Fox Business, PBS NewsHour, The Huffington Post, NBC Nightly News, The BBC News Channel, Reuters and (of course) Inc.

We had quite a different take on Greenblatt's media coverage here at The Audit this summer, noting how he's on the executive committee of the board of the National Association of Manufacturers, a major right-wing business lobby, a fact that is almost never mentioned in his press hits, which include two Fox Business TV appearances and yet another Inc. story just this month.
November 27, 2012 06:50 AM
Amazon sharecroppers

The Seattle Times on the hometown giant's uneasy relationship with its merchants
By Ryan Chittum
The Seattle Times has another good story on Amazon, this time reporting on the hometown giant's lopsided relationship with its third-party retailers.

Amazon's Marketplace is a digital consignment store that allows merchants to sell their stuff on Amazon.com in exchange for a 6 percent to 25 percent cut off the top. Sellers take the deal to get access to the 80 million people that shop Amazon every month, and some even pay Amazon to warehouse and distribute their goods, as the Financial Times noted earlier this year.

But as with ebooks, Amazon is developing something of a chokehold over online retail.

Last year Amazon had net retail sales of $25.3 billion in the U.S. and Canada. Total Internet retail sales in those two countries was roughly $215 billion. That gives Amazon 12 percent of online retail in the U.S. and Canada. By comparison, monolithic Walmart has 6 percent of total U.S. bricks-and-mortar sales.

And Amazon's 12 percent number hardly tells the full story. Three years ago, an RBC analyst estimated that, including Amazon's third-party sales, one in three dollars spent online on U.S. retail goes through Amazon.com.

That scale gives Amazon enormous power in its relationship with partners, and The Seattle Times reports that the company uses it aggressively and with little consequence when it errs. Using Washington state records, the paper finds that Amazon suspends merchants' sales for violating policies, holds their money, and often fails to tell its partners which policies they're accused of violating.

The merchants who drive Amazon's Marketplace tend to be the kind of small businesses that don't have a lot of capital. So when they get thousands of dollars in payments held up for months, they can run into serious cashflow problems, as the Times notes. That frustration is compounded by Amazon's poor customer relations with its merchants.

To add insult to injury, Amazon's sharecropper merchants aren't playing on a level field with the $110 billion company. Amazon knows all their customers, all their sales data, and doesn't hesitate to compete against them (read: squash them):

"We have clients who do as much as 40 percent of their business through Amazon, and yet they hate it," he said. "Their margins are lower because Amazon takes a cut, and Amazon knows all their market intelligence."

In 2001, the now-defunct electronics chain Circuit City began selling through Amazon's marketplace. But it severed ties in 2005 to concentrate on its own website.

"As soon as we could get out of the deal, we did. The marketplace is an R&D facility for Amazon, where they look to see what's selling and then sell it directly," said former Circuit City executive Fiona Dias.

One toy merchant who sells on Amazon said this in the FT's excellent story a few months ago: "We have to protect ourselves against Amazon, which has perfect knowledge of everything.”

That the toy merchant nevertheless feels compelled to use Amazon's site illustrates just how much clout the online retailer really has. Good for the Times for continuing to aggressively cover its giant neighbor down the block.
November 26, 2012 10:00 AM
The Washington Post needs a paywall—now

A strategic error needs to be reversed, stat
By Dean Starkman

The not-so-gentle ejection of Marcus Brauchli from the top editor’s chair at The Washington Post has cast a bright spotlight now on senior leadership, including his boss, Katharine Weymouth, the newspaper’s publisher, who pushed him aside, and her uncle, Donald Graham, chairman of the parent company’s board.

That the editorial change was awkwardly implemented is one thing. But much more important is the Washington Post Company’s—that is Weymouth and Graham's—strategic failure in failing to install a paywall around the paper's digital content. Every day this simple, ameliorative step is not taken is a day wasted.

I’m discussing the newspaper part of the business, because the broader company is separate issue. But no one believes the paper can sustain losses at anything like its current pace—$60 million-plus in the first three quarters of the year, on pace for a fifth straight loss year.

Make no mistake: the paper has become the American newspaper industry’s poster child for the folly of clinging to a free digital strategy. This would be great cautionary tale if only the Post itself—and its 500 plus -strong newsroom —were not such an important institution in its own right. Anyone who thinks that the public interest is not harmed immeasurably by the Post’s not-so-slow decline, or that Politico or buzzfeed or some such will pick up the slack, is dreaming.

The Weymouth/Brauchli fallout, according to very plausible reports in the Times and the Post itself, centered on staff cuts—and well it might. Just look at the revenue trends of the newspaper publishing group:

Print ads have been falling at a double-digit rate for six years (with a six percent decline in 2010 the exception), which is the industry norm. While much hope was invested—back in what seems like a different era—in the idea that digital ad growth would eventually make up the slack, the reality-based community has now moved on. Digital ad growth has tapered off at disappointingly low levels. The newspaper publishing group includes Slate but there’s no reason to believe that’s a plausible growth story in the WaPo’s digital ad model.

Put it this way, digital ads pulled in $115 million in 2007. It will pull in about that this year. It may go up a bit next year. But for all intents and purposes, it is flat. It is not growing enough. As Monty Python would put it, the free strategy is a dead parrot.

The illogic of giving away something online that you charge for elsewhere is now coming home to roost.

Believe me, I wish this were not the case. If there were a real growth story there, that would be one thing. But there isn’t. There's no secret sauce. And what’s required is not just growth but rapid growth, since to avoid drastic newsroom downsizing digital ads must offset the massive decline in print ads.

In the case of major newspapers, pursuing a digital-ad-only strategy while riding a downward slope of print ad revenue is a glide path to a desiccated newsroom. I don't mean smaller. I mean much smaller. It's like that old joke: How do you make a nice little local-news startup? Start with a great national news organization.

To say, in the absence of supporting data, that the answer for the Post is to “commit” to an anti-paywall strategy, to “push the innovation meter to 11,” and make “digital first a core mandate” is to say nothing at all. There is nothing in the PostCo.'s publicly released data to support that case. At some point, belief must yield to evidence. Even Clay Shirky, who needs no one to vouch for his network-theory cred, has recognized the obvious in the case of the Post.

"Digital First," in the sense of refusing to charge newspaper readers for a subscription, is bankrupt, both literally in the case of the main unit of the so-named American newspaper company, and, in the wider sense, as a strategy for newspapers generally. The Guardian—another digital firster—is yet another walking, talking cautionary tale against the free model. It is a financial basket case, subsidized by Auto Trader, a profitable trade publication. The unit that owns the Guardian posted a loss of £33 million in the year ended last March, after a loss of £34 million the year before. And, no, siphoning profits indefinitely from other corporate units is decidedly not a strategy.

Again, if it were a question of time, waiting for growth, that would be one thing. All things being equal, I’d still argue against free models because of its hamster-wheel incentives toward volume. It is the logic that persuaded The Washington Post's president, Steve Hills, speaking to a secret meeting of concerned top Post journalists to push—in earnest, apparently—for more traffic-driving slideshows. Does anyone else see a leadership problem at this company?

But, again, if there were a financial case for it, at least that would be something. But there is none.

Eric Wemple had a good post on Wednesday pointing out the Post actually did well traffic-wise, but underperformed the newspaper industry in monetizing it. Right. That’s bad.

But he quotes Alan Mutter saying, quite correctly, that even to perform to industry standards is to underperform the broader market place for digital ads.

As papers including the Financial Times have recognized, for a newspaper to compete in the digital ad game is to compete in a giant market where the game is monster traffic volume and ad rates are already tiny and still falling.

For newspapers, this is demonstrably a losing game. Again, even if the Post is able to rise to the industry standard, it will still lose. Digital ads are fine, but alone they are not enough when there is a honkingly obvious supplementary source of revenue available.

The benefits of adding a paywall are becoming more apparent by the day even as fears of a downside are receding. The FT, the Times and other premium papers—and I assume that's what the Post management thinks it is, right?—have shown traffic and digital ad losses to be more than manageable. Indeed, the FT says it can charge considerably higher ad rates than free sites. It has gone truly "digital first" in the sense that digital revenue is now eclipsing print revenue, and not because of print declines but because of digital growth. That may be why paywalls are being adopted all over the world, and papers like the Post find themselves living on an increasingly lonely, little FONtasy Island. And the tide is still coming in.

And if super-un-premium Gannett can make paywalls work, anybody can.

Our Ryan Chittum has roughed out the numbers for the Times paywall and finds it is pulling in $100 million in new revenue, money that it would not otherwise have. How much could the Post earn? Unknown. The Post’s daily circulation (470,000-ish) is a bit more than half that of the Times, so that might provide a guide. But in truth, the Post has hamstrung itself in other ways, namely by deciding it’s mostly a local paper. Let’s say it would make only a quarter of what the Times can generate. That’s still a lot of reporters, still helping to preserve the paper's main value-creator, the newsroom.

Incoming editorial chief Marty Baron, ex of the Boston Globe, is quickly proving himself master of the obvious when he says the size of the newsroom will depend on revenue. Via Wemple:

The resources we have will be dependent on the revenues of the company. That’s as true of The Washington Post as it is true of the Boston Globe... People will know where the resources are headed when they look at the revenues. It can’t be otherwise. No institution can spend more money than it has. That means it’s not easy, it’s painful.

Etc. etc.

I think, by now, we get that. The question for leadership is, what are they going to do about it?
November 23, 2012 06:50 AM
Audit Notes: not Fortune tellers; Foursquare, two million; Big Ten

The magazine's picks for future Apple and Microsoft CEOs go awry immediately
By Ryan Chittum
Fortune peered into its crystal ball for the October 29 issue and came up with four "best bets" on who's in line to replace four tech CEOs, presumably years down the road (although it's a wonder how Steve Ballmer continues to hang on at Microsoft).

The mag's top picks: iPhone chief Scott Forstall at Apple and Windows honcho Steven Sinofsky at Microsoft.

Oops.

Before the issue was even off newsstands this bet had gone awry. Apple fired Scott Forstall and Microsoft forced out Sinofsky two weeks later.

With Fortune's track record here, I wouldn't want to be Robert Lloyd of Cisco or Safra Catz of Oracle—the other two possible successors it picks.

— The Wall Street Journal reports that the bursting of the social media bubble isn't just hurting overvalued companies like Facebook and Groupon. It's dinging smaller upstarts like industry darling Foursquare, which is having a tough time raising money that would value it at 380 times annual sales.

Last year, Internet companies including Foursquare and Tumblr Inc. raised tens of millions of dollars at valuations between $500 million and $1 billion. With shares of Facebook down around 40% from its IPO price and other social media stocks such asZynga Inc. and Groupon Inc. off more than 75% since they went public, some investors reckon valuations of closely held companies will give way as well.

In the third quarter of this year, 39% of the companies that raised venture capital did so at valuations at or below those secured in their previous investments, up from 26% of companies in the second quarter, according to a financing survey by Silicon Valley law firm Fenwick & West LLP.

Foursquare is four years old and only has $2 million in annual revenue.

— The Big Ten's decision to water down its conference by adding Maryland and Rutgers to is baffling, particularly when you remember it turned up its nose last year at a much more valuable—and Midwestern—expansion school in the University of Missouri.

The thinking, presumably, is that the Big Ten will get better access to the giant, rich New York and D.C. media markets and make more money, which is what college football unfortunately is all about these days. But Nate Silver writes that the moves may not help them grab much more of a toehold since very few New Yorkers care about Rutgers football. And far fewer D.C. area people care about the Terps.

And then there's the issue of the integrity of the ~~business~~ game:

The question, rather, is what the Big Ten stands to gain at all by expanding. Fans of a current Big Ten team might find their new schedules less compelling.

Wisconsin Badgers fans, for example, will now have fewer opportunities to see their team play against regional rivals like Iowa, Michigan and Illinois. Those matchups will instead be replaced by more games against Rutgers and Maryland.

Many college football fans also travel to road games, which bolsters business for local restaurants and hotels. It is about a three-hour drive from Madison, Wis., to Iowa City. But it is 15 hours to College Park, Md., and more than 16 hours to New Brunswick, N.J.
November 21, 2012 06:50 AM
Audit Notes: the free model, Coulson and Brooks, another DOJ stunt

A musician writes a compelling business argument against Pandora
By Ryan Chittum
The free model isn't just a failure for newspapers. It doesn't work in music either, as this terrific Pitchfork piece by former Galaxie 500 co-founder Damon Krukowski shows.

Krukowski discloses some of his band's royalty payments from Pandora and Spotify. For one song, played 7,800 times on Pandora in the first three months of the year, the band got 21 cents. The 6,000 plays on Spotify netted them $1.05. And Pandora is fighting in Congress to dramatically lower royalty payments to artists.

This leads Krukowski to a smart read of how the economics of Silicon Valley are at odds with the people who actually make the stuff that makes the technologists their millions:

When I started making records, the model of economic exchange was exceedingly simple: make something, price it for more than it costs to manufacture, and sell it if you can. It was industrial capitalism, on a 7" scale. The model now seems closer to financial speculation. Pandora and Spotify are not selling goods; they are selling access, a piece of the action. Sign on, and we'll all benefit. (I'm struck by the way that even crowd-sourcing mimics this "investment" model of contemporary capitalism: You buy in to what doesn't yet exist.)...

Leaving aside why these companies are bothering to chisel hundredths of a cent from already ridiculously low "royalties," or paying lobbyists to work a bill through Congress that would lower those rates even further-- let's instead ask a question they themselves might consider relevant: Why are they in business at all?

The answer is capital, which is what Pandora and Spotify have and what they generate. These aren't record companies-- they don't make records, or anything else; apparently not even income. They exist to attract speculative capital. And for those who have a claim to ownership of that capital, they are earning millions-- in 2012, Pandora's executives sold $63 million of personal stock in the company. Or as Spotify's CEO Daniel Ek has put it, "The question of when we'll be profitable actually feels irrelevant. Our focus is all on growth. That is priority one, two, three, four and five."

— The woes keep coming for Andy Coulson and Rebekah Brooks, News Corp.'s hacking leaders with close ties to prime minister David Cameron. They'll both face criminal charges for bribing government officials. This is both disgraced editors' third set of criminal conspiracy charges.

The Guardian reports that the new charges raise the odds that News Corp. will face criminal charges in the U.S. under the Foreign Corrupt Practices Act:

Mike Koehler, professor of law at Southern Illinois school of law and author of the blog fcaprofessor.com, said the charges "would be hard for the Department of Justice and the Securities and Exchange Commission to ignore. We have been hearing allegations for a year and a half now, now we clearly have charges against high ranking officials at a foreign subsidiary," he said.

The paper slags this story by The New York Times, writing this:

The developments also bring to a crashing halt the recent perception in America that News Corporation had begun to recover its confidence after months on the defensive as a result of the phone-hacking scandal. Only on Monday, the New York Times ran an article headlined Clouds Lifting Over Murdoch, He's Out to Buy Again...

But the new charges will increase pressure on the company. Koehler said US authorities would be looking to see how high up the chain of command the bribery scandal reached. "The question will be what did James know and when did he know it," he said.

— Bloomberg's Jonathan Weil scorches the Obama administration for yet another financial-prosecutions stunt, writing that the Department of Justice's latest numbers are bogus.

Just how bogus is impossible to tell, because Eric Holder's DOJ won't even release a list of the prosecutions:

Holder said the multiagency initiative, led by the Federal Bureau of Investigation, ran from Oct. 1, 2011, through Sept. 30 and resulted in 285 indictments and complaints against 530 criminal defendants “for allegedly victimizing more than 73,000 American homeowners.” He also credited the program with 110 civil complaints against more than 150 defendants.

It took two days to discredit the figures. On Oct. 11, Bloomberg News reported that the numbers for the criminal cases included fraud charges against a Chicago lawyer that were filed in October 2006, two years before Obama was elected. The lawyer, Norton Helton, was sentenced in January to 15 years in prison.

The Justice Department at the time declined to release a complete list of defendants’ names. Bloomberg identified the George W. Bush-era charges from a sample list of eight cases that the department did provide. In 10 more cases that individual U.S. attorneys’ offices publicized in news releases as being part of the initiative, Bloomberg found that six of them were filed in 2009 and 2010, before the initiative began.
November 20, 2012 02:57 PM
Rise Above, CNBC’s move into advocacy

Corporate America's house organ starts an anti-political political campaign
By Ryan Chittum
Any time you see Wall Street CEOs and CNBC campaigning for what they call the common good, it's worth raising an eyebrow or two.

So it is with CNBC's "Rise Above" crusade, which has blanketed its airwaves and adorned its lapels since the day after the election with pleas for a solution to the so-called "fiscal cliff."

You'll note that CNBC has not Risen Above for the common good on issues like stimulating a depressed economy, ameliorating the housing catastrophe, or prosecuting its Wall Street sources/dinner partners for the subprime fiasco. But make no mistake: even if it had, it would have been stepping outside the boundaries of traditional American journalism practice into political advocacy. And that’s precisely what it’s doing here, at further cost to its credibility as a mainstream news organization instead of some HD version of Wall Street CCTV.

The big question: Why is a news organization running what's effectively a political campaign for Simpson-Bowles, complete with thirty-second spots and campaign buttons? Look, kids. You can get your very own Rise Above pin, wrapped in the flag, just like your favorite business-news personalities! Roger Ailes himself must blush at this kind of grandstanding, but I have a hard time believing the business class and CNBC would be so worked up over this austerity program if it weren’t for the major tax increases contained therein.

The day after the election, Joe Kernen read off the prompter, with all the enthusiasm of a TASS newscaster, "We are 'Rising Above' the partisan rhetoric to find a solution for the fiscal cliff."

Five minutes later and in the same segment, Kernen claimed that Obama's reelection wasn't really a mandate for raising taxes on the well off. Way to Rise Above there, Joe!

Jim Cramer called Rise Above "The most important issue of this time," which would sound profound and stuff if we could read that without imaginary honks and whistles going off.

CNBC thinks it can get around the newsroom-as-advocate problem by asserting that it's only pushing a kind of starched-shirted patriot's common sense wrapped in insipid branding.

Here's editor Nik Deogun explaining the campaign:

The election is over, but the American economy will only be unleashed if we avoid the fiscal cliff, pare our deficit and rise above partisan politics. On this point, nearly every business leader and investor who appears on CNBC has been consistent: The status quo leads to economic stagnation or worse; solutions could release powerful forces that propel the nation out of its post-recessionary funk.

Politics and politicians can solve this crisis but they are now in the way. For a deal to get done, we must rise above partisan bickering. For a deal to get done, they must move the public toward some form of sacrifice. That’s always been the spirit of America.

You can see the problem here: CNBC is mobilizing because the capital class is near unanimous about something. What do the union leaders or the academic economists have to say? Hey Nik, Let some air into that bubble. It’s starting to smell like Clive Christian No. 1 in there.

CNBC's own promo furthers the echo chamber impression, featuring Maria Bartiromo saying, "CEO after CEO tells us we will go back into a recession if this is not dealt with." Bartiromo was last seen here sandbagging Eliot Spitzer, who was disgraced in a prostitution scandal, while giving the utmost deference to AIG CEO Hank Greenberg, who was disgraced in an accounting fraud scandal—and that interview was no outlier, as I noted in that post. I wonder what Spitzer thinks, but CNBC doesn't.

Come to think of it, I wonder what a leading economist like, say, Paul Krugman has to say about the issue. Despite being vindicated time and again in this crisis, Krugman is Keynesian kryptonite to the Joe Kernens and Michelle Caruso-Cabreras of CNBC land—a unicorn, even.

But as Krugman has said for years now, contra CNBC, there is no fiscal crisis. If there were, the Treasury would not be able to borrow at 1.57 percent, as it did yesterday, near all-time lows and below the current rate of inflation (meaning investors are paying Uncle Sam to borrow their money). Krugman, among many others, is vehemently opposed to Simpson-Bowles, which is a deficit plan that would put an artificial cap on government revenue and reduce tax rates on the rich by 12 percentage points.

The advocacy of a certain type of Very Serious (to cop a Krugmanism) point of view isn't the only problem with the Rise Above nonsense. It's the reporting—poor to the point of misleading— on what the "fiscal cliff" is. You'd think if you were going to jeopardize what's left of your journalistic credibility with a crusade that you'd do a better job explaining the issue.

First, the terminology. The term "fiscal cliff" is deeply misleading and a broader media failure in its own right (our Greg Marx has a good explainer on the nomenclature). It's more like a fiscal slope or better yet austerity gridlock. The problem is that if no agreement is reached, current law will slash the deficit by sharply raising taxes and gutting spending.

If Obama and Boehner don't reach an agreement by December 31, the economy will not plunge into a precipice on January 1. Here we'll turn to no less an authority on business and investing than Warren E. Buffett, who says, "The fact they can't get along for the month of January is not going to torpedo the economy." Reuters notes that the tax increases and spending cuts wouldn't be implemented for months.

But CNBC has no qualms about “fiscal cliff,” which it uses without context.

And this gets to another problem with Rise Above: Does anyone think the two sides weren't going to hammer out some agreement to avoid $720 billion in new taxes and spending cuts by the end of next year but for the self-righteous protestations of talking heads on CNBC?

Last but not least is the hypocrisy of CNBC in talking about Rising Above politics. This is the network, after all, that kicked off the Tea Party, an austerity push that was one of the more damaging political movements in recent memory. With no apparent irony, CNBC features Rick Santelli himself in its ad, urging politicians "to reach across the aisle," while looking angry as ever:

Reach across the aisle, losers!

This is the network that employs Larry "Goldilocks" Kudlow, whose record of being appallingly wrong is rivaled only by his record of ideological rigidity, whose lesson for Republicans three days after the election, was "Don't Go Wobbly, GOP." Rise Above—the re-elected president of the United States!

But CNBC is working hard to appear even-handed on its anti-politics campaign:

With the American economy held hostage by politicians from both parties, CNBC is launching a network-wide initiative to call attention to the fiscal crisis.

Note the last two words there: "fiscal cliff" has become "fiscal crisis" and fiscal crisis is a synonym for deficit spending.

But the “both parties” formulation is false equivalence. It's simple: You can't have meaningful medium to long-term deficit reduction without raising taxes, Obama and the Democrats have cut trillions of dollars in spending, and Republicans have refused to raise taxes. Most non-blowhards already know this—A poll by CNBC's better half, NBC News, found that Americans say Republicans get the blame for any standoff by 53-29 compared to Obama—why doesn't CNBC agree?

It's just not CNBC's job, institutionally, to campaign for anything. Cover the news, as they say, don’t become it.

— Further reading:

CNBC: kid gloves for bankers, boxing gloves for bank critics. Interviews with Barofsky, Spitzer, and Krugman underscore the network’s capture.

Waiting for CNBC. A tragicomedy in one long act.

CNBC Editor: The People Are Revolting! Rick Santelli plays Mel Brooks playing Louis XVI.

A Zombie Lie Is Born. CNBC’s false welfare-state story spreads far and wide.

Becky Quick Thinks the Fed Is Too Focused on Jobs. That makes no sense historically or in the current context.
November 20, 2012 06:50 AM
Audit Notes: marginal taxes, a redesign for core readers, Murdoch

An NYT's anecdote's confusion goes uncorrected
By Ryan Chittum
The New York Times flubs some reporting on how investors and well off people are bracing for higher tax rates:

Kristina Collins, a chiropractor in McLean, Va., said she and her husband planned to closely monitor the business income from their joint practice to avoid crossing the income threshold for higher taxes outlined by President Obama on earnings above $200,000 for individuals and $250,000 for couples.

Ms. Collins said she felt torn by being near the cutoff line and disappointed that federal tax policy was providing a disincentive to keep expanding a business she founded in 1998.

“If we’re really close and it’s near the end-year, maybe we’ll just close down for a while and go on vacation,” she said.

What Collins is saying, as Kevin Roose points out at New York, is that she has no clue how taxes actually work. If you make $250,001 and move into a higher tax bracket, that new rate only applies to the $1. Your first $250,000 isn't affected at all.

Most people just flat don't understand marginal tax rates. The Times does, but by not pointing out that people like Collins are wrong, it helps further misimpressions about them.

For a nice, concise explanation of how moving into higher tax brackets actually affects what you pay in taxes, see Kevin Drum's "Handy Tax Table for Innumerate Rich People."

— I've talked a lot over the years about how newspapers should focus on serving their loyal readers online and forget about catering to junk traffic. The News Tribune in Tacoma (and its McClatchy sister down I-5 in Olympia) says it's doing the same thing with the print paper:

On Tuesday, we plan to launch our latest redesign of The News Tribune. Brace yourselves. We’re about to do something radical.

We’re going to design a newspaper for newspaper readers...

For decades, the newspaper industry designed papers for people it hoped would read them. We ran giant headlines to entice nonreaders to grab a paper out of the sidewalk box. We splashed fancy type here and there to look cool and modern. We dreamed up layouts for the coveted 18- to 34-year-old demographic that didn’t much read the paper.

This says quite a bit about the reduced ambitions of newspapers, not least because it seems to make sense. We'll see how it's actually executed, but this is an experiment worth watching, particularly with a backing soundtrack of ragtime silent movie tunes:

The look also hearkens back to old-time newspapers when covers routinely had eight or 10 story starts.

— You have to read Michael Wolff in The Guardian on Rupert Murdoch and the Jews. Murdoch stepped in it this weekend with this tweet:

Why Is Jewish owned press so consistently anti- Israel in every crisis?
— Rupert Murdoch(@rupertmurdoch) November 18, 2012

Wolff, who spent lots of time with Murdoch for an authorized biography, has the explosive background (emphasis mine):

Gary Ginsberg, his long-time aide - part chief-of-staff; part PR consigliere - was often hurt and confounded by Murdoch's jibes, insensitivities, and humor (there was the Christmas every executive desk got a crèche by order of the boss). Once, with me, Murdoch got into a riff about Jewish groups and money: how they were good at tricking him out of his dough.

And yet, as soon as he focused his business attentions on the US and New York in the mid-seventies, he started to hire Jews as his closest advisers. His support for Israel has been absolute. Arguably, it is his support for Israel, and for neoconism in general (for many years, he owned and funded the losses of the Weekly Standard), that helped solidify rightwing support for Israel. (I was once at an Anti-Defamation League dinner where Rupert Murdoch presented Silvio Berlusconi an award for meritorious conduct with respect to the Jews.)

I think that Murdoch, a man not so much paranoid as he is realistic about his enemies, is parsing what he sees as "'good Jews" from "bad Jews". Jews are just another subset of the people who are for him or against him, who he either has to manage or isolate. Along with his open dislike of Muslims - once, he explained to me his theory about how Muslims often married close cousins, therefore depressing their general IQ - and his geopolitical views about world domination, supporting Israel, I believe, is a way to win the support of what he perceives as the good Jews. (That is, if you support him, you are a good Jew.)

Wow.
November 19, 2012 06:50 AM
Audit Notes: hustled, Brauchli fallout, NYT’s Walmart impact

ProPublica connects the dots on a former Countrywide executive named in a DOJ lawsuit
By Ryan Chittum
ProPublica's Paul Kiel reports (with an assist from TheStreet) that the JPMorgan Chase executive in charge of its program to pay foreclosure-scandal victims was implicated by the feds last month in their fraud case against Countrywide.

The executive, Rebecca Mairone, worked at Countrywide and Bank of America from 2006 until earlier this year, when she left for JPMorgan Chase, according to her LinkedIn profile.

In a lawsuit filed last month in federal court in New York, Justice Department attorneys allege that Countrywide, which was bought by Bank of America in 2008, perpetrated a two-year scam to foist shoddy home loans on Fannie and Freddie. Neither Mairone nor any other individuals are named as defendants in the civil suit, and no criminal charges have been filed against her or anyone else in connection with the alleged misconduct. But Mairone is one of two bank officials cited in the suit as having repeatedly ignored warnings about the "Hustle," as the alleged scheme was called inside the company, and she prohibited employees from circulating some of those warnings outside their division.

Mairone was chief operating officer of the Countrywide lending division that allegedly carried out the "Hustle." She took the helm of JPMorgan Chase's involvement in the Independent Foreclosure Review this summer, according to a former Chase employee.

As is the way things go now, neither Mairone nor any other former Countrywide executive was charged in the fraud.

— David Carr writes about Katharine Weymouth's flubbing of the Marcus Brauchli exit, which, beyond the business concerns long expressed, dents her credibility:

Last summer, Ms. Weymouth began discussing with people outside the paper her desire to replace Mr. Brauchli, less an attempt to undercut him than a rookie mistake of indiscretion. But the ensuing four months of speculation and paralysis further damaged the newspaper.

Once the change was made official, Ms. Weymouth made another mistake; she insisted in interviews that the decision was Mr. Brauchli’s, when most people knew better. Mr. Brauchli declined to comment, but his wife, Maggie Farley, left a large breadcrumb to follow when she asked in a now deleted Facebook post how had “the Washington Post of Watergate fame become the place where you can’t speak truth to power?”

That lack of forthrightness clanked at a news media organization where the chief asset is credibility.

Worse than that, it clanked for readers too.

— That Walmart bribery probe kicked off by The New York Times's blockbuster investigation into its corrupt payments in Mexico is going global.

And that's just its internal inquiry:

The announcement underscores the degree to which Wal-Mart recognizes that corruption may have infected its international operations, and reflects a growing alarm among the company’s internal investigators. People with knowledge of the matter described how a relatively routine compliance audit rapidly transformed into a full-blown investigation late last year — involving hundreds of lawyers and three former federal prosecutors — when the company learned that The Times was examining problems with its operations in Mexico.

A person with direct knowledge of the company’s internal investigation cautioned that Thursday’s disclosure did not mean Wal-Mart had concluded it had paid bribes in China, India and Brazil. But it did indicate that the company had found enough evidence to justify concern about its business practices in the three countries — concerns that go beyond initial inquiries and that are serious enough that shareholders needed to be told.

— Make sure you don't miss this dead-on Oatmeal comic on making stuff for the Web, which pretty much sums up everyday life for many of us journalists these days.
November 16, 2012 03:08 AM
Audit Notes: Papacare, Post problem, trade reporting

Forbes finds Papa John's Obamacare math doesn't add up
By Ryan Chittum
Papa John's CEO John Schnatter has been carping for some time that Obamacare will add 10 to 14 cents to the price of a pizza.

That sounds like an argument for the health care law rather than against it (a dime extra on a $10 or $15 pizza to insure your pizza delivery guy?) but Papa John, from his 40,000 square foot Kentucky mansion, says this pittance is an outrage.

It turns out that even Schnatter's 10 to 14 cents looks like a serious overestimate of how much insuring his employees will cost.

Forbes's Caleb Melby has a nice post running the numbers on the pizza math. He comes up with a cost increase of 3.4 to 4.6 cents per pizza:

Last year, Papa John’s International captured $1.218 billion in revenue. Total operating expenses were $1.131 billion. So if Schnatter’s math is accurate (Obamacare will cost his company $5-8 million more annually), then new regulation translates into a .4% to .7% (yes, fractions of a percent) expense increase.

— Ken Doctor and I are on the same page on the real problem at the Washington Post. It wasn't Marcus Brauchli:

Things have been going from bad to worse at The Washington Post Company. Its cash cow, Kaplan, is in maddening decline, as federal government crackdowns on for-profit education continue to take a toll. So the major prop to the Post’s flagging publishing financials has been removed. Further, the Post continues to lag most of its peers, its downward fortunes generally a little worse. More cuts, including newsroom ones, are underway...

Beyond that, though, is the fact that the Post overall has lacked a forward-reaching business model strategy. It’s still a great newsroom, with national reputation and national ambitions, but a company that has focused on harvesting revenue on the regional D.C. area. It’s a great, affluent market, but the regional strategy, as now in place, can’t pay the bills of a national operation. (Good rundown on the Post’s woes by Erik Wemple.)

The deeper problems of the Post are business, not editorial ones. It must figure out what many of its peers have, that a digital circulation strategy is an essential part of the way forward. It must develop a way to make the mobile audience — as much as a third of newspaper audiences now — a key part of its monetization. It must learn to cross borders within its own building, including such things as applying its national Social Code social marketing business to its local market.

— The Post's Wonkblog reports that "NAFTA raised pay here and abroad," citing a report that found that the trade deal raised real wages in the U.S. by 0.17 percent over 12 years, which is some kind of raise!

Public Citizen isn't having any of it, noting that most of the benefits went to the top:

Trade economists widely acknowledge that any U.S. income increases resulting from NAFTA-style trade deals will tend to disproportionately favor the wealthy while real wage reductions are likely to be the result for the rest of us. In standard trade theory, the Stolper-Samuelson effect predicts that open trade will create increased demand for U.S. capital-intensive goods and reduced demand for U.S. labor-intensive goods, thereby increasing income for capital owners (i.e. the wealthy) while reducing wages for workers...

Median real incomes in the U.S. have been falling for the last decade, while the income of the richest 1% has been continually climbing. Workers’ productivity has been steadily rising while labor’s share of income has been steadily falling. Why are workers getting paid less while doing more? Economists from institutions ranging from the Economic Policy Institute to the Federal Reserve have named NAFTA-style trade as a key answer (“increased globalization and trade openness,” in the words of Federal Reserve economists). So the income-related takeaway from NAFTA is not the deal’s miniscule impact on aggregate wages (whether negative or positive), but its large impact on income inequality.
November 15, 2012 06:50 AM
Marcus Brauchli’s impossible task

The Post's ultimate problem is the business side, not the newsroom
By Ryan Chittum
I can't think of any editor whose last few years ran headlong into the financial collapse of the newspaper industry more than Marcus Brauchli's.

Brauchli got the top job at The Wall Street Journal hours after learning that Rupert Murdoch had made the Bancroft family an offer they couldn't refuse. That hapless bunch presided over the unlikely fall of the once-mighty Dow Jones, which—weakened by two decades of disastrous business-side missteps and drained of capital by the dividend-hungry family—had little defense left when News Corp. laid siege.

Defenestrated with a $6.4 million golden parachute, Brauchli landed as top editor of the Washington Post, hardly a step down.

But his timing, again, was awful. He took over a week before Lehman Brothers collapsed, and the plunging economy turned an advertising downturn at newspapers into a rout. That made cost-cutting (read: layoffs) an early part of his tenure, which is an awkward way for an outsider to come into a newsroom. The Post's newsroom under Brauchli is at least 25 percent smaller than when he got there.

None of which is Brauchli's fault. Ultimately the Post's troubles are a business problem, not an editorial one. You just can't do more with less.

We don’t know yet all the details behind his exit, but The New York Times plausibly reports that Brauchli had fallen out of favor with publisher Katharine~~ryn~~ Weymouth for resisting cuts beyond the 25 to 30 percent he'd already had to institute. For that he at least deserves an Audit hat tip and click of the heels for standing up to short-sighted budget cutters—the same ones who have gutted its newsroom while squandering more than $1.1 billion since the start of 2008 on share buybacks and dividends.

But cuts are an inevitability when you have a division gushing red ink with no end in sight and no apparent turnaround plan. A new editor isn't going to fix that. What the Post needs is a new business strategy. Giving its journalism away isn't working and it's not going to work.

It's clear now that the reason the newspaper industry, all over the world, is moving to a subscription system is because it recognizes that the free model left serious, newsroom-sustaining money on the table.

The Times and others have shown that you can charge core readers for digital subscriptions and shore up print circulation while maintaining almost all of your digital ad revenue. A leaky paywall isn't going to restore newspapers to their heydays—nothing can—but it is a way to stanch the bleeding and to hold out some hope that news organizations can cross over to all-digital operations without becoming seattlepi.com.

Look at the Times last quarter, where all that kept its earnings report from being an unmitigated disaster was the sturdy, growing revenue stream generated by digital and print subscriptions.

Clinging to its free website is making matters worse for the Post, and that's ultimately on Weymouth and her uncle, Donald Graham.

As the Post notes in its own report, "Senior executives in the newsroom were recently at odds with the newspaper’s business side, led by President and General Manager Steve Hills, over what the newsroom saw as insufficient initiative in generating additional revenue" (emphasis mine).

Brauchli now will, in the Post's words, "become a vice president of The Washington Post Co. with responsibility for evaluating new media opportunities."

At base, this isn’t about personalities: revenue losses of the sort the Post is experiencing will strain any relationship. It's about a misguided strategy that trumps every other problem the Post has and will continue to dog the company no matter who’s editor.

At this point, all we can do is wish his well-regarded successor, Marty Baron, all the best. It looks he'll be handed the same impossible task given Brauchli: Leading an already diminished newsroom waiting for the outsider's ax to fall.

— Further reading:

The Washington Post Co.’s Self-Destructive Course. Dividends, share buybacks, and an anti-paywall stance help bleed the paper dry.

A Rocket’s Trajectory. Marcus Brauchli at the Washington Post.

The WaPo Ombudsman’s Faulty Paywall Analysis. The NYT’s meter is saving or adding more than $70 million in revenue a year already.
November 14, 2012 06:50 AM
Apples and oranges on Google and publishers

Print performance is bad enough without putting a thumb on the scale
By Ryan Chittum
Slate tells us that "Google ad revenue tops entire US print media industry" in the first six months of the year, based off this chart from a German outfit called Statista:

Business Insider makes it its "CHART OF THE DAY" and says "Google Is Bigger Than The U.S. Print Ad Business."

That's (sort of) accurate, but misleading. There's an apples-to-oranges problem here, as you may have noticed from the modifiers: It compares U.S. newspapers and magazines, which by their nature are almost entirely local industries with U.S.-only ads, with Google and its global operations.

Statista noted in its post accompanying the chart that its "comparison is obviously unfair," which means it probably shouldn't have made it in the first place. But at least Statista pointed out the serious flaw with its chart. Slate and Business Insider don't bother.

It's not hard to estimate Google's U.S. ad revenues. Google gets 46 percent of its revenue from the U.S., which gives us a U.S. ad number of about $9.6 billion in the first six months of this year. That means Google's U.S. ad revenue was half the $19.2 billion in print ad revenue U.S. publishers brought in.

But there's more apples-and-oranges nonsense here: Statista tilts the scales by excluding digital ads from the publishers' totals, which would have added roughly $3 billion in the first six months of the year. That's like saying the publishing industry is absolutely crushing Google in advertising—if you exclude all digital and overseas advertising.

And Statista notes in an update that it used Google revenue numbers by using gross revenue, which includes money it has to pay its publisher partners, meaning that about 20 percent of Statista's Google number isn't really Google revenue.

See, if you don't limit yourself to comparing things that are alike, you can have all sorts of fun with charts. The silly thing is you hardly need to put your thumb on the scale to show how Google has taken over fast-growing Internet advertising while print has collapsed.

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The Audit

Roddy Boyd digs into a diet-shake pyramid scheme

An anchor pins a minor dip in stocks on the TV appearance of a minor politician

Report shows how drug research is corrupted by corporate money

But Pearson says the paper is not for sale.

The Seattle Times on the hometown giant's uneasy relationship with its merchants

A strategic error needs to be reversed, stat

The magazine's picks for future Apple and Microsoft CEOs go awry immediately

A musician writes a compelling business argument against Pandora

Corporate America's house organ starts an anti-political political campaign

An NYT's anecdote's confusion goes uncorrected

ProPublica connects the dots on a former Countrywide executive named in a DOJ lawsuit

Forbes finds Papa John's Obamacare math doesn't add up

The Post's ultimate problem is the business side, not the newsroom

Print performance is bad enough without putting a thumb on the scale