By Ryan Chittum Mar 12, 2014 at 05:00 PM
Herbalife is one of those multilevel marketing companies, often sketchy, that usually operate below the view of the national press. Bill Ackman is a hedge-fund billionaire who has placed a billion-dollar bet against its stock, arguing loudly that the company is a fraud, a pyramid scheme.
A New York Times investigation shows how Ackman has spread cash around to astroturf the issue. It’s a case study in how vested interests pollute the news stream.
To pressure state and federal regulators to investigate Herbalife, an act that alone could cause its stock to dive, his team has helped organize protests, news conferences and letter-writing campaigns in California, Nevada, Connecticut, New York and Illinois, although several of the people who signed the letters to state and federal officials say they do not remember sending them, an investigation by The New York Times has found.
His team has also paid civil rights organizations at least $130,000 to join his effort by helping him collect the names of people who claimed they were victimized by Herbalife in order to send the leads to regulators, the investigation found. Mr. Ackman’s team also provided the money used by some of these individuals to travel to Washington to participate in a rally against Herbalife last month.
These are the larger forces playing out behind the scenes, dear readers, when you see stories like “Latino Group Demands Herbalife Probe” from ABC News, as we did a month ago. Nowhere in that story did ABC report that the Latino group, the League of United Latin American Citizens had received $10,000 from Ackman early last year before it went on its crusade. The Times:
“It’s not the Latino groups that are helping Bill Ackman,” (Brent A.) Wilkes said. “Bill Ackman is helping the Latino groups. He has elevated this battle.” On Sunday evening, after questions from The Times, Mr. Wilkes said he had decided to return the donation, so there was no chance anyone could suspect he had undertaken the effort “for a mere $10,000 table purchase” at one of his fund-raising events.
That’s very interesting, because the Washington Post reported in November that LULAC hadn’t taken money from Ackman. Or as the paper put it:
Wilkes has spoken with people from Ackman’s investment fund, Pershing Square, but both of them opted against financial support for LULAC’s awareness-raising about Herbalife’s perils, to avoid the perception of a conflict.
That’s so narrowly worded that it’s potentially accurate. But it’s definitely misleading. A reader would think Ackman hadn’t given LULAC money, when that was not the case at all. That’s a miss by the Post.
Indeed, the Latino nonprofits involved in this mess come out looking pretty bad all around. Herbalife, for its part, has funneled cash to its own set of nonprofits, as the New York Post reported two weeks ago:
Herbalife recently donated money to five of the seven Hispanic groups that signed a letter last week supporting the company, The Post has learned. The donations were not disclosed and were only admitted by Herbalife after a reporter contacted three of the groups on Wednesday.
The NYT has a smoking gun on at least one nonprofit, the United States Hispanic Leadership Institute, which tried to get Ackman’s people into a “bidding war,” as the paper puts it, euphemistically, in my book:
“Are you able to match the $30K we have received from Herbalife?” Juan Andrade Jr., the president of the Institute, wrote to the consultant. “If Herbalife says neutrality is unacceptable and wants their money back, are you able to replace it?”
Ackman and Herbalife have so poisoned the well by paying nonprofits and hiring key congressional staffers that it’s hard to tell if anyone in this fight is untainted.
This is not to say that Ackman and/or the Latino advocacy groups don’t have a legitimate case against Herbalife—one that they truly believe in. The propriety of the multilevel marketing industry and of Herbalife in particular are serious issues.
Still, the regulators have done nothing. And who can blame them? If they did something now, they would look like Ackman’s tools.
See, for example, the Federal Trade Commission, which, either despite or because of Ackman’s lobbying, is probing Herbalife, the company announced today after the Financial Times contacted it about the investigation. Its stock plunged.
Having said all that, the Times’s piece could have been better balanced. Surprisingly, it doesn’t report that most of the “Friends of Herbalife” letter’s signers had taken Herbalife cash, as earlier reported by the Post. It notes only one, the National Puerto Rican Coalition. And it doesn’t mention anything about the millions it has poured into UCLA, whose scientists have given it their imprimaturs, as the Los Angeles Times’s Michael Hiltzik found last year.
More problematic, the Times doesn’t mention that Herbalife spent seven times more money lobbying last year than Ackman did. Herbalife isn’t even in the Fortune 500, but it ranked 290th in the country in lobbying last year after ramping up to fight Ackman.
To a certain extent, then, it looks like Ackman’s trying to fight fire with fire. That doesn’t excuse the astroturfing, of course, but it raises questions about why the Times, in a generally fine piece, didn’t focus at least a little more on Herbalife’s activities.
By Ryan Chittum Mar 12, 2014 at 06:50 AM
Michael Hiltzik of the Los Angeles Times has a must-read column about agnotology, the study of the “cultural production of ignorance,” which is one of the biggest (non-journalism business) problems facing journalists today:
But then there’s ignorance custom-designed to manipulate the public. “The myth of the ‘information society’ is that we’re drowning in knowledge,” he says. “But it’s easier to propagate ignorance.”
That’s especially so when issues are so complicated that it’s easier to present them as the topics for discussion in which both sides are granted equal time.
Big Tobacco’s public relations campaign against the anti-smoking movement, for example, was aimed at “manufacturing a ‘debate,’ convincing the mass media that responsible journalists had an obligation to present ‘both sides’ of it,” reported Naomi Oreskes and Erik Conway in their 2010 book, “Merchants of Doubt.”
The industry correctly perceived that no journalist would ever get fired for giving the two sides equal weight, even when that balance wasn’t warranted by the facts.
It’s he-said-she said arbitrage, though the obfuscators can largely go around the press now.
— Audit Chief Dean Starkman takes to The New Republic for a long piece on why “No, Americans Are Not All To Blame for the Financial Crisis.”
Here’s a snippet:
Lately, a flying squadron of scholars and lawyers, taking up where journalism left off, has dug further into federal housing data to uncover new mind-melting patterns. One of them, Jacob Faber, a Ph.D. candidate at New York University, last year came up with what may be the second-most astonishing fact about the crisis era: In 2006, the year of the locust, some households earning more than $200,000 annually were more likely to be put in subprime than others earning just $32,000. For those unlucky borrowers, income—the best measure of ability to repay—was not the variable that determined the quality of the loan they received.
Short version: That’s not how a fair market works. But it’s what happened. And the real reason those $200,000-plus borrowers found themselves in subprime leads us to the darkest origins of the lending practices that wrecked the economy—as well as of the troubling way we’ve misallocated accountability…
Let’s return to Jacob Faber and his finding about those high-earning families finding themselves with subprime loans. Of course it was African American households earning more than $200,000 who were more likely to wind up in subprime than white households earning $32,000. Go ahead and roll that around for a minute.
For more on this, read Dean’s new book (particularly chapters 6 through 9), The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism.
— Advertising Age reports that The Wall Street Journal has launched its first native ads despite Editor Gerard Baker’s contention last year that they were a “Faustian bargain.”
Here’s what it looks like below the fold on the WSJ.com home page:
And here’s what the ad itself looks like:
Mr. Baker was in Asia last week and unavailable for an interview. In a statement, he stressed that the native ads were clearly and thoroughly labeled. “I am confident that our readers will appreciate what is sponsor-generated content and what is content from our global news staff,” he said.
Trevor Fellows, head of global media sales at The Wall Street Journal, said actually blurring ad-edit lines would be “absolutely a Faustian bargain” but that readers won’t be confused in this case.
I agree. The Journal, like the Times has done native ads the right way. There’s no confusing this and the paper’s own copy.
Again, though, that raises the existential question about native ads: If you make the ads look too native, it’s deceptive. If you ake it look too non-native, nobody will want to read it.
Unless you somehow just can’t resist a headline like “Data Centers: Old and in the Way.”
By Ryan Chittum Mar 11, 2014 at 07:50 AM
Gawker has long delighted in thumbing its nose at journalism convention, and that’s fine. On the other hand it makes no bones about it being a journalism organization, and it certainly is.
Flouting convention is one thing. Allowing a death-row inmate to whitewash the facts of his case, and his role in a grisly murder, without any vetting is another matter altogether.
As part of its “Letters From Death Row Series,” it ran a long missive from Ray Jasper, who is scheduled to be executed by the state of Texas next Wednesday. It had all the stuff of a compelling story: injustice, racism, an underprivileged man quoting Thoreau and Aristotle, Texas, God, etc. It went viral, and currently has 1.7 million pageviews.
Hamilton Nolan says Jasper was “convicted of participating in the 1998 robbery and murder of recording studio owner David Alejandro.” Fine, so far.
But this is how Jasper himself puts it:
I’m on death row and yet I didn’t commit the act of murder. I was convicted under the law of parties. When people read about the case, they assume I killed the victim, but the facts are undisputed that I did not kill the victim. The one who killed him plead guilty to capital murder for a life sentence. He admitted to the murder and has never denied it. Under the Texas law of parties, they say it doesn’t matter whether I killed the victim or not, I’m criminally responsible for someone else’s conduct. But I was the only one given the death penalty.
And that’s the sum and substance of the facts of the case in the Gawker post.
Except to say those facts are in dispute would be a wild understatement. They are a grotesque misrepresentation of a record clearly established at trial.
This record came to light on Gawker only after the murdered man’s brother wrote to Gawker in protest, a letter he should never have been forced to write. Here’s what really happened (emphasis mine):
Ray Jasper knew well that he could not rob David’s studio equipment without being fingered to the police by him later. So it was, seven to ten days prior, Jasper made the decision to end David’s life. He enlisted the help of two others. That night (and this is all from on-the-record courtroom testimony and statements he gave police in his confession) the three men made the recording appointment. They were there for roughly two hours working, recording, David sitting at the control console. Jasper admits to then grabbing David by his hair, yanking his head back and pulling the kitchen knife he brought with him across David’s throat, slicing it open. David jumped up and grabbed at his own throat from which blood was flowing. He began to fight for his life. At this point Jasper called to one of his accomplices who rushed into the room with another knife. His accomplice then stabbed David Mendoza Alejandro 25 times. David collapsed, already dead or dying—we will never know. The final stab wound was at the back of David’s neck; the knife plunged in and left there…
At one point while he was on the stand testifying, he asked to speak to us— David’s family members. He looked us square in the eye and exclaimed “I didn’t kill your son. He was one of the nicest guys I ever met, but I did not kill him.” Jasper’s reasoning was that since the M.E. cited the 25 stab wounds as the cause of death and not the throat slit committed by Jasper, he was technically not guilty of murder.
Alejandro’s version is supported by a judge’s sentencing opinion drawing on the facts of the trial, which Gawker links to but doesn’t quote.
So we learn, belatedly, that Nolan short-armed his account of Jasper’s crime and then allowed Jasper to mislead the world about it. And this is not some Texas railroading. Jasper confessed to slitting David Alejandro’s throat.
But hey, Gawker got some clicks!
(UPDATE: Gawker Editor John Cook says suggesting they ran the letter for clicks is “galactically stupid.” Fair enough. My point is, Gawker got them, and it almost certainly wouldn’t have had the post not glossed over Jasper’s crime. I’ve moved up the following three paragraphs from the bottom of the post to make that point clearer.)
If the true facts of the case had been made clear, it’s doubtful that Jasper’s letter would have merited publishing at all. Or if it did, it would have been a very different column with a very different response. It’s worth noting that none of Gawker’s other posts in its Letters From Death Row series, most of which included more detail on the crimes (“On Christmas day, he suffocated the child to death, and later buried her in a shallow grave outside of Houston”) went nearly as big.
Alejandro’s rebuttal, “A discussion of the Ray Jasper Death Row issue from a family member of the victim,” hasn’t gone quite as viral. It has gotten about 2 percent of the tweets Jasper’s sob story got.
At the very least, Gawker should update Jasper’s piece with a link to Alejandro’s, but it hasn’t even done that much.
This isn’t to say that there’s no value in soliciting and running letters from prisoners facing execution. Clearly there is. But a letter is basically an opinion column, and while columnists should have wide latitude, wholesale distortion of an established record—a record to which Gawker had easy access—is far out of bounds. Just because The Wall Street Journal op-ed page does it doesn’t make it right.
It’s an old issue. How much latitude do you give opinion writers? It’s a judgment issue, but Gawker didn’t use any.
And no, allowing the facts to be fixed later, in a separate post—by the victim’s brother, no less—doesn’t make it okay.
By Ryan Chittum Mar 10, 2014 at 11:00 AM
Leah McGrath Goodman tells Felix Salmon this about her controversial Newsweek piece on the founder of Bitcoin:
“If I read my own story, it would not convince me,” she says. “I would have a lot of questions.”
And that sums up the problem with Newsweek’s piece claiming to out Satoshi Nakamoto: Newsweek, by its own admission, didn’t prove its assertion promised on its cover that this Satosh Nakamoto is the Satoshi Nakamoto.
Goodman has been taking the heat on this, and some of it is truly vile. Whatever else happens, the Goodman experience should be added to a growing file of cases demonstrating why the internet is a more hostile place for women journalists than their male counterparts.
But let’s be very clear: The Newsweek story is an editing problem, not a reporting problem.
Goodman’s reporting has held up fine thus far.
For what it’s worth, I think (and hope, actually) that Newsweek probably has its man. But I’m nowhere near 100 percent certain about it, much less 90 percent. And if you read Newsweek’s piece carefully, you can see the uncertainty is in there too:
Standing before me, eyes downcast, appeared to be the father of Bitcoin…
Of course, there is also the chance “Satoshi Nakamoto” is a pseudonym…
Calling the possibility her father could also be the father of Bitcoin “flabbergasting,”
While Goodman certainly lays out her case for it, nowhere in the body of the piece does she say that Dorian Nakamoto is the founder of Bitcoin. It’s the headline on the cover that does that.
Even assuming Newsweek has Dorian Nakamoto’s disputed admission correct and there was no misunderstanding, it still wouldn’t have conclusive proof that he invented Bitcoin. But it’s the temptation of headline writers everywhere to overplay what you’ve got. That temptation is much stronger when you’re trying to make a splash with a magazine launch. In journalism, we talk about bulletproofing a story and this one certainly isn’t bulletproof, at least as presented.
As Felix said the other day, “the responsible thing to do, from Newsweek’s perspective, would have been to present a thesis, rather than a fact.”
In this case simply adding a question mark to the headline would have been the way to go, along with some more explicit hedging in the actual piece. The bitcoin/redditor types would still be outraged about even attempting to find Satoshi. But Newsweek wouldn’t have been asserting a fact it couldn’t conclusively prove.
The Newsweek/bitcoin affair shows how much more accountable news organizations are than they ever were before. In other eras, news organizations saw stories go sideways, but they always had huge advantages over people who might want to complain. Most of the complainants were obscure, and the news organizations were famous and let’s just say it helped to own the means of distribution. Getting a complaint publicized was always an uphill struggle. Now, a piece can be shouted down by sheer volume on Twitter, which can also pass along humorous and deeply skeptical line-by-line annotations on News Genius.
It’s worth pausing here to note that Bitcoin is not a case of grievous error, like Wen Ho Lee, which eventually came back to haunt The New York Times. So far, this is a case of a story not proved, at least to the satisfaction of many, and it may stay that way for some time.
But one thing we know for sure: The days of “trust us” journalism, for better or for worse (but mostly for better), are long gone.
By Ryan Chittum Mar 7, 2014 at 03:00 PM
The New York Times has been looking for ways to build on the massive success of its three-year-old metered paywall as its growth slows. Details are now emerging on some of its plans.
Journalism.co.uk reports that NYT exec Denise Warren told a conference that the paper’s new mobile product will be called NYT Now and a subscription will cost $8 a month. The paper is also developing lower-priced subscriptions for opinion and food content.
Its full paywall package already costs $35 a month, but the Times is working on an even higher-end subscription service.
The NYT’s meter is already a $160 million-a-year business, but it has gotten big fast, and sequential (quarter-to-quarter) growth is slowing:
Here’s another way to look at that slow-down. This chart cuts out seasonality by showing the rolling annual change in NYT digital subscribers:
And here’s the percentage change in year-over-year digital subs. The dramatic difference in this chart and the one immediately above is due to the law of large numbers we’ve been talking about:
To be clear, these are subscription numbers, not revenue numbers and the revenue is what ultimately matters. We don’t have the ability to back into all those numbers yet, but we know that the NYT’s digital-sub revenue grew by 36 percent year over year in 2013, nearly twice as fast as the 19 percent growth in subscriptions. That means the paper is getting much more money from each average user.
Again, though, the simplest way to boost revenue would be to consistently raise prices for the main paywall by at least 2 percent to 3 percent a year. The Times should get on that right away.
By Felix Salmon Mar 7, 2014 at 11:00 AM
Newsweek wanted a scoop for its relaunch cover story, and boy did it deliver: it uncovered the identity of Satoshi Nakamoto, the inventor of bitcoin. Who then promptly came out and denied everything. Which means that one of the two is wrong: either Nakamoto is lying through his teeth, or Newsweek has made what is probably the biggest and most embarrassing blunder in its 81-year history.
But before we try to work out what the answer is, it’s important to separate out the various different questions:
- Is Dorian Nakamoto the inventor of bitcoin, Satoshi Nakamoto?
- Do we, and/or Newsweek, have enough evidence to conclude, with certainty, that Dorian Nakamoto is the inventor of bitcoin?
- Is it reasonable to believe that Dorian Nakamoto is the inventor of bitcoin?
My tentative answers to the three questions are “we don’t know”; no; and yes.
One way to look at this problem is to try to calculate probabilities, and do some kind of Bayesian analysis of the question, given that either Dorian is Satoshi, or he isn’t. (To make matters even more complicated, Dorian’s given name is, actually, Satoshi. But you know what I mean.) But here’s the problem: if you believe either of the two possibilities, you have to believe in a reasonably long series of improbable propositions. Call it the Satoshi Paradox: the probability that Dorian is Satoshi would seem to be very small, and the the probability that Dorian is not Satoshi would seem to be just as small — and yet, somehow, when you add the two probabilities together, the total needs to come to something close to 100%.
The place to start is the Newsweek article, which brooks no doubt about the matter, and which is told using all the power of narrative journalism. The author, Leah McGrath Goodman, has constructed her 4,700-word article as a case for the prosecution, taking us with her on her quest for evidence and ultimately trying to persuade us that there can be no doubt: Dorian is Satoshi.
Goodman adduces lots of evidence, starting with the crazy coincidence of Satoshi’s name. Dorian’s name is Satoshi Nakamoto. He is an accomplished engineer and mathematician: “brilliant”, according to his brother. He was happy to correspond with Goodman until she asked him about bitcoin — at which point he stopped replying to emails and even called the cops on her. Dorian’s brother even predicted his response to Goodman’s article: “He’ll deny everything. He’ll never admit to starting Bitcoin.”
Goodman says that Dorian, “for most of his life, has been preoccupied with the two things for which Bitcoin has now become known: money and secrecy”. He’s a libertarian, whose daughter says that he is “very wary of the government, taxes and people in charge”. He’s 64, which would help explain slightly old-fashioned aspects of Satoshi, like his use of reverse Polish notation and his worrying about saving disk space. And then there’s the smoking gun — the quote that he gave to Goodman when she arrived at his doorstep.
“I am no longer involved in that and I cannot discuss it,” he says, dismissing all further queries with a swat of his left hand. “It’s been turned over to other people. They are in charge of it now. I no longer have any connection.”
This fits exactly with what we know about Satoshi: that he was deeply involved in bitcoin at the beginning, but has had basically nothing to do with it in recent years. It’s well short of an outright confession, of course — but if you add up all of the circumstantial evidence, it’s pretty hard to believe that everything is some bizarre coincidence. Goodman has presented a lot of pieces of the puzzle — and they fit elegantly together, at least at first glance.
On the other hand, even within the article there are signs that it’s not as clear cut as all that. There’s Goodman’s admission, in the article, that she “plainly needed to talk to Satoshi Nakamoto face to face” — something she never really did, except for a few quick words spoken in front of police officers while he was trying to make her go away. Goodman also quotes Gavin Andresen, the person most publicly associated with the development of bitcoin, as saying that even in the early days, Satoshi “went to great lengths to protect his anonymity”. Which hardly squares with the thesis that he was using his real name.
Then there are the duff notes in the piece. “This is the guy who created Bitcoin? It looks like he’s living a pretty humble life.” That, supposedly, is a verbatim quote from a Temple City cop: it’s possible that a cop uttered those words, but that doesn’t stop them from sounding like very bad expository dialogue. And Goodman can certainly overstretch, as for instance here:
There is also the chance “Satoshi Nakamoto” is a pseudonym, but that raises the question why someone who wishes to remain anonymous would choose such a distinctive name.
Remember that the pseudonym theory was not a mere theory, up until yesterday — it was almost universally accepted as the truth. In terms of Bayesian priors, you need very strong evidence to be persuaded that “Satoshi Nakamoto” is not a pseudonym. And this argument doesn’t even come close.
There’s also the whole question of Satoshi’s English, where Goodman can be seen placing a very hard thumb on the scales. Dorian’s English is not good: you can see that in his Amazon reviews, or in the letter he sent about a proposed Los Angeles rail project: “good secruity system against usage of rail as a get away means from the low income generated theives/criminals from area of east LA et. al must be also put in place regardless of the rail passage chosen.”
That kind of language can be seen too in Dorian’s email correspondence with Goodman: “I do machining myself, manual lathe, mill, surface grinders.” Goodman uses this as evidence for her case: she characterizes Satoshi’s original bitcoin proposal as being “somewhat stiffly written”. She also says, reading the original bitcoin paper, that “the punctuation in the proposal is also consistent with how Dorian S. Nakamoto writes, with double spaces after periods and other format quirks.”
But in fact the proposal is written in deeply fluent English:
Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.
What is needed is an electronic payment system based on cryptographic proof instead of trust.
How is it possible that Goodman would notice double spaces after the periods, here, but would not notice that the sheer fluency of the language is quite incompatible with everything we know about how Dorian writes and speaks? She even quotes an email from Satoshi to Andresen: “I wish you wouldn’t keep talking about me as a mysterious shadowy figure. The press just turns that into a pirate currency angle. Maybe instead make it about the open source project.” This is breezy, colloquial English — and it’s entirely incompatible with Dorian’s language. The discrepancy is hard to square — and is all the more glaring for the fact that Goodman doesn’t even attempt to address it directly.
Then there’s the whole question of finances. Dorian “fell behind on mortgage payments and taxes” in the 1990s, reports Goodman, and lost his home to foreclosure; what’s more, he doesn’t seem to have had a steady job in well over a decade. And yet, famously and notoriously, he has never sold a single one of the million bitcoins he’s credibly assumed to own, despite the fact that, according to Goodman, he and his family “could really use the money”.
Because all bitcoin transactions are public, and because the specific coins Satoshi owns have been identified, selling or spending those coins would give the world a huge clue as to Satoshi’s identity. But with hundreds of millions of dollars at stake, it begs credibility to believe that Dorian couldn’t have found a way to sell at least some of his coins.
Even within Goodman’s piece, then, there are reasons to doubt her thesis. And in the wake of Dorian’s interview with the AP, there are more. His lack of fluency in English is clearly real; he has a credible explanation for the words he said in front of Goodman; and he has a guilelessness to him which would be very hard to fake, especially over the course of many hours with a skeptical reporter.
Put all that together, along with various other problems surrounding things like the time zone of Satoshi’s postings, and there would seem to be a lot of doubt that Dorian is, in fact, Satoshi.
At this point, it’s easy to fall down a rabbit hole of second-order second-guessing. It’s not particularly credible, for instance, that a libertarian engineer named Satoshi Nakamoto would never have heard of bitcoin until three weeks ago, and would, even after today’s news, “mistakenly” call it “bitcom”. What’s more, Dorian’s deny-everything reaction (and the official denial from Satoshi) is entirely consistent with Goodman’s article.
But the fact is that if you believe that Dorian is Satoshi, you have to accept that there are still a lot of things which don’t really add up. And conversely, if you believe that Dorian is not Satoshi, then you at the very least have to wonder at the astonishing number of coincidences that Goodman has uncovered.
Which means that the responsible thing to do, from Newsweek’s perspective, would have been to present a thesis, rather than a fact. For instance, when Ted Nelson attempted to reveal Satoshi’s identity last May, he put together a video where he put forward a theory which he said was “consistent, plausible, and, I believe, compelling”. He then took a step back, and let the bitcoin community more generally come to their own conclusions about whether or not to believe him; in the end, they (generally) didn’t.
Newsweek could have done that. It could have said “here’s a theory”, and then let the world decide. Many people would have believed the theory; others wouldn’t. And lots of us would probably have changed our minds a few times as we weighed the evidence and as Dorian’s own words came out.
But Newsweek didn’t want a theory, it wanted a scoop. And so, faced with what was ultimately only circumstantial evidence, it went ahead and claimed that it had uncovered Satoshi — that, basically, it was 100% certain.
That decision was ill-advised. Newsweek certainly got lots of buzz for its return to print — but it’s now getting just as much buzz for going to press with what is looking increasingly like a half-baked theory. Personally, I don’t know whether Dorian is Satoshi — but I think I can be pretty safe in saying that the probability is somewhere in the range of, say, 10% to 90%. In other words, it’s possible; it might even be probable; but it’s not certain. And anybody who says that it is certain is wrong.
I believe that Goodman believes that Dorian is Satoshi. I believe that Jim Impoco, my ex-boss, who’s now the editor of Newsweek, also believes that Dorian is Satoshi. But belief is not enough. Dan Rather believed that the Killian documents were genuine; Hugh Trevor-Roper believed that the Hitler diaries were genuine; Lara Logan believed that Dylan Davies was telling the truth about Benghazi. Big scoops are dangerous things.
It would have been less satisfying, for Newsweek, to leave a bit of wiggle room — to present the Dorian-is-Satoshi theory as just a theory, rather than as fact. But it is only a theory. And ultimately, it’s always better to be Ariel Dorfman than it is to be Paulina Salas.
By Ryan Chittum Mar 7, 2014 at 06:50 AM
The Wall Street Journal has an excellent investigative series going into Wall Street self-regulator FINRA and how its system of investor protection allows brokers to hide red flags they’re supposed to report.
If you’re paying someone managing your money or giving you investment advice, you probably want to know whether they can run their own finances. You can do background checks on brokers through FINRA’s BrokerCheck site.
FINRA wouldn’t give the Journal access to its database, which is in itself a story. If the government is going to outsource regulation to private entities (FINRA, by the way has a budget that’s half that of the SEC’s), it might want to have them covered under the Freedom of Information Act.
The Journal’s Jean Eaglesham and Rob Barry got around this, though, with some great enterprise reporting: The paper filed open-records requests in 50 states and got records on 558,000 brokers—about 88 percent of all brokers nationwide—from 21 of them.
It found at least 1,500 brokers across the country whose post-2004 bankruptcies didn’t show up on BrokerCheck. Now, you might think that’s a tiny number out of more than half a million brokers. It’s just 0.3 percent of the brokers the Journal examined.
The bankruptcy rate for all Americans over the last decade has averaged about 0.4 percent a year. Back out repeat filers and kids and that means roughly 3 percent of the population has declared bankruptcy since 2004.
So FINRA is missing roughly one in ten of its brokers’ bankruptcies, assuming financial advisors file at the same rate as the general population (do they? That could be an interesting next use of the WSJ’s new database). That’s a big deal.
The Journal also uses its data to show that bankruptcy-filing brokers are far more likely to have other problems on their records, including criminal charges and customer complaints.
This isn’t the first major story the WSJ has gotten from its database. In October, Eaglesham and Barry had a fascinating story that there are more than 5,000 stockbrokers whose firms were shut down by FINRA that are still working in the industry, a phenomenon called “cockroaching” in the industry. The Journal led with this anecdote:
Regulators expelled the first brokerage firm where Kenneth Dwyer sold securities. They did the same to his third, fourth, seventh and eighth. His 10th closed in June after regulators accused it of fraud…
Regulators on Sept. 30 suspended Mr. Dwyer for nine months and fined him $10,000, for allegations that included excessive trading, filings show. Mr. Dwyer agreed to the sanctions without admitting or denying wrongdoing.
The WSJ put together this brilliant graphic for the October story showing the more than 600 brokers who ended up at two or more firms FINRA ultimately shut down. It’s like an interactive six degrees of Glengarry Glen Ross:
Here’s how the Journal put it:
Some of these brokers appear to create bonds that bring them together repeatedly at firms that regulators later expelled. Mr. Dwyer, after his first brokerage job in 1998, would cross paths at other firms with contemporaries from his first job; at least one broker from his first firm was with him at his 10th.
The paper followed that piece up with one reporting also in October on an outside study that showed FINRA expunges customer complaints from the records of the vast majority of brokers who ask it to do so. Settling a case implies some acknowledgment of guilt, but in 98 percent of them in 2011, the brokers got the original customer complaint expunged from the record. That’s a very serious problem.
Today, Eaglesham and Barry follow with another report on somebody else’s smart study, one that says FINRA deletes brokers’ red flags:
The red flags that can be accessed in some states - but not from Finra directly - include information about whether a broker was ever under internal review “for fraud or wrongful taking of property, or violating investment-related statutes, regulations, rules or industry standards of conduct,” the study said.
Other potential black marks scrubbed from BrokerCheck include whether brokers have previously failed industry qualification exams, federal tax liens that have now been satisfied and personal bankruptcy filings that are more than 10 years old, according to PIABA.
This series is first-rate work on a bread-and-butter issue for Journal readers and for a good chunk of the general public too. Individually and together, these stories raise serious questions about Wall Street’s self-regulator—including whether this critical component of investor protection should be left in private hands at all.
By Ryan Chittum Mar 5, 2014 at 03:00 PM
The paper says its digital revenue will hit $117 million in its current fiscal year, which ends on March 31. That’s up a quarter from $92 million the year before. That’s an excellent performance.
Even better, the paper says its overall revenue, including print, will be up more than 5 percent from last year, which would put it at about $345 million. In the newspaper world, that’s what counts as torrid growth. It helps that print, which still accounts for two-thirds of Guardian revenue, was down less than 4 percent, according to my estimates.
We don’t know quite how big a deal this is yet, though, because The Guardian is rather selectively leaking its numbers. The top line (revenue) matters a great deal, but not as much as the bottom line (profit). How much did that revenue cost?
We know The Guardian has been expanding in the U.S. and Australia. To a certain extent, the paper can scale its existing journalism, but it costs real money to staff up and build out new editions in foreign countries. I’d bet The Guardian’s new revenue is profitable. The question is how profitable is it?
Because the paper still loses gob-smacking amounts of money. In the 2012-2013 fiscal year it lost $51 million, down from $73 million the year before. Even if the paper somehow managed to keep costs flat in 2013-2014, it still would post a $34 million loss and have a profit margin of negative 10 percent, by my calculations.
The Guardian’s finances look to be moving in the right direction, but how does it compare to its closest global competitor, The New York Times?
The Guardian’s digital revenue is now growing faster than the NYT’s (25 percent to 11 percent), though it’s off a much lower base. At $312 million last year, the Times still has more than two-and-a-half times The Guardian’s digital revenue:
The NYT’s digital business grew by $30 million last year, while The Guardian’s grew by $26 million. But the Times’s digital growth is slowing, while The Guardian’s has picked up speed in the last two years:
The big problem for the Times is that its digital ads went into reverse in the second year of its metered paywall. As a result, the paper’s digital ad revenue is exactly where it was in 2010—$163 million a year.
That’s still significantly more than The Guardian’s. It’s hard to imagine the Guardian will be able to maintain 25 percent growth rates much longer, but if it were to, it would overtake the NYT’s digital ads by 2015.
Of course, the Times could console itself with its digital-subscription revenue, which by 2015 will probably be near $200 million a year, but digital ads are critical to its medium-to-long-term health.
The Times needs to study very closely how The Guardian is growing digital ads. Was it through sharply higher unique visitors and clicks? Did they manage to increase rates somehow? Are the country-focused international editions moving the needle, as they say? Perhaps the NYT needs a dating site? For now, The Guardian simply reports that “the key drivers (are) a rise in online advertising and recruitment and a rise in online apps and mobile websites, as well as the continuing popularity of dating site Guardian Soulmates.” Its annual report won’t be published until mid-summer.
The Guardian is ruling out a metered paywall now, but it knows it needs to get money directly from readers one way or another, and it’s making noise about a membership model. “We know that over time we will have to monetise our direct readers,” CEO Andrew Miller tells the Financial Times, which itself is perhaps the preeminent digital success story of all newspapers, as I wrote the other day.
I still think The Guardian is leaving money on the table, though. You can set a meter as high as you want, and even then you could simply ask for money, rather than require it. The Guardian could at 30 pageviews in one month, say, trigger a request to pay for its online offerings or to become a Guardian member or whatever it wants to call asking for money. More people would spring for it than you might guess.
What the NYT and FT don’t have, though, and what The Guardian does, is a $1.5 billion to $1.9 billion trust set up solely to ensure its survival in perpetuity. That’s allowed The Guardian to preserve most of the power of its newsroom despite losses well into the hundreds of millions of dollars since 2008. It allows the paper to eschew readers’ money too.
Assuming a minimum level of competence by its investment managers, the trust can maintain a baseline of strength at The Guardian. Actually expanding would take maintaining the kind of rapid digital growth The Guardian has posted the last two years, at least for a few years.
The law of large numbers means maintaining that rate of growth is unlikely to continue for long, and, again, we need to see the P&L statement, which is ultimately what matters. But the fact that it’s even possible to think about future expansion is a sign of how much the paper’s outlook has improved.
And good thing, too. We need a strong Guardian.
By Ryan Chittum Mar 5, 2014 at 07:30 AM
Marc Andreessen has some outlandish predictions about the future of the journalism business:
I am more bullish about the future of the news industry over the next 20 years than almost anyone I know. You are going to see it grow 10X to 100X from where it is today.
Sorry, but those numbers are crazy town, as Poynter’s Rick Edmonds notes.
The US newspaper business alone is about a $35 billion-a-year industry. Add in cable news channels, local newscasts, network news shows, magazines, digital-only sites, and radio and you’re surely up to at least $50 billion.
Is the news going to become a $5 trillion industry? No. That would be one-third of the US economy.
Could the news become a $500 billion industry? No. All advertising spending in the US comes to about $170 billion a year, and only a small portion of ad money goes to news organizations.
Edmonds is on this:
A major order-of-magnitude issue also afflicts Andreessen’s central contention — that the news industry can grow 10 times to 100 times its current size over the next 20 years…
But I cannot get to 10 times, let alone 100, unless 240-hour days are right around the corner. There is only so much time, and only so much time for consuming news, even with double screening. And part of the news industry’s problem is competition for that time from non-news entertainment content and diversions like games and Facebooking.
When people spent 30 to 40 minutes a day on the old newspaper bundle (and tens of millions of people still do), a good chunk of that time—probably most of it— was spent on non-news parts of the paper: the sports page, the living section, the funnies, etc. One of the positive aspects of a successful paywall or membership model is that it tends to rebundle the news with the non-news, particularly on tablets.
But there’s just no way that time-spent can grow 10 times, much less 100 times.
Andreessen also writes this about why journalism is going through such turmoil right now:
The main change is that news businesses from 1946-2005 were mostly monopolies and oligopolies. Now they aren’t. The monopoly/oligopoly structure of newspapers, magazines, and broadcast TV news pre-‘05 meant restricted choice and overly high prices. In other words, the key to the old businesses was control of distribution, way more than anyone ever wanted to admit. That’s wonderful while it lasts, but wrenching when that control goes away.
The end of monopolistic control doesn’t mean that great news businesses can’t get built in highly competitive markets. They just get built differently than before.
This is halfway true. But the control of distribution that was so profitable IRL hasn’t ended online. It just moved, passing from newspapers, TV stations, and the post office to the companies in Andreessen’s portfolio, which happen to have zero cost of content: Google, Facebook, and Twitter (plus the ISPs).
Google’s gross profit margins were 57 percent last year and Facebook’s were 76 percent, which is just bananas. Gannett at the peak of its labor-cutting and advertiser-milking could never have dreamed of those kinds of margins.
The existential problem for the news is that the Internet has unbundled advertising from content creation. The new digital monopolies all have hundreds of millions of people creating free content for them. That’s where the big profits are. Oh, sure, there are major differences between the old newspaper monopoly distribution model and the digital one. But the similarities are greater.
The equivalent of Google, Facebook, and Twitter in the pre-Internet days would be a newspaper that shut down its newsroom, kept the ad department (though replacing much of it with robots), and printed stuff other people wrote. Today, Facebook’s got your weddings, baby announcements, and soccer pictures. Twitter’s got your breaking news. And Google’s got your stock listings, sports scores, news, recipes, etc. Oh yeah, and Craigslist has your classifieds (UPDATE: I should mention that Craig Newmark is on CJR’s board of overseers.)
This isn’t to say that this is a bad thing. Not at all. Craigslist, for instance, is a vast improvement over newspaper classifieds, where people used to get gouged for a tiny patch of text. A Google search is far better at finding information you know you want than flipping through a newspaper. Twitter is far timelier for breaking news than any print medium.
But hiving off those services has gravely (and probably irrevocably) damaged the news-industry’s prospects.
Journalism, particularly on the local and regional level, doesn’t scale like Facebook scales. Producing quality news necessarily entails relatively high labor costs. Somebody has to make the calls, knock on the doors, write the stories, edit the video, and shoot the photographs. There’s no way to automate that and the user-generated content that Silicon Valley relies on can be a nice supplement for newsrooms, but it’s hardly a replacement for them or even a significant part of them.
Finally, Andreessen would like you to think that unions are a big problem for the future of news:
An obvious one is the bloated cost structure left over from the news industry’s monopoly/oligopoly days. Nobody promised every news outfit a shiny headquarters tower, big expense accounts, and lots of secretaries!
Unions and pensions are another holdover. Both were useful once, but now impose a structural rigidity in a rapidly changing environment. They make it hard to respond to a changing financial environment and to nimbler competition. The better model for incentivizing employees is sharing equity in the company.
First, where is this newsroom with the shiny headquarters tower, the big expense accounts, and lots of secretaries?
That all stopped around the time this started:
Second, by “structural rigidity,” Andreessen really means “harder to fire people and/or slash their wages and benefits .”
Really, does anyone actually believe unions have prevented news organizations from making layoffs and cutting benefits? That’s rich. One must only assume Andreessen’s never been a member of the not-so-mighty Newspaper Guild. What the news industry needs is stock options! That would have fired up the morale in the last decade (see the above chart).
Still, in the face of all we know about why newspaper have declined, Andreessen presents unions as a big obstacle in the way of exponential growth. That’s just not the case. Unionization had nothing to do with the structural changes that have decimated news organizations.
But thanks for the Google Glass-eye view of the news business.
By Ryan Chittum Mar 4, 2014 at 06:50 AM
Adweek clickbaits us with a headline saying, “You Won’t Believe How Big TV Still Is.”
It’s unclear why you wouldn’t believe how big TV still is, since people really like the teevee. The average American watches an incredible 35 hours a week, at least according to Nielsen.
But Adweek’s post does have an interesting point, which is more like, “You Won’t Believe How Small Online Video Is.” Here’s the chart:
There are 283 million television viewers monthly (the population of the United States is 313 million), each watching an average of 146 hours of TV. Compare that with 155 million online video viewers averaging just shy of six hours monthly on mobile and almost six and a half hours over the Web. So while TV’s audience is still almost twice that of digital video, the amount of money in digital isn’t even 5 percent of the mammoth $74 billion chunk of change in television. What’s going to bring about growth in the former, said Amit Seth, Nielsen’s evp, global media products, is equivalency.
Using Adweek’s numbers, we find that Americans cumulatively watch 41.3 billion hours of TV a month, while they watch 1.94 billion hours of video online. TV hauls in $6.2 billion a month, while online video brings in $292 million a month.
That works out to about 15 cents in ads per hour of TV—and 15 cents in ads per hour of online video.
What’s going to bring about growth in online-video ad revenue then, at least according to Adweek numbers at least, is growth in watching video online.
And NPR follows the Mail Online’s lead in hyping up the story, such that it is, with a misleading clickbait headline:
Pope Francis Drops F Bomb During Vatican Address
The pope mispronounced an Italian word and corrected himself. NPR’s headline is misleading enough to be false.
It then changed the headline to “Pope Francis Lets A Vulgarity Slip During Vatican Address,” which is still as misleading as the original.
— ProPublica has a sharp idea on how to monetize its journalism: Selling its databases.
Like most newsrooms, we make extensive use of government data — some downloaded from “open data” sites and some obtained through Freedom of Information Act requests. But much of our data comes from our developers spending months scraping and assembling material from web sites and out of Acrobat documents. Some data requires months of labor to clean or requires combining datasets from different sources in a way that’s never been done before…
For datasets that are the result of significant expenditures of our time and effort, we’re charging a reasonable one-time fee: In most cases, it’s $200 for journalists and $2,000 for academic researchers. Those wanting to use data commercially should reach out to us to discuss pricing…
The Data Store is a bit of an experiment. We don’t know for sure how much interest there is for the data. For now, there are only a few datasets available and it’s a manual process to buy them.
It may amount to nothing or not much. But it’s a good experiment. ProPublica could make an iTunes of data, let other news organizations hawk their datasets on the store, and take a cut. Just don’t take 30 percent.
By Dean Starkman Feb 28, 2014 at 11:10 AM
Just a couple of years ago, although it feels like a lot longer, the media world was embroiled in something like a gigantic family argument over the idea of whether it was good idea to charge readers for news online. Among aficionados, this was known as the “paywall debate.”
The angry fracas was part of a much larger argument about the future of news itself. On one side, a new generation of technology-centered journalists trumpeted a new, decentered news system of networks, news shared and even gathered by volunteers, a more, informal, “iterative,” approach (posting news now and fixing mistakes along the way), less concern about separating business and editorial functions, and, of course, free online news for all. The other side, my side, which resisted the name “old guard,” argued about the importance of news institutions and professional newsgathering, traditional standards (or many of them), longform storytelling, reporter impartiality, strict separation of the news “church” and the business-side “state,” and paywalls. (One thing we old guarders did not insist on, by the way, was the survival of print.)
When I wrote critically about what I called the “future of news (FON) consensus” in the CJR in the fall of 2011, the technologists’ views were in ascendance and predicting, if not hastening, the death of newspapers. The intra-journalism debate that has unfurled over the last couple years has been heated and often angry, sometimes surprisingly enlightening, sometimes deeply stupid.
But now, it shows signs of abating. I see a consensus taking hold, one that, all in all, is much, much healthier for public-interest reporting than the old one. Is this inside media baseball? Most definitely! But the reality is that such debates can have an alarmingly large impact on the actual news the public will get. They matter. What was damaging about the old consensus, particularly, was its fealty to the god of clicks—digital ads revenue generated by high traffic volumes, which, in turn, require high quantities of new posts, often of indifferent quality. This side also believed that newspapers, under no circumstances, should charge readers for news online. This created what I called the “Hamster Wheel” effect in American newsrooms, speed for speed’s sake, volume without thought, and a downward quality spiral of local news. The problem with the free-content model isn’t that longform investigations and accountability reporting isn’t possible. It’s that its incentives run in the opposite direction. It is now generally understood that this belief has had disastrous effects on the newspaper industry, the backbone of American journalism (albeit an increasingly frail one), and is still doing damage in some quarters.
I’m speaking for myself here, not as the voice of CJR. But here’s what I see as the new FON consensus, or perhaps better, the Present of News (PON) consensus, since this looks like not so much as where we’re going as where we are:
Consensus #1: Free online news is a poor fit for legacy news organizations. Basically, the paywall side, the old guard, won this one. The New York Times digital subscription breakthrough in 2011 was initially dismissed as a unique case (just as the digital subscription success of The Wall Street Journal and the Financial Times was similarly dismissed a few years earlier. But that argument has eroded as digital subscription meters have gone up successfully around the world. That variants of the model have been adopted by digitally native sites like Andrew Sullivan’s, Politico, and even Capital New York further illustrates that paywalls have turned some kind of corner. Determined attempts by Advance Publications, controlled by the Newhouse family, to shoehorn once-great news organizations like the New Orleans Times-Picayune and Cleveland Plain Dealer, into the free-ad model have gone sideways, providing a grisly counter-example. And mostly, it’s the realization both that newspapers’ digital ad growth, the great hope of free news, has hugely disappointed, and that Times-style metered subscription systems have shown they don’t even hurt digital traffic much anyway. You can both subscriptions and keep your traffic, and whatever you can earn from ads. Digital subscriptions, properly deployed, are free money.
Consensus #2: Paywalls are just a tool, not a panacea, a straw man we’ve had to argue against for years. While paywall revenue is often meaningful, and at places like the Times and the FT, it has actually helped offset perilous declines in print ad revenue, at most places it is a helpful revenue stream that is not enough to offset total revenue declines, which set the stage for a downward spiral of newsroom cuts and quality deterioration.
Consensus #2a: Paywalls impose a quality imperative. For there to be any kind of growth story, the content behind a paywall cannot be rote newspapering. There is a reason that Gannett, which has, as Ryan Chittum puts it, “a well-earned and long-established reputation for high margins and poor quality,” has seen its digital strategy hit a wall. After initial success in selling print subscribers on a digital product (basically a stealth price increase), it has had little success selling new digital-only subscriptions on the merit of its content. By contrast, the Minneapolis Star Tribune remains a quality paper and has had early success with digital subs, showing 33-percent growth despite a price increase. Paywalls around middling content don’t wash.
Consensus #3: Digitally native news organizations are free to charge or not charge and can do pretty much whatever they want. The subscription issue pertains basically to newspapers. Huffington Post, Business Insider, BuzzFeed, and other operations rely on huge volumes of traffic—usually generated by readers sharing on Facebook and other social media platforms—to drive digital ad revenue. While usually mocked for their clickbait content (“Drake Rocked His Yarmulke And Vest Again For His Re-Re-Bar Mitzvah On ‘SNL’”—BuzzFeed, Jan. 18), they also do some news gathering and longform stories of high quality. Given that their competition in digital ads is overwhelmingly dominated by a few non-news organizations, e.g. Google and Facebook, any journalism the new organizations generate is a net addition to the news. One interesting question is how much of the quality stuff these sites can produce. Major newspapers still crank out longform stories by the hundreds and even thousands annually, although at a dramatically reduced rate from a decade ago.
Consensus #4: The traditional news story—not the tweet, blog post, or word cloud (remember those?)—retains its primacy in American journalism. I know this because two of the most thoughtful representatives of the technologically centered view, author Clay Shirky and Columbia’s Emily Bell, said as much in a justly celebrated 2011 report, “Post-Industrial Journalism,” co-authored with Christopher Anderson. “What is of great moment is reporting on important and true stories that can change society,” they wrote. And I agree. This doesn’t mean that other news forms won’t continue to grow in prominence—video news in particular is on the rise. But I suggest they will continue to supplement the story.
Consensus #5: The utility of crowdsourced journalism—volunteers gathering or sorting through news—is real and so far really limited. Non-professionals have provided major contributions in breaking news situations like mass protests and disasters (the Arab Spring, the Fukushima nuclear accident) and sorting through masses of data (ProPubica’s “Dollars for Docs” project enabled readers to sort through millions of payments from the pharmaceuticals industry to doctors). The limits were exposed when readers on the Reddit social media site identified the wrong people as suspects in last year’s Boston Marathon Bombings. Of course, the New York Post did, too, so crowdsourcing doesn’t have a monopoly on screw-ups, by any means. Still, while a few years ago, network theorists held out great hopes for what they called peer production in journalism, the bulk of newsgathering will be done by people who are paid to do it, even as experiments in crowdsourcing continue and its potential remains untapped but large. As Jay Rosen wrote in a sweet, short post last year on where competing journalism philosophies agree and disagree: “Bloggers and citizen journalists cannot fill the gap.”
Consensus #6: Whatever one thinks about the current news ecosystem—better, worse, richer, thinner, more democratic, dumber—coverage of local and state government is a disaster area. Metropolitan newsrooms that once covered police departments, school districts, taxing authorities, and the powerful in their communities, look like they’ve been hit by a neutron bomb; the desks are there, but the people are gone. Major beats like the environment and education go uncovered. As an important Federal Communications report put it in 2011, “an abundance of media outlets does not translate into an abundance of reporting…While digital technology has empowered people in many ways, the concurrent decline in local reporting has, in other cases, shifted power away from citizens to government and other powerful institutions, which can more often set the news agenda.” Amen.
These aren’t the only things that might be said to have found consensus. And maybe I’m wrong; Maybe, there is no consensus at all. (I don’t think the church-state issue has been fully worked out, for instance, though traditional news organizations seem to be reaffirming the importance of clear boundaries.)
But unless you think the current news environment is fine as it is—and if you do, zeit gezundt—it’s high time for technologists, traditionalists, and the public to find one, and then find ways to build on it.
By Ryan Chittum Feb 28, 2014 at 11:00 AM
The paywalled Financial Times is the real digital-first newspaper, and it had a very, very good 2013.
Online revenue now accounts for 63 percent of the FT’s overall sales, and digital subscriptions outnumber print ones by a wide margin.
At its peak in 2001, the FT had a print circulation of 504,000. That has collapsed in the last five years, and the FT’s print run now totals just 237,000.
But the FT is now in the seventh year of its digital meter, a model it created and which has become, following The New York Times’s successful imitation, something of a newspaper-industry standard. Look at what FT subscriptions have done overall thanks to digital subs, represented by the red line here:
Its paid circulation is now at an all-time high despite the print plunge. The big news is that the FT’s digital subscription growth actually accelerated last year—sharply. In business, the easy growth is the early growth. As a business matures and its customer base grows, it tends to become progressively harder to maintain growth rates and, eventually, absolute growth.
But the FT broke the law of large numbers last year. It added 99,000 subscribers, which is by far the most it’s ever added in a single year. And while its annual growth rates had slowed in the last couple of years, the FT grew digital subs 31 percent last year, which is the second highest rate its ever had:
The New York Times, whose metered paywall is about to end its third year, needs to look closely at those numbers, which suggest that it may have quite a bit more room for growth. The NYT grew digital subscriber count by a solid 19 percent last year, but it grew digital subscription revenue by 36 percent, which means it got more money per subscriber.
I asked the FT what caused its spike last year and whether it could continue. Spokesman Andrew Green responded:
In 2013, we saw strong growth in both individual and corporate FT.com subscriptions, powered by mobile and product development like fastFT and mobile app redesigns. We are also seeing good growth in 2014.
The FT has now has 415,000 digital subscribers, and they pay a lot of money. A basic subscription in the UK costs $450 a year. If you want the Lex column, it’ll run you $622 total. In the US, those numbers are $325 and $467.
That’s a lot more than an FT.com subscription cost four or five years ago, when paywall growth rates were much lower, oddly enough. Importantly, the FT has made the mobile transition well too. Sixty-two percent of its subscribers’ usage comes via mobile.
Better yet. Unlike the NYT and others, it doesn’t have to fork over 30 percent to Apple or Google. Its apps use HTML5, which allows the FT to bypass the monopolies.
By Ryan Chittum Feb 27, 2014 at 03:42 PM
Earlier this week, investigative journalist Andrew Ross Sorkin outed the joke Twitter account @GSElevator, which purported to tweet actual quotes from the Goldman Sachs elevator.
Surprise! @GSElevator didn’t work at Goldman and his tweets were not actual conversations overheard in the Goldman elevators. The New York Times editorial board saw fit to write an editorial about it as if there was nothing else in the world going on for them to fulminate about.
The most damning revelation to come out in recent days, though, is not that @GSElevator didn’t work at Goldman—that should surprise no one—it’s that he ripped off his jokes from other people.
Anyway, Simon & Schuster apparently still plans to publish the book, according to yet another NYT story about the @GSElevator scandal. But this piece has something interesting after all (emphasis mine):
One publisher who considered bidding on the book said he was concerned about taking on a giant like Goldman Sachs, which used its power and resources to attack the credibility of “Why I Left Goldman Sachs,” the tell-all by Greg Smith, a former Goldman Sachs employee. Mr. Smith received a $1.5 million advance from Grand Central Publishing, but the book sold fewer than 20,000 copies in hardcover, according to Nielsen BookScan, which tracks about 85 percent of print sales.
Another publishing executive said that while there was an increasing temptation to scout for potential projects on social media — the best-selling book “—— My Dad Says” was born as a Twitter feed — making bets on online performance art and parody is fraught with risk.
Hey, NYT: That sounds like a real story.
— Rebekah Brooks, Rupert Murdoch’s one-time favorite editor, claims she didn’t know anything about the systematic hacking at the News of the World, which she edited.
And even if she had, she testified, she didn’t know hacking into people’s phones was illegal:
“No one - no desk head, no journalist - ever came to me and said ‘We are working on such and such story but we need to access voicemail; or asked for me to sanction it.’” She said she had not realised that it would have been a breach of the Regulation of Investigatory Powers Act. She was pretty sure, she added, that she had not even heard of the act. She added: “Even though I didn’t know it was illegal, I still would have felt it was absolutely in the category of a serious breach of privacy.”
T-Mobile has introduced actual competition into an already-consolidated industry:
Former F.C.C. officials say this is exactly what the agency hoped for when, in 2011, it weighed in against AT&T’s plan to purchase T-Mobile. As the agency’s staff explained in a lengthy report, regulators feared that shrinking the four major carriers to three would give providers an incentive to raise prices. Instead, regulators saw an elegant escape hatch for T-Mobile. If AT&T was forced to call off the deal, it would owe T-Mobile a breakup fee worth at least $3 billion in cash, plus an additional $1 billion in rights to wireless spectrum. The money and spectrum would allow T-Mobile to build out its network infrastructure, making it more attractive to new users. Given the right leadership, regulators hoped the fourth-place carrier could play a spoiler’s role in the marketplace. By aggressively courting new users, T-Mobile would act as an agitator prompting change across the industry…
T-Mobile’s plans were so blindingly sensible that its competitors have been forced to respond.
By Ryan Chittum Feb 27, 2014 at 06:50 AM
You can tell right from the headline on this Bloomberg News story that the piece is going to be seriously problematic:
Lamb for 12 on $400 Monthly Shows South Africa Welfare Addiction
Is this news story really going to suggest that a family of 12 is living high on the hog off what comes to $1.14 a
month day per person? Yes, it is. Those good-for-nothing poor people and their lamb and macaroni. Let them eat veal!
Let’s pick it up from the second paragraph:
Side dishes: macaroni and bolognese sauce. What pays for the meal: South Africa’s taxpayers, via 4,540 rand ($418) in monthly government benefits. Nine of the residents in the house, from Matthys’s baby great-granddaughter to Hendrik, her husband, receive one kind of aid or another. Only one of the 12 works.
Welfare dependency, a problem across the developed world, has reached a danger level in South Africa. More people receive aid than have jobs, and the ratio has been worsening for five years. While the handouts have helped address abject poverty since the end of the apartheid regime, they haven’t helped recipients get skills needed for jobs in a country with 24 percent unemployment.
Did the ghosts of Lee Atwater and Ronald Reagan write this thing? It has everything but the Cadillac and the “strapping young buck.” Perhaps lamb is Afrikaans for “T-bone.”
Bloomberg writes that “only one of the 12 works.” But it never gets around to telling us that nine of the 12 aren’t of working age. We have to back into that ourselves. The heads of the household are in their 70s. There are seven kids. Bloomberg makes hay out of the fact that one, Christoline, says she’d have to move to Cape Town, 540 kilometers away, to look for a job if she didn’t get welfare for her baby. Christoline is 16, by the way.
That leaves two layabouts living on “handouts.” Is that because they’re lazy or because the unemployment rate in their city is some 90 percent?
That’s the first of a number of chicken-and-egg problems with Bloomberg’s piece. Here’s another:
In towns such as Brandvlei, dependence on social grants helps feed alcohol dependence, said Christolene Markus, a community-development worker at the Department of Social Services, as she stood in the door of the satellite office building. Two doors away is B&B Liquor Store, the biggest such establishment in town. People line up before 8 a.m. on Mondays. “Look outside,” she said, pointing to a group of rowdy young men stumbling along the street running toward the store. “This is what it looks like when they get paid. And then later they come and beg at our office again.”
It blames welfare payments for fueling alcoholism, but doesn’t acknowledge that no-hope joblessness is surely a much bigger factor. It also implies that welfare payments for incentivizing pregnancy, but doesn’t acknowledge that poverty and pregnancy go hand in hand.
This isn’t to say welfare doesn’t provide negative incentives in some cases. It can and does, and there are legitimate reasons to restructure programs to less those effects. But at a minimum, it is highly questionable that welfare itself is a bigger factor in self-defeating behavior than the underlying poverty and joblessness it is meant to ameliorate. And a look at the data seriously undermines Bloomberg’s unsupported inferences.
If welfare were really causing indolence in South Africa, you’d expect to see people dropping out of the labor force. But the OECD reports that labor participation has risen significantly over the last two decades, particularly among women, who are more likely to be welfare recipients (though it’s fallen sharply since the crisis, as it has just about everywhere):
What about welfare-fueled pregnancies? Bloomberg, of all places, should know better than to rely on anecdotal data. With the explosion in welfare recipients in South Africa, you’d expect to see a booming birth rate, according to the wire’s logic. Instead, it has collapsed:
Does receiving welfare payments cause South Africans to work less? There’s data that actually contradict that via Katherine Eyal and Ingrid Woolard in Oxford’s Journal of African Economies:
We find that grant receipt is associated with a higher probability of being (in) the labour force, lower unemployment probability for those who do participate, and a higher probability of being employed. These effects are not small, ranging as high as 15% for some groups.
How’s the South African economy doing? Pretty good, all things considered. And by all things, I’m mainly talking about an HIV crisis that still plagues it, the lingering effects of the global financial crisis as well as the economic transformation that has accompanied the end of institutionalized segregation and political oppression not so long ago.
Government debt is still just 42 percent of GDP, up from a mere 28 percent before the crisis. South Africa’s stock market is worth more than $800 billion, ten times that of the next richest African country and 100 times more liquid in terms of trading volume. Real GDP per capita is up 40 percent since 1995. Disposable income has risen 10.3 percent a year since 2001. Productivity per worker has tripled in a decade. Extreme poverty has fallen dramatically, while the black poverty rate declined from 70 percent in 1993 to 61 percent in 2008. There’s been a dramatic upgrade in living standards across the population since 2001:
That chart and all the stats above come not from some goo-goo NGO, but from Goldman Sachs, which counts the growth in welfare grants from 2.4 million at the end of apartheid to 16.1 million now as one of the country’s “key advances” in “Two Decades of Freedom.” Those notorious Goldman lefties!
But can South Africa afford to give its poorest people lamb and macaroni on occasion? Bloomberg’s own reporting undermines its thesis:
Dependence on welfare has soared since South Africa’s first multiracial vote in 1994. At 13 percent of gross domestic product, spending on social programs including health but not education is less than the developed-world average, calculated by the Organization for Economic Cooperation and Development at 22 percent.
It reports that social spending in the country is 12 percent of government spending. Not 12 percent of GDP, but 12 percent of government spending, or about $12.4 billion. The South African economy is $392 billion. So welfare payments, which bring millions out of abject poverty, cost roughly 3.2 percent of GDP.
That includes old-age welfare, a la our Social Security.
Plus, South Africa is still one of the most unequal countries in the world—basically a third-world and first-world economy in the same country—which is why the headline fact here, that “16.5 million people receive government benefits, compared with 15.2 million working as of the fourth quarter of 2013” isn’t as relevant as an indicator of sustainability as spending levels are. Since high-income South Africans make so much more than those with low or no income, the taxes of the former can cover many of the latter. South Africa has relatively low taxes—roughly the same level as the US.
Then there are the massive structural issues that still weigh on the country’s primarily black population after apartheid, which Bloomberg all but ignores.
Melefe, writing at Africa Is a Country, is elegant on this, responding to Bloomberg’s anecdote about Christoline, the welfare recipient
But don’t mistake the desperate situation taking away the social grants would create for her as just the thing she, and her family, need to get jobs. If you know and understand the country’s history of racist land dispossessions and forced removals, and the destructive social effects of the migratory labor system on the communities supplying workers to the country’s economic centres like Cape Town and Johannesburg, you’ll know that it is a good and just thing that the social grants are stopping Christoline from leaving behind her one-year-old baby, family support network, and the possibility of returning to school in order to chase the faint promise of a job hundreds of miles away.
Melefe also picks up on the Reaganesque overtones of the piece.
Bloomberg, by the way, quotes no one that doesn’t criticize the welfare system. It’s a poorly done news story, frankly, and well below Bloomberg’s own standards.
One question I had that’s unanswered in the story: Did the Matthys family make this feast because a well-paid journalist from an important news organization was coming for a visit?
By Ryan Chittum Feb 25, 2014 at 03:00 PM
What does it take to make someone quit a $100 million a year job?
The Wall Street Journal’s Greg Zuckerman and Kirsten Grind tell us in a devastating page-one story on one of the most powerful people in finance, the bond king Bill Gross—a press favorite.
We learn conclusively that Mohamed El-Erian, who resigned as PIMCO’s CEO last month, did not quit to spend time with his family, as “people close to PIMCO” told the Journal at the time, and we get a positively evil-looking picture of Gross atop the story. Felix Salmon puts it best in declaring (surely prematurely) the story fatal for Gross: “a gruesome photograph of the 69-year-old money manager, looking sideways through yellowing eyes as he reaches out like something from a zombie movie. And it just gets worse from there…”
You don’t get to the top of finance by being polite, but the Journal reports that Gross rules his $1.9 trillion empire, um, imperiously. If you work at PIMCO, you don’t make eye contact with Gross or speak to him, just as if you were an opening band backstage with Bob Dylan.
In fact, you don’t speak much at all:
On the trading floor, Mr. Gross doesn’t like employees speaking with him or making eye contact, especially in the morning, current and former employees say. He prefers silence and at times reprimands those who break it, even if they’re discussing investments, these people say.
When Mr. Gross establishes an investment thesis, he usually doesn’t appreciate dissenting views, employees and former Pimco traders say…
Late last year, in front of a number of traders, Mr. Gross said, “if only Mohamed would let me, I could run all the $2 trillion myself…I’m Secretariat,” referring to the famed thoroughbred. “Why would you bet on anyone other than Secretariat?”
The Journal never quotes El-Erian directly, but it also never says that he declined comment. Hmm.
Much of the trading-floor culture stuff was reported by Matt Phillips of Quartz in a great piece last month.
“It’s kind of medieval. You only speak when spoken to,” the same trader said.
All communications about trade ideas for Gross are submitted according to his protocol. The trades are printed out, with charts, yields and prices. They’re handed to Gross’s assistant. She takes the recommendations and walks a few feet to put them in Gross’s in-tray, on his desk. Traders aren’t supposed to put the recommendations in the in-tray directly…
As one story goes, confirmed by separate sources, Gross once sent a corporate bond trader home in the midst of the trading day with instructions to hand-write 1,000 times that he would not submit trade recommendations without charts.
How can we resist?
But while Quartz’s piece did much of the spadework, the Journal takes it to another level by connecting the cultural craziness directly to El-Erian’s departure and by giving the story the page-one treatment.
Page one of the WSJ still means a lot, even if it’s not what it once was. Excellent work by both the Journal and Quartz.
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