Wednesday, April 16, 2014. Last Update: Wed 3:22 PM EST

The Audit

USA Today’s third-rate clickbait

Trolling for pageviews à la Business Insider, but without the panache

What happens when America’s Newspaper tries to go Business Insider?

Something like this:

That’s the America’s Markets section of USA Today’s website, which puts business journalism on the Hamster Wheel—I counted 12 bylines in one day from one reporter—with predictably poor results.

Like this headline:

Is a 1987-type market crash 37 days away?

Betteridge’s Law says if a headline is framed as a question, the answer is always “no.” As it is here. This is Newsmax-level clickbait:

If it does, the market could be in some serious trouble in 37 trading days. In 37 trading days, the ongoing bull market would be 1,311 trading days old, says Jim Paulsen of Wells Capital Management. That is a scary date because it was on the 1,311 trading day after the start of the 1982 bull market that the Standard & Poor’s 500 suffered its biggest one-day crash in history on Oct. 19, 1987. That crash snuffed out what had been a powerful market rally starting in 1982.

USA Today might as well run a story breathlessly touting an astrologer’s predictions on the stock market, and then stuff the “to be sure” at the bottom, as the paper does here.

But the paper has a thing for spurious correlations in the stock market. See this story headlined, “Stock rebound could hinge on ‘Turnaround Tuesday’”:

Stocks rose Monday, putting its worst week since June 2012 behind it, at least for a day.

Next up: Tuesday. And that has a certain bullish ring to it.

Here’s why: Tuesday is the only trading day of the week in 2014 that has posted average gains, with the Standard & Poor’s 500 rallying and closing higher on 12 of 14 Tuesdays this year, according to data compiled by Bespoke Investment Group.

This is statistical noise, or as USA Today itself put it back in 2006, when it wasn’t in such a race for cheap clicks: “while some days may outperform others periodically, there’s really nothing to attribute this to, other than chance. And I wouldn’t bet my portfolio on that.”

Here’s another one, this time on personal finance:

Ask Matt: To live well in old age, invest $82.28 a day

This kind of short, context-light personal finance advice is worse than useless. It makes it harder for people to figure out what they really need to do. And it’s not what USA Today suggests.

First, there are very few Americans who can save $30,000 a year for retirement. The median household income is $51,000, which would require a savings rate of 60 percent. There aren’t many households making three times that much that can save $30,000 annually. That would be more than a quarter of their after-tax income.

Investors might be surprised to hear that for the average, typical person making a number of back-of-the-envelope assumptions, $82.28 a day may be what you should be shooting for, based on an analysis done for USA TODAY by investment management firm T. Rowe Price. If you save $82 a day and invest it in a fairly aggressive but not crazy portfolio, in 30 years you could amass enough wealth to generate the U.S. average household income for 30 years, even after adjusted for inflation

The “average, typical person” gets and will get more than half their retirement income from Social Security, two words USA Today doesn’t mention. The average benefit is about $15,500 a year, and retired households need much less money than younger households—80 percent is the rule of thumb. The upshot: $82.28 a day, fortunately, is way too high.

Plus, USA Today says you could continue investing that same $82.28 a day for 30 years, despite inflation. It would be great if everybody could save a bunch of money early in their careers to take advantage of the glories of compound interest. But in the real world it doesn’t work like that. People tend to make much less money early in their careers than they do as in their later years. They’re able to save more later, which is why it’s nuts to suggest that the average 25 or 30 year old with kids needs to save far more in real terms than they will when they’re 45 or 50.

This is just bad financial advice. But it sure makes a good headline.

That failure is compounded by this piece:

Report: 85% of pensions could fail in 30 years

USA Today gives all of 247 words to this apocalyptic story, based on outlandish assertions by a hedge-fund billionaire trying to gin up pension-fund investments. But that was enough to spread it far and wide on the internet, mostly in the right-wing swamps:

You might have thought your public pension was on shaky ground, but you’re likely still being too kind.

Influential and well-regarded hedge fund Bridgewater Associates Wednesday warns public pensions are likely to achieve 4% returns on their assets, or worse. If Bridgewater is right, that means 85% of public pension funds will be going bankrupt in three decades.

Better get to saving that $82.28 a day!

Michael Wolff’s digital media bloopers (UPDATED)

The Newser founder trolls (other) digital-news companies

Having accurately predicted that Lachlan Murdoch would return to his dad’s company, Michael Wolff, in his exhilaration, made this crack recently:

Good one. Except he’s gotten so much other stuff wrong lately, particularly on the state of digital media, that you start to wonder.

Digiday quotes Wolff telling a Hearst forum earlier this week that The New York Times has “had incremental success in adding subscription income. It is in no way offsetting the decline in their advertising.”

Trouble is, that’s just wrong. Here’s a chart I made in November showing how the paywall has plugged the ad revenue hole:

In fact, the paywall has, in every meaningful way, offset the decline in their advertising. And it’s not just a third quarter fluke, either (I used that because it’s the best data the NYT had disclosed then). Here’s what the Times’s annual revenue looks like since 2006:

Without the paywall revenue, the NYT would be down at least $128 million since 2010, the year before it launched, rather than up $21 million. So, that’s offset.

Wolff also tells Hearst this about Politico:

“They did usurp The Washington Post, so they took what was essentially a 2 billion dollar business and replaced it with a business that does 25, 30 million dollars in revenue. So that’s kind of the paradigm.

But a moment’s reflection shows that the damage Politico did to the Washington Post is tiny in comparison to that done by the internet as a whole. Politico didn’t take the classifieds, department-store ads, or even the subscribers away from the Post. That’s what’s gravely wounded the paper and it’s due to much bigger forces than Politico.

And while Wolff is tossing off lines like this…

As far as I can tell, Yahoo as we know it has no value. They could just as easily close it down.

…it’s worth pointing out that Yahoo made $1.3 billion last year and has $34 billion worth of value, according to the market.

Okay, so Wolff is spouting off in real time and should be cut some slack (though all this is a reminder of how to take TV bloviating, for instance, with a boulder of salt. Clearly, an authoritative, blasé tone goes a long way.) But it’s not like he doesn’t do this stuff in writing too.

See Wolff’s November column in USA Today on Henry Blodget and Business Insider, in which he said that TheStreet had $60 million in subscription revenue. In fact, it had $37 million subscription revenue in the last full year’s filing (2012) at the time. That rose to $43.5 million in 2013 report, filed a few months after Wolff’s column.

Wolff followed that up with another USA Today column last month that prompted Blodget to ask for three corrections that Wolff and USA Today declined to make.

Specifically, he said Business Insider’s valuation was flat in its latest round of financing and that its owners kept their existing stakes. Blodget says the valuation was “much higher” than the previous round and that one investor upped its stake “significantly.” This is a he said/she said dispute since Blodget’s firm isn’t required to disclose financial information. It’s a bit like a faceoff between Godzilla and Mothra—it’s hard to root for either side—but suffice it to say that Wolff’s account is entirely unattributed, so we have no idea where his information is coming from or if he’s “just kind of making this stuff up.”

Wolff writes that “BI made more than $19 million” last year, when it actually lost money. He’s talking about revenue, but that’s just sloppy.

Back in January, Wolff wrote this for The Guardian:

At a cost per thousand advertising rate on the web or in mobile of $1 or $2 - pretty standard - Ezra Klein will make, optimistically, $8,000 a month, before expenses, if he has a million readers (assuming four page view per unique visitor).

But two months later, he was writing this:

A rule of thumb is that for every 1 million uniques a month, a site might make $500,000 to $1 million a year.

Which is it?

And in the March column on Business Insider, he wrote that, “Part of the problem, in classic publishing terms, is that Business Insider, like the other traffic aggregators, is not an expression of a particular coherent vision or sensibility that people are compelled to seek out. It is, rather, running after the market instead of creating one.”

Which reminds me that we haven’t heard much of anything in a while from Wolff about Newser, Wolff’s own traffic aggregator—a much more parasitic one, at that—with no “particularly coherent vision or sensibility that people are compelled to seek out.”

Wolff tells me this on Twitter about that:

Excellent. Maybe Blodget will want to buy it. Or maybe not. For what it’s worth, here’s a Compete chart comparing Business Insider visitors to Newser visitors:

USA Today and The Guardian don’t tell you that its columnist is actually competing in the same space as some of the companies he’s slagging, so I thought I would.

Let’s call that an error of omission.

UPDATE:

“It’s a fair question,” says USA Today Editor-in-chief David Callaway in response to a an email I sent over a few days asking why Wolff’s Newser relationship wasn’t disclosed. “Michael isn’t involved with Newser’s day-to-day management, but he is an investor.

“I’ll discuss with him and his editor. We’re happy to disclose all relationships that might appear to cause conflict.”

I haven’t heard back from The Guardian yet.

The press and the tech bubble

How the groundwork might be laid for another Big One

Here’s a headline you don’t like to see if you’re worried about a possible social-media/tech bubble:

Slate wrote this toward the end of March:

Candy Crush’s Terrible Market Debut Shows We’re Not in a Tech Bubble

The stock performance of one company among thousands doesn’t show much of anything, much less that tech valuations are reasonable.

Particularly when that company is not a growth stock. King Digital Entertainment, a UK social-gaming outfit caught lightning in a bottle with the game Candy Crush Saga but the fad is already fading. King’s big mistake was taking a quarter too long to launch its IPO, which means instead of its charts looking like this:

They looked like this:


Candy Crush parent King Digital couldn’t sell an exponential growth story, and its stock dropped 16 percent on its first day of trading. It’s a good thing that not every IPO soars—it would be a sure sign that something was wrong if they did—but it’s hardly a sign that there’s no tech bubble. King ended up still valued at $7 billion even as its (considerable) net income was already plummeting and revenue was beginning to slide.

And there were lots of tech IPOs that faltered back before the dot.com bubble popped, but the bubble kept expanding anyway. When it burst it wiped out trillions of dollars of wealth that had often been moved from safer and/or more productive areas and hit regular investors—aka the “dumb money”—particularly hard.

Take 1-800-Flowers.com for instance. It never closed above its August 1999 IPO price and was down 29 percent two weeks after it went public. Its shares today are down 81 percent in real terms.

But August 1999 was well before the most damaging stage of the dot.com bubble. The Nasdaq doubled between then and March 2000, before plummeting 76 percent over the next two-and-a-half years. Even now, 14 years later and five years into an enormous bull run, the Nasdaq is still 16 percent below its 2000 levels, and 38 percent lower if you adjust for inflation:

Don’t get me wrong, while there have been clear signs of speculative fever, this is not 1999 all over again. The valuations aren’t nearly as insane, many or most of the businesses are actually businesses, and much of the action has shifted to private markets. So far, anyway.

Actually, right now we’re in the middle of a significant downturn for tech stocks, though it’s far too early to tell whether it proves to be the breaking of the fever or just a short-term correction before it shoots up again. Facebook, LinkedIn, Pandora, Netflix, and Twitter are all down between 18 and 31 percent over the last month (as are Zynga and Groupon, whose stocks flamed out long ago). That’s brought Facebook’s P/E down to 86, LinkedIn’s to 730, and Netflix’s to 183. Twitter and Pandora lose money, so they don’t have any “E.” Even Amazon has sold off 15 percent over the last month. The 20-year-old company’s P/E is now a mere 543.

Perhaps investors were spooked by a company valued at 100 times earnings buying a company valued at 950 times sales, which is what happened when Facebook bought WhatsApp for $19 billion.

Or maybe the Coupons.com IPO made the echoes of the dot.bomb era impossible to ignore.

Two weeks before the Candy Crush IPO went sideways, Coupons.com—one of those late 1990s dot.coms that didn’t get to go public before the bust—skyrocketed 103 percent on its debut, despite never having posted an annual profit in its more than 15 years of existence. Bloomberg View’s Jonathan Weil marveled:

This is one of those days where I realize I don’t understand anything about finance or capital markets. I’m a dinosaur. I don’t get it. People are saying things like “this time is different” again in news articles about initial public offerings by Internet companies, and they mean it. All I can do is watch, dumbfounded.

Coupons.com has nosedived since then, shedding 38 percent.

Even after the recent correction, though, the Nasdaq’s average P/E is still at 32, nearly double that of the S&P 500.

What I’m concerned about is how the intellectual groundwork (so to speak) for a potential final phase of a bubble is laid.

Daniel Gross, who wrote an, uh, ill-timed book in 2007 extolling the benefits of bubbles, did make an interesting point the other day about the various stages of bubble formation:

… a few solid years of impressive fundamental growth give way to highly ambitious projections and world-changing proclamations; a host of new entrants run onto the field, oblivious to profits or many of the other basics of running a business; individuals and naïve corporations start to get in on the action with bold, aggressive moves; and in the most dangerous stage, the phenomenon crosses over into popular culture—i.e. from CNBC to NBC.

And right on cue, here comes USA Today touting IPO jumps (“GrubHub IPO jumps a tasty 31%”) and talking about metrics created by Silicon Valley (see: adjusted earnings before interest, taxes, depreciation, and amortization) that magically turn losses into profits not recognized by Generally Accepted Accounting Principles.*

Which brings us to another recent headline, this time in Fortune:

Tech IPOS: Profits don’t matter

Fortune here writes about Box, a cloud-storage company that filed for an IPO two days before Slate’s piece and which spends more on marketing than it reaps in sales. Fortune writes that investors are only focused on growth and “total available market” and that:

… my overarching point remains: Profits do not decide a company’s success or failure in the public markets. If they did, growth-focused Amazon wouldn’t be trading at more than $350 per share.

The Amazon example also is instructive for one other reason: Many of these tech issuers — particularly the enterprise tech ones — could be profitable if it was somehow required. They’d probably shrivel up and eventually die, but it technically could be done (as opposed to investing into future growth). This is a key difference between today’s tech IPO market and the dotcom boom — where many of the frothiest companies had no underlying business to fall back on if times got lean. You may disagree with the notion of revenue growth trumping profitability — and it’s a near certainly that valuations will eventually fall, leaving many tech IPO investors with losses — but at least today’s buyers are looking at those metrics, instead of something like “eyeballs.”

But there’s a bit of a disconnect here. What does it say about a company’s value that it is unable to make profits, and that any changes required to generate profits would rob it of investment capital and eventually cause it to shrivel up and die? That’s different from the late 1990s in that profits are at least theoretically possible, I suppose, even if only temporarily. But still, that’s a long way from reasonable valuations based on expected future earnings.

No two bubbles are the same and you’d be hard-pressed to top the one we saw in the 1990s, much less the housing bubble of the 2000s.

Back in 1999, we had not just unsustainable valuations but the wild-eyed cheerleading that purported to justify them, including the infamous Dow 36,000, where American Enterprise Institute think-tankers said stocks were undervalued by two-thirds and that P/E ratios would be fairly valued at 100.

But even they had nothing on Wired founding editor Kevin Kelly, who in September 1999 wrote perhaps the most insane piece of the entire dot.com bubble. Kelly wrote that the Dow would be above 50,000 by 2010, a prediction that was off by 40,000 points or so.

It’s fascinating in retrospect to see how aware Kelly is of the craziness he’s amidst but how he’s able to brush it off:

The beginning of every previous boom has hatched prophets claiming that “this time is different.” Immediately after these claims are made, the market crashes. But sometimes, things really are different.

And so he predicted:

Fast-forward to 2020. After two decades of ultraprosperity, the average American household’s income is $150,000, but milk still costs only about $2.50 a gallon. Web-enabled TVs are free if you commit to watching them, but camping permits for Yellowstone cost $1,000. Almost everyone working has signed up for a job that does not exist (at the moment); most workers have more than one business card, more than one source of income. Hard-hat workers are paid as much as Web designers, and plumbers charge more for house calls than doctors. For the educated, the income gap narrows. Indeed, labor is in such short supply that corporations “hire” high school grads, and then pay for their four-year college educations before they begin work.

What the rich have in the year 2000, the rest have in 2020: personal chefs, stay-at-home moms, six-month sabbaticals.

As best as I can tell, we’re not seeing anything quite like this yet. It may in fact, be impossible to be wronger than Kevin Kelly was 15 years ago.

So maybe it is different this time. But in trying to find similar thinking out there that could be preparing the ground for our era’s mania, you don’t have to look far.

Here’s a chart from an actual Morgan Stanley presentation on the ultra-bull case for Tesla Motors, the innovative and very richly valued electric car maker:

Yes, that says “Phase four (two decades): 100% autonomous penetration, utopian society.” As The Wall Street Journal’s Tom Gara pointed out, Morgan Stanley “uses the word ‘utopian’ 11 times — each of them in a sincere, non-ironic way” in its report.

The FT’s Izabella Kaminska calls this an example of Silicon Valley’s “God complex,” and she’s not exaggerating their thinking:

But what we’re dealing with now is arguably a new level of scary entirely. Google has transcendentalists like Ray Kurzweil on their payrolls openly pursuing eternal “cloud-based” life, robot armies and AI — most of it, if not all, facilitated by their exclusive ownership and access to an ever growing global organic dataset (G.O.D.), that one day has the capacity to be all-knowing not only about the here and now, but about the probability of your consuming a cheese sandwich at tea-time next Thursday.

Google has plenty of cash to play with, and bored cash-rich companies that don’t really care about returns can invest in the craziest of things. This is especially so if they have the power to mint their own cash in the form of overly inflated stock prices, the product of cult-like investor appeal, which can be used as acquisition currencies in their own right to stifle the competition or buy it out.

Is it any surprise then that techland is consequently displaying delusions of godhood all round?

Ever think you’d read three paragraphs like that in the Financial Times?

Google has effectively signaled that it’s pursuing nothing less than immortality. It has hired Ray Kurzweil as its director of engineering. Kurzweil is the chief proponent of the Singularity, which posits that very soon, computer intelligence will overtake human ability and either merge with or supplant mankind. Kurzweil is actively working to make this happen, and Google is snapping up every robotics company it can find.

And so we get magazine covers like this:

And headlines like “Google’s New A.I. Ethics Board Might Save Humanity From Extinction” in the Huffington Post and “Facebook Buying Oculus Isn’t The End of The World, In Fact, It’s the Opposite” on a sight aptly called Bright Side of News. And “Hungry hi-tech giants: Are Google and the gang really getting ready to take over the world?” in The Independent, and “Fly me to the moon: Oculus Rift is just the beginning,” in The Week, and “How You’ll Fund — And Wildly Profit From — The Next Oculus Rift” in Wired, and “Will Minecraft and Makerbot usher in the post-scarcity economy?” at Boing Boing.

Take some real technological trends, add the tech industry’s staggering hype machine, mix in the press’s need for sensational headlines to drive clicks, and you have the makings of the next big one.

Maybe.

* I updated this paragraph for clarity

Audit Notes: CNN, SEC scorched, how we read now

CNN is launching a show built for Twitter called Your 15 Second Morning, The Wall Street Journal reports.

Fifteen seconds! But will it have a 30-second pre-roll ad?

If that’s not exciting enough, there’s this from what’s ostensibly still the Cable News Network:

Beyond that show, which executives hope will become a daily habit among younger news consumers, CNN has lined up some top talent for a slew of original franchise series of the news/entertainment variety.

For example, there’s Related with Dave Franco, which will focus on celebrity siblings (Mr. Franco’s brother is actor James Franco). That show is a co-production with Funny or Die. Turner Broadcasting, the Time Warner Inc. unit which houses CNN, is an investor in Funny or Die.

Several projects have yet to be nailed down, but one potential CNN Web series will likely feature an ex NFL player examining productivity in people’s lives. Another is said to star a hot young urban chef who is a protege of Anthony Bourdain, who of course headlines his own show for CNN on TV.

Seriously, CNN?

— Bloomberg News reports on a retirement speech given by SEC trial attorney James Kidney that just scorches the agency on his way out:

The SEC has become “an agency that polices the broken windows on the street level and rarely goes to the penthouse floors,” Kidney said, according to a copy of his remarks obtained by Bloomberg News. “On the rare occasions when enforcement does go to the penthouse, good manners are paramount. Tough enforcement, risky enforcement, is subject to extensive negotiation and weakening”…

Kidney said his superiors were more focused on getting high-paying jobs after their government service than on bringing difficult cases. The agency’s penalties, Kidney said, have become “at most a tollbooth on the bankster turnpike”…

“I have had bosses, and bosses of my bosses, whose names we all know, who made little secret that they were here to punch their ticket,” Kidney said. “They mouthed serious regard for the mission of the commission, but their actions were tentative and fearful in many instances.”

Kidney had some words about the press too, which you can read here:

The only other item I want to be serious about, besides some personal observations in a minute, is the metric of the division of enforcement: number of cases brought. It is a cancer. It should be changed. I have suggested to our higher ups on several occasions starting a discussion about factors we-after Monday, you—should weigh in evaluating investigations to be sure our resources are being well-spent and properly distributed. It has gone nowhere. One argument against change is that the press and congress are welded to our own anvil. But I submit that there are not more than a dozen reporters who matter covering the Commission, and about the same number of Hill staffers. I imagine they would welcome coming to an educational event about the Division’s new metric, one which focuses on quality, not quantity. Who could be against it? Goodness knows we spend millions promoting even our emptiest achievements. Why not promote a new metric that will be sensible and helpful.

— I’d call this Washington Post piece a bogus trend story if it weren’t for the fact that I command-tabbed, got up, and switched browser tabs at least 15 times before I managed to make it through the whole thing:

The Internet is different. With so much information, hyperlinked text, videos alongside words and interactivity everywhere, our brains form shortcuts to deal with it all — scanning, searching for key words, scrolling up and down quickly. This is nonlinear reading, and it has been documented in academic studies. Some researchers believe that for many people, this style of reading is beginning to invade when dealing with other mediums as well.
“We’re spending so much time touching, pushing, linking, scroll­ing and jumping through text that when we sit down with a novel, your daily habits of jumping, clicking, linking is just ingrained in you,” said Andrew Dillon, a University of Texas professor who studies reading. “We’re in this new era of information behavior, and we’re beginning to see the consequences of that.”

Audit Notes: Online polls, local TV news, HuffPost art

The LA Times runs with a shaky survey on wage theft

The Washington Post’s Erik Wemple picks apart poor Los Angeles Times coverage of an Internet survey that found that 90 percent of fast-food workers had their wages stolen.

It was paid for by a labor group and had all kinds of methodological problems, like inducing people to take the survey on Facebook by offering the chance to win a gift card.

To compile the results, Hart conducted an online survey of 1,088 respondents via Facebook “who work in fast food restaurants in the top 10 metro areas across the country.” Recruitment got a little help from inducements, as the Facebook ad above notes: “FAST FOOD EMPLOYEE? 2 MINUTES, AND YOU COULD SCORE $100 BUCKS.” Guy Molyneux, a partner at Hart Research Associates, told the Erik Wemple Blog, “They had to also confirm to us that they work in a fast-food restaurant.”

Helpful, but not good enough for outlets that have promulgated exacting standards as to what survey results are worth passing along to the public.

The LA Times ran its story without getting comment from the fast-food industry, and tells Wemple it couldn’t have because the poll was embargoed.

That’s a poor excuse. The LAT should want to get scooped on a PR-planted story based on a sketchy poll.

Mother Jones looks at disturbing Pew research on consolidation in local television news, which tens of millions of people rely on to get their news:

In terms of dollar value, more than 75 percent of the nearly 300 full-power local TV stations purchased last year were acquired by just three media giants. The largest, Sinclair Broadcasting, will reach almost 40 percent of the population if its latest purchases are approved by federal regulators. Sinclair’s CEO has said he wants to keep snapping up stations until the company’s market saturation hits 90 percent. (And that’s not a typo.)

Now here’s where things really get sketchy: Media conglomerates such as Sinclair have bought up multiple news stations in the same regions—in nearly half of America’s 210 television markets, one company owns or manages at least two local stations, and a lot of these stations now run very similar or even completely identical newscasts, according to a new report from the Pew Research Center. One in four local stations relies entirely on shared content…

As it stands, some local stations simply share office space or vans or helicopters, but others take the overlap much further. To offer one example, CBS and NBC affiliates in Syracuse, New York, use separate anchor teams but run nearly identical stories produced by a shared group of reporters. In some markets, partner stations run virtually identical newscasts, albeit at different times. And then there are stations like the CBS and NBC affiliates in Honolulu, which don’t even bother staggering the times: They run identical newscasts simultaneously.

For more on this, read CJR’s piece on the phenomenon from last September.

— It’s hard to illustrate some stories, we’re well aware. But the Huffington Post needs to execute better editorial judgment than this:

Audit Notes: Star-Ledger sinks, Strib swims, news revenue quantified

Advance Publications and the Newhouses slash another already-gutted newsroom

The Newhouses brought the ax down yet again on the Star-Ledger today, slashing 167 jobs, including 40 in the paper’s newsroom.

That’s just the latest blow to a paper which had 350 journalists in 2008 and which now has an anemic 116. It’s a catastrophe for news coverage in a notoriously corrupt state, though at least some of Advance Publications’s Jersey reporting has been centralized at NJ.com. Some of these papers are getting to the point where there’s nothing left to save.

You can see the Star-Ledger’s structural problems easily, as well as the mismanagement that has exacerbated them. The paper had 750 employees, but just 20 percent of them were journalists. It had journalists overlapping beats at the paper and NJ.com. and was headed for a $19 million loss in 2014 (perhaps more than its entire newsroom cost).

— Meantime, things are going better at the Minneapolis Star Tribune, which has resisted gutting its newsroom and which has implemented a successful digital-subscription program. It’s now being eyed by a local billionaire:

The sale would be a pivotal moment for the media company, which emerged from bankruptcy in 2009 with the challenge of reinventing itself for a digital audience while also keeping its print editions robust. Since then, the company has expanded its readership, stabilized its finances and striven journalistically, winning two Pulitzer Prizes in 2013.

“Right now, I think the Star Tribune has great leadership,” said Dan Sullivan, Cowles Chair of Media Management and Economics at the University of Minnesota. “They’re one of the real success stories in terms of major dailies today”…

Despite ongoing challenges in print advertising, the Star Tribune has been “solidly profitable” in every year since its restructuring, Klingensmith said, characterizing the profits as consistently “in the eight digits.”

The Strib still makes at least $10 million a year, and it’s building a digital business that relies on readers as well as advertisers to make the eventual leap to digital-only. Perhaps the Newhouses should take a field trip to Minneapolis. Just please don’t buy the paper!

— The Pew Research Center reports that news-industry revenue have plunged by one-third since 2006, a loss of about $30 billion in real terms. With the collapse of advertising, reader revenue now comprises 24 percent of journalism revenue across print, broadcast, and online.

There is, however, a twist to those numbers: Even as it has grown as a share of the total pie, in actual dollars, news-related audience revenue is about the same as what it was in 2006. Adjusting for inflation, the 2006 figure is estimated at around $15 billion, just as it is today. But that doesn’t mean it’s been stable all those years.

Newspaper circulation revenue, after five years of decline from 2006-2011, grew 5% in 2012, tied to both print price increases and digital subscription plans. It is expected to stay even or see slightly smaller gains in 2013. In the television news business, retransmission fees, which ultimately benefit cable and broadcast networks and their newsrooms, have been steadily on the rise over the past handful of years as has the typical monthly cable bill.

Pew Research estimates the retransmission money funneled to TV newsrooms has doubled since 2006.

Native ads: Advertorial for the digital age

Talking Points Memo, Andrew Sullivan, and advertising as a necessary evil

The native-ad wars have flared up again, this time over Josh Marshall’s Talking Points Memo, the longtime standard bearer for serious, digital-first, for-profit news. TPM has signed up Phrma, the drug-industry lobby, to sponsor its Idealab Impact section, a deal that includes running Phrma-written pieces as native ads.

There’s nothing inherently worse about an advertiser using a thousand words in story form to spread its message than there is with an ad that uses 30 words, an idealized photo, and a catchline to do the same.

So if we accept that advertising itself is a necessary evil, the only question for native ads is whether they’re clearly presented as advertisements and not editorial.

As Dean Starkman has written, that presents an existential problem for native ads: Make them too native and they deceive readers. Make them too non-native and few will read them.

Marshall, though, sees something of a third way:

Why are these “Sponsored Messages” attractive to advertisers, particularly our advertisers? Because our advertisers are policy focused and thus tend to have more complex arguments. They’re not just selling soap or peanut butter. There’s only so much of those arguments you can fit into a picture box or a video. They want room to make fuller arguments, lengthier descriptions of who they are and what they do, as you would if you were writing an editorial - in text, going into detail. The opportunity to do that to an audience like TPM’s is of particular value because you’re people who care about policy and you read stuff.

I don’t see anything in this that’s inherently different than a regular ad, which also tries to get across its message to readers, often via propaganda:

So it comes down to execution. Here’s what TPM’s non-ad Idealab Impact stories look like:

Here’s what the landing page looks like with Phrma’s native ads mixed in:

And here’s Phrma’s actual sponsored post:

TPM doesn’t cross any lines with its native ads, but it walks closer to them than, say, The New York Times and Wall Street Journal did with theirs.

The NYT, for instance, put a bright colored border around its Dell native ad, put the Dell logo on the byline, used a different, smaller font, and blocked Google’s spiders from indexing it.

TPM’s distinctions are subtler: A thin border, a byline that says PHRMA in regular text, an easily missed “SPONSORED MESSAGE” disclosure atop the post, a centered layout, the same font. Most people are going to know this is an ad, but it’s conceivable that at least some will not.

That doesn’t mean you throw out the baby with the bathwater. Just make these signals much clearer.

Andrew Sullivan isn’t having any of that:

My concern with “sponsored content” in vast swathes of online media - from the New York Times to Time Inc. and Buzzfeed - is simply that, by deliberately blurring the distinction between advertising and editorial, it must necessarily undermine this integrity and cast a doubt over that trust. It violates the core integrity of any journalistic institution to treat the prose of commercial interests as the equivalent of the prose of editors and writers - or to blur the lines between the two, by presenting commercial speech in extremely similar formats to editorial speech.

Am I being too purist? All I can say is that my position was once held by every journalistic institution you can think of only a few years ago. Back then, advertising was a revenue model that was self-explanatory, clearly differentiated from any article, and if it could in any way be confused with an article would have the word “Advertisement” attached to it.

Here’s the thing: Native ads are just advertorials by another name, and advertorials have long been published by news organizations of the highest standards, including The New York Times, The Wall Street Journal, and The New Yorker. Those “special advertising sections” are the native ads of print, and they’ve been there for decades.

Does anybody read them? You have to assume somebody does or advertisers wouldn’t keep paying for them.

Journalists may not like to think it, but advertising is part of a publication’s content. Lots of people buy the Sunday paper for the coupons. Some still buy papers for the classifieds. They buy Vogue for the ads. And some people read the special advertising section.

In a perfect world, journalism would be paid for entirely by readers and publications’ interests would align with them and them alone. But while Andrew Sullivan and Consumer Reports can make a go of that, 99.9 percent of journalists and their organizations cannot.

And so in this fallen world, we have advertising, which is potentially corrupting in all its forms, not just in advertorial ones.

The much more dangerous aspect of advertising is the self-editing or outright censorship big advertisers can prompt on the news side. If TPM becomes heavily reliant on pharmaceutical ad dollars, will it be able to cover pharma issues without pulling back? I’d like to think so. The most famous case in business journalism was when The Wall Street Journal’s legendary editor Barney Kilgore faced down General Motors after the carmaker withdrew its huge account in protest of WSJ coverage. But we know from history that this is not always the case.

Tobacco companies’ products killed 100 million people in the 20th century, most of them after scientists proved they caused mortal diseases. Marketers and the media played critical roles in creating and passing on the propaganda that allowed cigarette companies to addict millions of new customers a year.

Journalism was so addicted to tobacco advertising that the press at least sometimes censored itself when covering the cigarette companies.

The New Republic, for instance, a few years before Sullivan got there, squashed an investigation on Big Tobacco’s insidious media strategy because Marty Peretz foresaw “massive losses of advertising income.”

Time, also around the same time in the 1980s, deleted anti-tobacco references from an advertorial pushing healthy living, and a spokesman actually said this to the Chicago Tribune:

`Time, as does Newsweek, has a lot of cigarette advertising. Do you carry material that`s insulting to the advertiser?“

And that was when the media was minting money. With the press now in a far weaker position, the temptation to self-edit is surely stronger. That’s potentially a far bigger problem than native advertising, particularly when the latter is well disclosed.

Digital First plans layoffs (Updated)

High-level executives and high-profile digital projects targeted

Digital First Media, the New York-based newspaper operator that has made a high-profile bet on its digital business, is planning layoffs as it heads into a year expected to see rapid consolidation in the newspaper industry, a person familiar with the matter says.

The cuts are expected to number only about 100 people out of the company’s 10,000-plus employees, but those affected are expected to be higher-level executives and certain high-profile digital projects, the person says.

The person says the cuts are part of an ongoing strategy to take out about $60 million annually in expenses of about $1.15 billion in total costs, while reinvesting in its digital business, investments eventually expected to add $100 million a year to company expenses. The cuts have been under discussion internally for about three months.

It’s not known which executives or projects will be affected.

Digital First has taken a prominent place in future-of-news debates with its outspoken chief executive, John Paton, bluntly calling for his industry to adapt and implementing bold experiments at his own company. One of the most high-profile digital projects, for instance, has been a consolidated national and foreign desk, known as Thunderdome, that gathers non-local news and distributes it throughout the company’s network of local papers.

The move comes three months after the closing of a deal to merge the assets of MediaNews Group, the newspaper chain including flagship Denver Post, co-founded by Dean Singleton, who retired last fall. And in January, the company appointed Steven B. Rossi, a former Media News executive, as chief operating officer, reporting to Paton and responsible, among other things, for controlling costs.

Digital First, a successor to the Journal Register Company, has struggled like the rest of the business with falling print revenues and a digital business that is growing but at a slower pace than its print business is declining. Two years ago, JRC, owned by the hedge fund Alden Global Capital, announced its second bankruptcy, ascribing the filing to legacy costs left from its previous owners, which declared bankruptcy in 2009.

The cuts come as the rest of the industry is expected to consolidate with some companies, including the Tribune Publishing Company, newly emerged from bankruptcy and spun off from its television assets, and Gatehouse Media, also recently emerged from bankruptcy, looking to make acquisitions. Cutting costs is often seen as a way to make a company more attractive to buyers.

A Digital First spokesman didn’t have an immediate comment.

[UPDATE: After I (ahem) broke this story, Ken Doctor and Paul Farhi add considerable detail, principally that it is in fact Thunderdome that is on the chopping block.]

Audit Notes: WSJ’s Obamacare frame, undercover, too big to fail

The Journal’s angle slants against HealthCare.gov

Contrast how The New York Times and The Wall Street Journal frame the Obamacare news on their front pages:

The Times gets it just right:

Health Care Signups Reach Frenzy in Final Day to Enroll

Volume on the Website Causes More Snags

The Journal, though, slants its headline to focus entirely on the bugs the website had yesterday:

New Technical Woes Hobble Health-Insurance Sign-Ups at Zero Hour

It doesn’t mention—even in the body of the story—were due to the enormous last-minute demand for health-care plans. The fact that hundreds of thousands of people pushed Obamacare over the 7 million goal is a far bigger story than the website crashing for a while.

The Washington Post, meanwhile, fronted this headline, which works fine:

HealthCare.gov hiccups amid deadline-day frenzy

Americans racing to sign up before midnight encounter glitches

See James Fallows for more on the slant that shows up too often in the Murdoch-era Journal.

— Check out this great site from NYU on undercover reporting and its role in the great stories of the last 150 years.

This collaboration with NYU Libraries collects many decades of high-impact, sometimes controversial, mostly U.S.-generated journalism that used undercover techniques. It grows out of the research for Undercover Reporting: The Truth About Deception (Northwestern University Press, 2012), which argues that much of the valuable journalism since before the U.S. Civil War has emerged from investigations that employed subterfuge to expose wrong. It asserts that undercover work, though sometimes criticized as deceptive or unethical, embodies a central tenet of good reporting—to extract significant information or expose hard-to-penetrate institutions or social situations that deserve the public’s attention. The site, designed as a resource for scholars, student researchers and journalists, collects some of the best investigative work going back almost two centuries.

Look at the “Other People’s Work” section, which highlights dozens of undercover reports ranging from the mattress factories of Minnesota in 1888 to a Toronto Star report from last year on child labor in Bangladesh. Fascinating.

— This Fortune piece on “Why America’s fear of ‘too big to fail’ is irrational” is a bit off (emphasis mine):

The U.S. Federal Reserve recently concluded that six of America’s biggest banks enjoy about $8.5 billion a year in savings, mostly in the form of paying lower borrowing costs than smaller institutions. That might sound unfair, but that’s a pretty small price U.S. taxpayers effectively pay to avoid another financial crisis. In addition, the Troubled Asset Relief Program, though unpopular, actually netted a profit for taxpayers as the government’s investments have been gradually wound down; and then there is the case of Ally, the former General Motors finance subsidiary, whose planned IPO will result in a gain for the public.

Still, the fear of “too big to fail” persists. The reason for this is a lack of understanding of why our biggest banks can’t really be allowed to fail.

“Too big to fail” doesn’t exist because we have sympathy for Citigroup or JPMorgan Chase or because Wall Street is too powerful. It exists to preserve the integrity of the global financial system, which is a complex and interconnected web of financial relationships that cannot realistically be insulated from the downfall of even a single large bank.

Fortune is saying that these TBTF subsidies are what Americans pay to avoid financial crises. That’s just staggeringly wrong. Those subsidies (which most studies conclude are far larger than $8.5 billion a year) are what banks get because markets perceive them as too big to fail and thus lend to them at lower rates.

But big banks got these indirect subsidies for years years before the 2008 crisis too. An implicit government backstop doesn’t prevent a financial crisis from occurring. If anything, it makes it more likely.


Audit Notes: Business Insider’s junkets, NYT’s union dig, naive AP

Henry Blodget’s site lets sources pay for business reporters’ overseas trips

Henry Blodget’s Business Insider is still letting reporters take junkets paid for by their sources, which it should go without saying, is a serious ethical problem. No, it’s not okay, even if you disclose it at the bottom of your story.

Lucia Moses of Digiday reports:

Still more unorthodox, BI has published at least three stories in the past year that included a disclosure that a source paid expenses related to the coverage. A story by Steve Kovach about Samsung’s design philosophy, for example, includes the following disclosure: “Samsung paid for a portion of our trip to South Korea for this story, including the flight and some meals. Business Insider paid for lodging and all other expenses.”

Another, about Chinese Internet company Tencent, ends with this revelation from the author, Nicholas Carlson: “Disclaimer: I was only in Beijing because Tencent paid for me to fly to China to be on a panel. I paid for my airplane ticket to Shenzhen, however.”

A third, by Alyson Shontell, about a high-tech London hotel CitizenM, includes this disclosure: “London & Partners, a not-for-profit funded by the city’s mayor, paid for our flight and hotel to London this week to cover London’s startup scene. It paid the full price (about 400 pounds for three nights) at the CitizenM.”

The silly thing here is these junkets probably saved Business Insider no more than several thousand dollars in expenses last year. Blodget’s selling whatever credibility he has awfully cheap.

The New York Times looks at the printing industry in Britain, which is, obviously, retooling and retrenching. But this is odd:

Britain, with its heavily unionized work force, is also vulnerable to competition from elsewhere in Europe.

“The Italians offer very high quality but also low price because of their low labor cost,” said Robert G. Picard, a professor of media economics at the University of Oxford.

“And Germany and the Scandinavian countries have a very efficient printing industry, which takes away some of the price problems,” he said. “So for things that are time-sensitive like magazines and have to be done in the region, the best deal might be outside of the U.K. — and you can have your products here overnight.”

This reflexive blaming of unions doesn’t make any sense. Italy has much higher unionization rates than the UK, with 36 percent of workers in unions. About 65 percent of Scandinavian workers are organized. Just 26 percent of British workers are.

— The gumshoes at the Associated Press just can’t quite figure out how this German guy got his hands on so much magnificent art (emphasis mine):

Several hundred artworks hidden away for decades in a Munich flat - some believed to have been illegally seized during Germany’s Nazi era - are to be returned to the man who hid them, pending an investigation into their ownership, said German prosecutors Wednesday.

The collection - which includes works by Picasso, Chagalle and Matisse - was discovered in a raid upon Cornelius Gurlitt’s apartment in 2012 and was subsequently confiscated pending an investigation into Nazi expropriation.

Gurlitt is the son of an art dealer who worked for the Nazis. It remains unclear how many of the items came into his possession.

h/t Zac Bissonnette

Straw men fail to advance future-of-news debate, as usual

A response to Ben Thompson on the Web’s supposed golden age of journalism

Ben Thompson writes a three-part series about newspapers and the future of news over at his blog Stratechery.

Since the posts are basically a response to a piece I wrote criticizing Marc Andreessen’s assertion that the news business will grow exponentially over the next 20 years, and since I get to play the straw man in all three of Thompson’s posts, I thought I’d respond. The arguments read like something of a greatest hits of technology-centered tropes offered in the future-of-news debate, such as it’s been, for the last, oh, 10 years or so.

These include a gratuitous sneer at newspapers and those who value them (“Newspapers are held up as an irreplaceable tentpole of a free society, especially by the journalists who work at them”); the obvious presented as revealing (businesses are supposed to make money); hyperbole (“Newspapers Are Dead”); comparisons of apples and oranges (clicks on a blog post as the equivalent of subscribers to a paper); the apparently obligatory misrepresentations of other viewpoints (see below); trashing of core values (“ETHICAL WALL=VALUE WALL”); an uncritical faith in technology (“The Internet… is the impetus behind a new golden age”), and an equally unblinking techno-libertarian faith in markets, even for public goods such as news (“the market will, for the first time in the history of news, be the ultimate arbiter of what writers are worthwhile”). And here it’s all topped with a Randian vision of an army of journalist John Galts as the “few big winners” with the rest of the poor schlubs weeded out by the Darwinian forces unleashed by the internet:

What then, though, of the tens of thousands of journalists who formerly filled the middle of the bell curve? More broadly - and this is the central challenge to society presented by the Internet - what then of the millions of others in all the other industries touched by the Internet who are perfectly average and thus, in an age where the best is only a click away, are simply not needed?

This is the angst that fills those in the news business, and society broadly. The reality of the Internet is that there is no more bell curve; power laws dominate, and the challenge of our time is figuring out what to do with a population distribution that is fundamentally misaligned with Internet economics.

Yes, what do we do with this “population distribution”?

Let’s see if we get this straight: laid-off state house or investigative reporters are by definition mediocre while gainfully employed BuzzFeed aggregators are proof of the internet’s talent-sifting prowess? Got it.

This ugly thought is at the core of Silicon Valley’s Panglossian worldview, though it’s not usually put so crudely. Perhaps rather than bending journalism to the needs of technology, technology can be bent ever so slightly to accommodate the needs of public interest reporting. Just a thought.

What the technology-centered view can’t account for is the high cost of reporting, a labor-intensive activity. And because it can’t, it all but dispenses with it.

Alas, the greatest reporter in the world can’t unearth City Hall corruption while writing about the high school lacrosse match, live-blogging a city council meeting, much less hopping that bothersome ethical wall to sell ads or the like. Reported journalism doesn’t pay for itself, and this is the problem that even technology hasn’t yet solved.

Thompson’s vision of the future belonging to individual blogger/reporters is at this point wildly out of date, with the exceptions pretty much proving the rule.

Journalism, and I’m not especially happy about this either, needs institutions too. Audit Chief Dean Starkman, wrote about all this much better back in 2011. Here’s a sample:

In that spirit, I’m going to make a bold leap and predict—eenie meenie chili beanie—that for a long time the Future of News is going to look unnervingly like the Present of News: hobbled news organizations, limping along, supplemented by swarms of new media outlets doing their best. It’s not sexy, but that’s journalism for you.
I’ll go further and posit as axiomatic that journalism needs its own institutions for the simple reason that it reports on institutions much larger than itself. It was The New York Times and Gretchen Morgenson, followed quickly by Bloomberg’s late Mark Pittman, who first pried loose the truth about the bailout of American International Group: namely, that it was all about Wall Street, led by Goldman Sachs. Those tooth-and-nail battles were far from fair fights—Goldman’s stock-market capitalization is about fifty (that’s “five-oh”) times that of the Times’s parent. Whether it be called The New York Times or the Digital Beagle, we must have organizations with talent, traditions, culture, bureaucrats, geniuses, monomaniacs, lawyers, health plans, marketing divisions, and ad salespeople—and they must have the clout to take on the likes of Goldman Sachs, the White House, and local political bosses.

So, it’s best to take with a grain of salt what Thompson says we think:

Actually, the problem of the unbundling of advertising from content creation is a problem for all news media, with the few exceptions being places like Consumer Reports that rely on subscribers exclusively or almost exclusively, and that’s why I intentionally wrote “news” there and not “newspapers.”

I’m arguing that Google and Facebook are in fact the new middlemen, taking newspapers’ middleman role while not producing any news. When Thompson writes that the internet “has made life in the middle much more difficult, particularly for old-school advertising middlemen like newspapers,” he’s right, except he’s not accounting for those whopping exceptions like Google and Facebook, who combined take in half of all online advertising dollars, a far, far higher percentage of advertising dollars in a medium than any newspaper company did in print or TV company did over the airwaves before the Web. And their cost of content is effectively zero. That’s what I mean about the unbundling of advertising from content creation.

And it says something about the technology-centered argument—anyone suggesting the internet has created problems for journalism must be portrayed as a Luddite defending trade interests—that it needs to erect strawmen like this :

It is incredibly tiring to hear newspaper defenders talk as if advertising dollars are their god-given right, and that Google and Facebook are somehow stealing from them, when in reality Google and Facebook are winning in the fairest way possible: providing better value for the advertiser’s dollar.

Except I explicitly said the opposite:

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.

Can we make a rule that if you’re going to link to something you should make a good faith effort not to pretend it says the opposite of what you say it says?

News has always depended on an advertising subsidy. Now advertisers can advertise at many other places that don’t produce news. The vastly increased supply drives down ad rates, making it difficult or impossible to sustain core reported journalism.

That’s why we’ve been hammering newspapers for years now about reader revenue. But even paywalls and memberships can only do so much. I suspect any long-term solution for public-interest reporting (and that’s what we’re talking about when we worry about the future of news) will entail a mix of reader revenue, ad revenue, and much heavier philanthropic or government (whoops! Did I say that?) support.

Happily the online news debate has progressed so much since Dean’s 2011 “Confidence Game” that even Thompson concludes that reader contributions will be necessary for the future of news.

By the way, those “dead” newspapers? They still have tens of millions of daily readers and pull in $39 billion a year, or about 48 times as much revenue as digital-news outlets combined.


Newspapers themselves pull in about four or five times as much revenue online as digital-only sites do.

They are still—a quarter century into the Web era—responsible for the vast majority of reported information and still employ eight to ten times the amount of journalists (Pew incorrectly includes Vice Media in that digital natives list I just linked, by the way).
Newspapers have critical problems that will in many cases be fatal, particularly for those that aren’t good enough to get significant revenue directly from readers. But let’s not put them in the grave just yet.

The question for them is the same it’s been for at least 15 years now: How can they transition to digital-only businesses models in the medium-to-long term? And if they can’t, how can we construct a reporting infrastructure to have the news we need that the market won’t provide?

It’s true as far as it goes that market-supported journalism will survive (though Andreessen is out to lunch when he says it will grow ten to 100 times over the next two decades). But much of journalism (believe it or not, neoliberals) is a public good—technically something that is not consumed no matter how many people use it but more broadly something society needs but the market may not support, an event known as a market failure

When technology-centered writers take on this problem the FON debate will be in much better shape. And no, Andreessen’s laughable assertion that the “total global expense budget of all investigative journalism is tiny—in the neighborhood of tens of millions of dollars annually” doesn’t count.

Audit Notes: Sex bias and arbitration, NYT Now, ageism in the Valley

The Times on corporate culture questions raised by a lawsuit against Sterling Jewelers

Susan Antilla has a disturbing story in The New York Times about a sexual harassment and bias lawsuit seeking class statu against the country’s biggest jewelery retailer, Sterling, which owns Kay Jewelers, among other brands.

When you’ve got a CEO who has affairs with subordinates and “jumped into a swimming pool with female managers who were ‘in various states of undress,’” the complaint alleges, you may have a cultural problem. Sterling didn’t answer NYT questions about those allegations.

And this raises serious questions about the extra-judicial process the company requires employees to go through for complaints:

Since 1998, Sterling has required employees to agree to take disputes to private arbitration as a condition of employment. Companies are increasingly demanding that employees agree to arbitration, said Cliff Palefsky, an employment lawyer in San Francisco. More recently, firms are including clauses that prohibit bringing class-action complaints to arbitration, he said.

“In the old days, arbitration clauses said nothing about class actions,” he said. “Now companies are jumping on the bandwagon.”

Sterling employees can get to arbitration only after they have filed a claim with its in-house resolution program. It received 474 complaints from 1998 to 2010. In that time, according to plaintiffs’ legal filings, only two moved to an arbitration decision.

— Ken Doctor looks at NYT Now, which is the primary piece of The New York Times Company’s paywall 2.0 strategy:

The pricing of the “essential” product, NYT Now, may be tricky. It’s only $2 a week, which gets you through-the-day reports plus a curated sense of what’s big news from elsewhere and the briefings. However, for $3.75 a week, you can get access to four or five times more New York Times content through its smartphone app — and full access to the NYTimes.com on the web. So a side-by-side comparison may give buyers second thoughts. It’s more likely that Times strategy will be to put NYT Now front-and-center as the shiny new must-have thing, believing that comparison shopping won’t be of major consequence.

If the three E’s have it, the word to avoid starts with a C: cannibalization, as in NYT Now eating away at the Times’ own full-price digital subscriber base. The Times has examined three years of data on customer usage and interaction to figure not just which products they might pay for, but also the kinds of partial-content Times products that wouldn’t incentivize existing subscribers to downgrade — which would put a dent in that $150 million in new subscription revenue the paywall is pumping out annually. So NYT Now, the first of the three new niche paid products (food and opinion products will roll out this summer), is intended to satisfy, but not satiate, segments of readers.

It seems unlikely that NYT Now will make much if any direct difference to the Times’s bottom line. But it doesn’t have to snag hundreds of thousands of subscribers to be a good investment. If existing subscribers come to view it as an essential part of their subscriptions, and the lessons in mobile news that the Times will learn from it make NYT Now worth the relatively small investment.

— Noam Scheiber’s New Republic piece on the hyper-ageism of Silicon Valley is a fascinating look at the arrested development of the brogrammer business:

Silicon Valley has become one of the most ageist places in America. Tech luminaries who otherwise pride themselves on their dedication to meritocracy don’t think twice about deriding the not-actually-old. “Young people are just smarter,” Facebook CEO Mark Zuckerberg told an audience at Stanford back in 2007. As I write, the website of ServiceNow, a large Santa Clara-based I.T. services company, features the following advisory in large letters atop its “careers” page: “We Want People Who Have Their Best Work Ahead of Them, Not Behind Them”…
In 2011, famed V.C. Vinod Khosla told a conference that “people over forty-five basically die in terms of new ideas.” Michael Moritz, of Sequoia Capital, one of the most pedigreed firms in the tech world, once touted himself as “an incredibly enthusiastic fan of very talented twentysomethings starting companies.” His logic was simple: “They have great passion. They don’t have distractions like families and children and other things that get in the way.” But, of course, whereas the Homebrewers mostly wanted to unleash the power of computers from IBM and share it with the common man, the V.C.s want to harness youthful energy in the service of a trillion-dollar industry…
And then there is the question of what purpose our economic growth actually serves. The most common advice V.C.s give entrepreneurs is to solve a problem they encounter in their daily lives. Unfortunately, the problems the average 22-year-old male programmer has experienced are all about being an affluent single guy in Northern California. That’s how we’ve ended up with so many games (Angry Birds, Flappy Bird, Crappy Bird) and all those apps for what one start-up founder described to me as cooler ways to hang out with friends on a Saturday night.

I’d have liked to have seen some data on the median age of these companies (Google’s, for instance, is 29. The average American worker is 42.) and more on what this aspect of the culture means for women, who are also massively underrepresented, but it’s a very good piece.

WSJ editorial page brazenly ignores Toyota’s own admissions

Holman Jenkins isn’t entitled to his own facts

Four years ago, at the height of the Toyota sudden-acceleration debacle, Holman W. Jenkins of The Wall Street Journal editorial page, pooh-poohed the “scare,” writing that “overwhelming evidence that the real menace to drivers is their own right foot stamping the gas instead of the brake.”

Megan McArdle, noting that the age of the drivers skewed high, wrote, “you don’t usually make a profit by killing your customers. It’s too risky, in this age of nosy regulators and angry consumer activists.”

The problem with these contrarian pieces was they ignored compelling evidence available at the time that Toyota’s reported problems were far more extensive than those of other carmakers.

Okay. Nobody’s perfect.

But then last week, Toyota agreed to not a civil but a criminal settlement in which it agreed to a 12-page statement of facts. In it, Toyota admitted its own design problems were squarely at fault and that it engaged in an extensive cover-up to avoid recalls and to hide these problems from the public and from federal regulators.

Normally, op-ed writers whose hunches are proven wrong by an extensive criminal investigation, including corporation admissions, would do the normal thing, which is to ignore the new revelations and find something else to write about. And that, McArdle, to her credit, one supposes, has done.

Jenkins, though, courageously ignoring what is now an established record, demonstrates that no amount of evidence, again, including a corporate admission, can change opinions on The Wall Street Journal editorial page.

Let’s look at the record.

In the settlement Toyota admits that it knew about not one but two accelerator design problems, which it repeatedly and actively concealed from regulators and consumers.
The carmaker knew that it had a serious problem with the positioning of its accelerator pedal, which was so low to the floor that it could become entangled with floormats. It ordered a redesign for future models, but resisted implementing recalls for at least two years after it knew about the problem. As a cost-saving measure, those redesigns were delayed until the model’s next full redesign, which come every three to five years.

Toyota then discovered a second, unrelated accelerator problem, what it referred to as a “sticky pedal” and quietly ordered a redesign. Several months later, as its sudden-acceleration PR crisis grew, the facts statement says, it “decided to suspend the pedal design changes in the United States, and to avoid memorializing that suspension, in order to prevent NHTSA from learning about the sticky pedal” and later “decided to characterize the changes as minor to prevent their detection by NHTSA.”

And even after Toyota finally agreed to recall five models, the statement says, it knew that three other models had similar problems, but didn’t inform regulators and didn’t plan to recall them.

As the press forced Toyota’s hand on the sticky-pedal problem, the carmaker misled federal regulators about the seriousness of the issue. As the statement says:

The presentation that TOYOTA gave to NHTSA on January 19, 2010 downplayed the seriousness of reports of sticky pedal in Europe. When, after the presentation, a TOYOTA employee who attended the presentation reviewed the actual reports from Europe, and saw that they included such phrases as “‘out of control’” and “‘safety issue,’” he was said to exclaim “Idiots! Someone will go to jail if lies are repeatedly told. I can’t support this.”

Toyota finally agreed to NHTSA pressure to recall the remaining three models, but then debated how to conceal its earlier knowledge of their problems, with one quality-control leader saying in an email that Toyota shouldn’t admit that it already had known about the problem. “…[I]f we say, ‘Everything is the same as Camry, etc.’, they may come after us by saying ‘Why didn’t you report when we agreed last time?”

In short, this is the very picture of a company endangering its customers to preserve its margins.

So it’s odd, to say the least, to see Jenkins revisit the issue in the wake of these damning admissions and essentially contend, based on basically nothing, that the problem was all about floormats, that dealers or drivers were basically responsible, and that Toyota panicked and took the blame (emphasis mine):

The 2009 crash that set off the Toyota panic was laid almost immediately to an improper, ill-fitting floor mat incorrectly installed in a loaner car by a San Diego Lexus dealer. This week the company agreed not to contest a single count of “wire fraud” related to supposedly failing to alert the public about the danger posed by floor mats—though Toyota in 2007 had already warned dealers about the problem and recalled floor mats in certain Toyota and Lexus vehicles.

The single “wire fraud” count also covers Toyota’s supposed reluctance to recognize a “sticky pedal” problem—though the “sticky pedal” clearly emerged because Toyota ransacked its files for any “defect” it could “fix” in order to calm a public hysteria. To this day, no accidents or deaths have been tied to the sticky pedal.

Never mind that extensively documented coverup Toyota just admitted committing, how many scare quotes can fit into two paragraphs? I count six, plus a “panic,” a “supposedly,” a “supposed,” a deceptive framing, and a red herring.

Look closer at Jenkins’s line about “recalled floor mats in certain Toyota and Lexus vehicles,” a classic example of Wall Street Journal editorial page misdirection. This wasn’t just about floormats. It was about pedal design, as Toyota itself admits and which it has long since fixed. And to say that Toyota did the right thing by recalling “certain” vehicles in 2007 is nonsense. It recalled all of 55,000 cars, and under duress. The final figure, after the scandal broke? More than 10 million cars recalled from 2009 to 2011, replacing floormats and reconfiguring the pedals.

It’s just bizarre, given what we know today, that Jenkins claims—contrary to the statement of facts that Toyota itself signed—that Toyota went scrambling to find a defect to shut up the panic. That defect was well known to Toyota, again, by its own admission, a year before the crash that kicked off the uproar.

Doubling down, Jenkins then takes this shot at the Los Angeles Times, which led the reporting on the Toyota’s sudden-acceleration story:

After the horrific San Diego floor-mat crash, the Los Angeles Times fed the furor with a series of articles pushing the electronic bug theory. For a laugh, check out its stories this week on the Toyota settlement in which the paper continues to pat itself on the back for its “investigation” even while acknowledging that, aside from two floor-mat crashes, driver error is the only explanation ever found for Toyota sudden-acceleration mishaps.

Needing a laugh, I went searching for these stories that acknowledged only two floor-mat crashes. I couldn’t find them. I did find that the LAT reported that Toyota has agreed to settle 131 injury and wrongful death cases so far with at least 300 more in the works. It also reported that Toyota admits to five deaths, while the Nader-founded Center for Auto Safety estimates there were hundreds of injuries and deaths.

The Jenkins column wasn’t even the most misleading WSJ piece. That title goes to Cato’s Walter Olson, who wrote this:

The Justice Department’s Unjust Toyota Fine

Cost of safety violations: 0. Cost of paperwork violations: $1.2 billion.

Paperwork violations.

The LAT’s Michael Hiltzik writing earlier on a different subject, talked about agnotology, the cultural production of ignorance. That’s what’s going on at The Wall Street Journal editorial page.

Audit Notes: Vice talks IPO, Wall Street suicides, Slate membership

CEO floats a Twitter-like valuation

Bloomberg reports that Vice Media is considering an IPO, reporting that its CEO says it will have $1 billion in annual revenue by 2016, up from a projected $500 million this year.

That’s not the only eye-popping number:

The company, backed by billionaire Rupert Murdoch, expects to reach that mark in 12 to 18 months, with profit margins targeted to widen to 50 percent of sales from 34 percent now, Smith, 44, said in an interview with Bloomberg TV.

With young, sometimes tattooed reporters filing stories from a snake-infested island off Brazil or the civil war in the Central African Republic, Vice Media attracts a male viewer coveted by Web and TV advertisers. The growing online, mobile and TV business could have a market value equaling Twitter Inc.’s $28.9 billion if Vice Media goes public, Smith said.

“We’d be stupid not to test what the market would bear,” said Smith, who is chief executive officer. “There’s a lot of money sloshing around in the system, obviously valuations are high.”

Put it this way, if Vice can double its revenue in two years while boosting its already enormous profit margin by 16 percentage points, it will deserve that $29 billion valuation. I wouldn’t bet on it.

— The Awl’s Choire Sicha debunks the Wall Street suicide trend story with some basic math.

Statistically speaking, there should be 23.75 suicides a year in the finance industry in New York City alone. Six suicides in the first quarter of the year would be “right on track” (I know, gross, sorry) for 24 suicides in 2014.

Except then when you read the story, two of these suicides were in London, one was in Singapore (that was Autumn Radtke), one was in Hong Kong, one was in Washington state, one was in Stamford, one was in Syosset, and then only one was in Manhattan.

So, great news! New York City’s finance professionals are vastly under-killing themselves, compared to the population at large. Put that on your tabloid.

— Slate is the latest outlet trying to get cash directly from readers. It’s going with a membership model, not a paywall:

The initiative, said David Plotz, Slate’s editor in chief, will try to coax revenue from its most committed readers and devoted listeners of its popular podcasts. A membership — costing $5 a month or $50 a year — will allow special access to Slate’s writers and live events.

Mr. Plotz said that this did not equate to a paywall and that all content on Slate’s website would still be free. In its infancy, in 1998, Slate erected a paywall and signed up 20,000 subscribers, but the experiment ultimately failed.

Bloomberg gets a taste of transparency

And the controversy over its China coverage reaches a crisis point

Ben Richardson’s very public resignation from Bloomberg LP over its China coverage takes a scandal that had been a contained to a crisis point.

Richardson’s courageous and forthright email to Jim Romenesko marks the moment Bloomberg lost all control of the narrative. Until now the controversy about the fate of an unpublished exposé had surfaced only through anonymous leaks from staffers.

As Richardson himself notes, that has left Bloomberg as the only on-the-record voice driving the discussion, and it has insisted that the story was not spiked but was simply “not ready.” The increasing implausibility of the claim notwithstanding, no one could know for sure.

Bloomberg further asserted its will when it dismissed one of the lead reporters on the story, Michael Forsythe, on suspicion that he was a source of leaks to The New York Times, which has since hired him. Such is an employer’s power in such matters that Forsythe, for his part, could only tweet thanks to well-wishers for their support and say nothing publicly.

Crisis contained. Then the mask began to slip when Peter T. Grauer, Bloomberg LP’s chairman, last week told a crowd at the Asia Society in Hong Kong in off-the-cuff remarks that because of the organization’s huge business interests in China, it “should have rethought” stories that “wander” from straight business news, “stories about the local business and economic environment.”

Grauer’s remarks appeared to confirm what would have at one time been unthinkable: that Bloomberg was prepared to compromise its journalism to preserve access to the Chinese market. Grauer and Bloomberg have declined to clarify the record.

Grauer’s unforced error clearly falls under Michael Kinsley’s definition of a gaffe—an advertent admission of the truth. (It’s somehow not surprising that Kinsley would be among the droves of big-name journalists now on the staff of Bloomberg View [UPDATE: for a while; Kinsley has since moved back to The New Republic; UPDATE 2 (sigh) and then to Vanity Fair].)

As Richardson says, Bloomberg has actively suppressed any discussion about the fate of the tycoon story or of Bloomberg’s overall approach to covering China (links added).

Throughout the process, the threat of legal action has hung over our heads if we talked — and still does. That has meant that senior management have had an open field to spin their own version of events. Suffice to say, what you read in the NYT and FT … was a fair summation.

Clearly, there needs to be a robust debate about how the media engages with China. That debate isn’t happening at Bloomberg.

Such threats seriously damage Bloomberg’s claim of transparency as a guiding principle—one supposedly so ingrained in the organization’s culture that it is incorporated into very design of its see-through headquarters. “Time for Bailout Transparency,” Editor-in-Chief Matthew Winkler wrote in one of a series of op-eds and other remarks in support of Bloomberg’s freedom-of-information suit for the Federal Reserve’s secret financial crisis bailout programs. For more, see the “Transparency” section of The Bloomberg Way. As I noted last week, the style book mentions the importance of “integrity” almost as much as it does “transparency.”

In his email to Romenesko, Richardson gives Bloomberg transparency in spades, particularly to a “small group of incompetent and self-serving managers” he says is responsible for killing the story:

Clark Hoyt supposedly reviewed the story and declared that it wasn’t ready for publication. But, to my knowledge, he didn’t ring or contact any of the team who worked on the story to discuss it. We don’t even know which version of the story he reviewed. Certainly the final version that I saw had been gutted and narrowed down so much that it could be dismissed as a story about “a bankrupt theatre chain”. The reporters who worked on the story for months didn’t get to review the copy before it was unilaterally spiked on a conference call with a ludicrous amount of top brass…
It’s interesting to see Grauer speak so plainly. He is a straight-talking man and I’ve always enjoyed his frank comments. I enjoyed them especially today in the sense that they illustrate the frame of mind of senior management from the business side—someone should ask Mike to go public on his views on the right to free speech as a universal value. //january town hall. hint hint///
The sad thing about this is that a small group of incompetent and self-serving managers have screwed things up for everyone else. I spent 13 years at the company, as did Mike [Forsythe] I worked with some fantastic people who did and continue to do great work.

Hoyt was named a Bloomberg’s independent editor last fall in the wake of an internal investigation into whether Bloomberg reporters were too aggressive in using information from Bloomberg’s system in reporting on Bloomberg’s customers, in this case, Wall Street banks. The haste and thoroughness with which Bloomberg tamped down a threat from the newsroom to its business model looks quite a bit different, and somewhat less laudatory, in light of recent events.

Hoyt declined to comment, as did a Bloomberg spokesman except to say Richardson left the company March 3. A person familiar with the matter said Hoyt reviewed a full version of the story, not an abbreviated one, and his view, like that of senior editors, was that the story wasn’t ready to run.

Last fall, I wrote that Bloomberg News was at a crossroads. For the first time, credible allegations surfaced that journalism interests were sacrificed, even though it had earned every benefit of the doubt over the years:

There is no evidence—at all—that financial considerations had anything to do with the editorial decisions on the stories in question.

Now there is evidence, from the chairman of the company himself. So much for the benefit of the doubt.

It is clear Bloomberg has decided which road to take on its China coverage— and it has run straight into a cul-de-sac. It’s difficult to see how it will find its way back.

The conflict is between a key market and cornerstone values.

There is no third choice.

It doesn’t add up - A science writer questions the conventional wisdom of US-born STEM workers

#Realtalk: Dear reader - For small sites, loyalty might be a better path to pageviews

Falling for internet hoaxes - Some people who share satire don’t realize they’re missing the punchline

Digital First plans layoffs (Updated) - High-level executives and high-profile digital projects targeted

Nobody’s that lucky’—except in Florida’s lottery? - Palm Beach Post ferrets out lottery fraud, prompts tightening of “meager” safeguards


The slaughter bench of history

How war has made the world safer and richer

How burrowing owls lead to vomiting anarchists

Or SF’s housing crisis explained

Jill Abramson on tattoos, Anita Hill, Nate Silver

“I’m very sorry, but The New York Times is always the prettiest girl at the party”

Bend it, charge it, dunk it

Graphene, the material of tomorrow

New Jersey’s good government

Despite the bridge scandal, Chris Christie’s state is relatively transparent and accountable. CJR’s Greg Marx talks to Gordon Witkin

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