Tuesday, September 16, 2014. Last Update: Tue 6:50 AM EST

The Audit

Audit Interview: Carol J. Loomis

The Fortune legend talks about 60 years in business journalism

Carol J. Loomis, who retired in July after 60 years at Fortune, where she became, indisputably, a giant of business journalism. Along the way, she blazed a trail for women journalists, felled CEOs, and became close friends with a little-known Omaha investor named Buffett. Put it this way: She won a Loeb award for Lifetime Achievement in 1993 and continued working at the highest level for another 21 years. CJR’s Ryan Chittum talked to her about her remarkable career. (This is an extended version of a Q&A in the current print issue of CJR).

The Audit: The obvious first question is: Why now?

Carol Loomis: I really think it’s funny to have to defend retiring at age 85. I mean, really! When you get right down to it, it’s pretty amazing that I worked this long and so, you would think it had to be sometime. And so I think the closest to “why now?” is when you get this age, you realize that traveling has gotten more difficult. And the fact is, a Fortune writer should have the ability to be assigned to a story this afternoon, wherever in the world it is, and get on a plane tomorrow and go there and do sometimes-exhausting work. When you’re age 85 that sounds harder than it used to. So I do think that the “why now?” has a lot to do with realizing that my ability to be a full-fledged, dedicated, capable Fortune writer is probably held back a little by the fact that I’ve gotten this old. So that’s really what it is.

TA: Do you plan to write at all for Fortune or do you plan to write your memoirs or anything like that?

CL: Well, I’m definitely not writing my memoirs. I’ve done that. It was 16 pages in the magazine. I feel like that was pretty much “A” copy. I feel that if I went on and tried to do a book it would be moving into “B”, “C”, and “D” copy, and I’m just not interested in that. The fact is, I have no economic reason to write. And many people who do write books, do have an economic reason to write one. Andy Serwer and I sort of left it up in the air as to whether I would maybe do another something for Fortune. It seems to me that if I got my fingers on a really great story that would be good for Fortune.com, it would take me about five minutes to sit down and report it and write it. A longer story, like a 6,000 word piece, would have to be something that I could do without pressure, setting my own timeframe. And that may be a hard recipe to come up with. So I just don’t know how it’s going to work out, and now there’s a new managing editor. I know Alan Murray only slightly but everything I know about him is very good.

TA: I know you’ve been opposed to Time being part of a media conlogmerate. And now with the spinoff, will that affect the culture at all? They have editors reporting to the business side now—things that hadn’t been done before. Are you worried about that?

CL: Well, I think “worry” would be too strong a word. I certainly recognize that it’s a different reporting structure, and I think the old one, where the managing editor reported to an editor-in-chief is to be preferred over this one. But times are very different today, as far as print’s concerned and so I can’t say just absolutely that it shouldn’t be this way. I don’t know. It’s just—everything’s very different.

TA: How about how they spun the company off? Rupert Murdoch when he spun off News Corp., he gave it a big pile of cash and no debt, and they didn’t do that here.

CL: Well, first of all. I think it’s good, as you say. I’ve expressed my feelings about print organizations being owned by conglomerates, so I think it’s better that we’re off on our own. First of all, I just haven’t studied as much as I probably should have the financial characteristics here, so I don’t have a strong opinion as to whether the amount of debt we got was burdensome. You know we’ve been sending an awful lot of money up to Time Warner, and we’re keeping our own cashflow now. That’s certainly to the good. But I don’t have a strong feeling as to whether the company is financially set up the way it should be or not.

TA: What do you think about the news industry these days? A big part of my job is writing about the business of news, and it’s a gruesome scene, a lot of it. Do you have any thoughts on where the business is now and what it could be doing?

CL: I don’t have views that I could support with a lot of knowledge. I think it’s a tough spot, and I’m glad to see the improvisation that’s out there as people attempt to solve their problems. I’m a huge admirer of The New York Times and The Wall Street Journal. I read them both religiously every day and am very thankful that I can still get the print copy delivered to my front door at about 5:15 in the morning. I think it’s tough for everybody going through these years, and we don’t know how it will shake out and I just hope it’s in a way that supports the newsgathering forces, which we need so much.

TA: What else do you read to keep on top of the news?

CL: Of course you have to recognize that there’s a difference in what I was doing a month ago and what I’m doing now, because I’m retired. I don’t need to worry about keeping up with everything as much as I did.

TA: How about what did you read, I should say?

CL: I didn’t see the Financial Times every day, but every day that I saw it, I was sorry that I didn’t see it everyday. And other than that, I read things like The New Yorker, which I still read. I go to Marketwatch.com to read what’s going on there and to look at a stock portfolio. And I sometimes saw the Washington Post, and I was always glad when I saw the Washington Post. It was the Times and the Journal that I considered indispensable every day, including on the weekends.

TA: Your whole career has been about doing longform journalism. These days, we often hear that to emphasize the 5,000-word piece is just “journalists writing for journalists.”

CL: First of all, I think the old Fortune, one of its quirks was that just about every story was the same length: long. The editors would talk from time to time… every managing editor would say we ought to have variance in the length of the stories. They all don’t deserve a full 6,000 words. Some of them should be 3,000 words, and everybody would give lip service to this but then it wouldn’t happen. So when we went to biweekly, I think that that was one of the things that we began to do better was that we did recognize that some stories deserved very long treatment and that others didn’t deserve as much. And so I think that was all to the good, and I believe that managing editors have gotten better and better at that, as they’ve gone along, in recognizing the number of words that a subject deserves. I can’t imagine the world without longform journalism. I simply don’t think it’s simply just journalists writing for journalists. There are some subjects that just can’t be covered without a lot of words. I think back on some of my stories where I just could not have done the subject the justice it deserves. Something like derivatives, for example.

TA: That’s the one I was thinking of.

CL: There were actually two of them. One in 1994 and one in 1995, both of them cover stories, and there’s no way of writing in a short fashion about derivatives. Particularly not when they’re brand new and people are trying to understand them for the first time, and you must have a generous supply of words to deal with that. You need room to handle the bigness of the subject.

TA: What impressed me about those stories was how prescient they were 13 or 14 years before the financial crisis. And that’s true for a lot of your stories going back as long as you’ve been writing.

CL: Some of it is luck. I remember on the first derivatives story, one of our editors Julie Connelly, said, “Carol, you ought to write about derivatives,” and I remember shrinking in horror. The Fortune way was that the great stories come out of a good subject and a writer who enthusiastically wants to cover that subject. And so, almost never, are you told you must do a story at Fortune. Almost never.

This editor and my managing editor at the time, who was Marshall Loeb, convinced me that (derivatives) was a subject that I should take on. And one of my failings is that I tend to get very interested in subjects if I go into them. That accounts for the messiness of my office, because I never forget my interest in those subjects. I got into derivatives and as I began to understand them I found them fascinating. I began to develop sort of a concept of how to write about them.

And I’ve always had the ability—and this is very important—to call up the smartest investor, definitely, and probably the smartest guy in the country, Warren Buffett, and say, “Guess what I’m going to do derivatives. You have any thoughts on this?” And I have benefited greatly from having Warren suggest a few things to me over the years.

TA: How much of that was him informed by you, and how much was you informed by him?

CL: As I said, I benefited from being able to ask his opinion about things. And so that’s been very important that I could check in on someone like Warren and get his views. And I could do that early and I could do it later, and in the meantime I could get informed myself totally about a subject. To the extent that there’s been any informing, I’m afraid that I haven’t informed him very much (laughs). He’s informed me more than the other thing. I wouldn’t be presumptuous.

TA: Being a woman who started in the Fifties at Fortune magazine to a lot of people it’s really surprising that that happened back then. At the same time, you have some of the greatest journalists have been women—Ida Tarbell, for instance…

CL: Of course. Good name to pull from the ancient times. Absolutely.

TA: Did you learn from them or did you sort of make your own way? How did you become a writer at Fortune back when women didn’t get those jobs?

CL: Well, I got invited to do it. First of all, it was not something that I was even the smallest amount of pushy about. I liked my job. I was a researcher, which was what they would call a reporter today, who worked with the writers, all of whom were men. And then we started this new investment column and my managing editor called me in and said that we need two writers on the column and one of them was going to be Tom Wise and the other one he hoped would be me. And I sort of did what women are not supposed to do. I said, “Are you sure? Women don’t write!” (laughs). And he said yes, he was sure. As I think the memoir said, I had two things I had to learn all at once. I had to learn about writing for Fortune and I had to learn about investments, which I didn’t know enough about. And the editor of the investment column was a guy named Dan Seligman and he more than any other person was responsible for teaching me how to write for Fortune. He probably didn’t know anything more about investment than I did, but both of us kind of learned together. So I owe a lot to Dan Seligman for teaching me, and the managing editors were always good about chiming in—maybe they didn’t even chime in often enough. I remember that there was, many years later, it was a story about utilities I did. And I turned in my first draft and my editor, who was Dan Seligman still then. Bob Lubar was the managing editor and Bob Lubar sent Dan Seligman a note and said—I can still remember it—“One of Carol’s virtues is that she leads the reader around so carefully. But she sometimes gets quite wordy in doing that.” Well, it was a revelation to me. Nobody—I’d been writing for 12 years or something like that—nobody had ever said that I sometimes got wordy. And the minute they did, I stopped it (laughs). Oh, if they’d only told me that five or six years ago, it would have been so much better. I think sometimes we didn’t get as much guidance as we should have, but eventually we did.

TA: Did you have problems when you were trying to talk to executives in a male-dominated culture—being taken seriously or getting interviews?

CL: After my first story, which wasn’t very good, I got absolutely rabid about collecting every fact I could before I ever interviewed anybody. I believed that if you’ve done your homework, then about one minute into the interview they don’t even notice whether you’re a man or a woman. They realize that they are talking to someone who paid them the compliment of studying up for the interview.

Sometimes I think that just doesn’t happen as much as it should, so that’s still one of the great things that I think journalists can do is try to just become as informed as they can before they ever make a telephone call.

TA: How has reporting changed over your career? Have the PR operations gotten savvier? Is it harder to get to the key people?

CL: I think that there are some companies that are pretty notorious for not welcoming journalists at all, and it’s hard to talk to Apple. We have a guy in California who can talk to Apple. But when I did a story last year on Apple, and I tried to talk to them, I couldn’t even get close to Tim Cook. Fortunately, it was the kind of story where I didn’t have to.

If you can’t get into these companies, you have to come to grips with the question of is this story worth a write-around, which is a term I never had heard for a long time. Sometimes you just have to prove to a company that you can do a good write-around to make them think that maybe they didn’t make the right decision originally. So I think that companies have gotten tighter to get into. It’s harder. I think that public relations men were sitting in on interviews very early in my reporting career, so I’ve always been used to that. A story I just did on BlackRock, they did not want me to do a story at the time I asked to do it. I just persisted and ended up writing Larry Fink a letter making the argument why I should do the story. And for whatever reason, he decided to say yes. So it just varies.

TA: It’s not like you have a beat where you’re covering these companies and know them, day in day out for ten years or something. When you get an assignment or story idea, how do you go about digging into the company?

CL: Well, it’s A) to do a lot of homework and study before I ever get a first interview, and then it’s to interview quite a few people. Talking to the CEO alone is not a good idea. You can certainly do a story if you talk only to the CEO but you’re so much better off if you can talk to the CFO and the head of marketing, head of engineering (I’m sort of making it up, because it would vary a lot with the company it was). Gradually, and I always asked to talk to the CEO when I was beginning and then at the end of the process, because by that time you’re so much smarter, you really know what the questions are. And of course all of this takes a lot of time and some publications aren’t willing to devote that much time to it, and Fortune has always been, so that’s one of the great things about working here.

TA: When you say homework, are you talking about reading clips and going into securities filings and court documents?

CL: I’m unusually fond of reading 10-Ks (laughs). I like to read 10-Ks. And now, one of the things you’ve got that you didn’t have, is you’ve got transcripts of earnings calls. So on the story I did about Apple where I said I could get no cooperation at all, I read seven years of earnings calls and took notes as I read them so that I could remind myself what was important in each one of them. And the earnings calls turned out to be—on the subject I was writing on, which was Apple’s cash—really, really important. Because I could find out what Steve Jobs said about cash. I could find out whether their story changed at all about cash over the years as it was building up. So thank heavens in that case for earnings calls.

TA: One of the things we’ve criticized at CJR is the speeding up of the reporting and writing process. That people have to churn out more content—more stories, videos, tweets, livechats and things like that. Do you notice that?

CL: I think an awful lot of what appears online is useless. It’s not well prepared, there are often important inaccuracies in something. And I think the form suffers because too little time goes into it and it’s very derivative. Everybody’s reading what everybody else has written about it, and I think a lot of it just doesn’t make the grade of good journalism.

TA: My boss, Dean Starkman, wrote a book about the financial crisis and how the press covered it in the runup to it, and he was critical about that. In 2004 to 2007, particularly the banks and mortgage lenders. While there was a lot of talk about a housing bubble, in his view, there was less of a direct take on the institutions that would lead to the financial crisis. What do you think about that and how the financial press…

CL: I haven’t read the book, but I have read some of what he said, and I thought there was a lot of merit in what he said. Our housing writer here was actually very good on the subject…

TA: Shawn Tully

CL: Shawn Tully, yeah you’re right. I was writing earlier about accounting scams, but I was not writing very much about that. Maybe I should have been during that period. Well, I take it back, I was writing a lot about Citigroup and toward the end under Chuck Prince, I was very critical of what was going on at the company. But I didn’t do anything on JP (Morgan) or Morgan Stanley. I did something earlier on Morgan Stanley.

TA: You’re one person, though, and I think you did plenty, but it’s the institutions. The Journal, where I was at at that point, or Fortune as a whole or Forbes or BusinessWeek. Any idea why we missed it or didn’t do a good enough job?

CL: I think it took a high degree of intelligence to see it. And we know how many businessmen—businesspeople, I should be saying—were completely fooled. Maybe we should have stepped out and realized how bad things had gotten. But I don’t think we were any smarter than the business populace that was largely fooled by the buildup and the bubble.

TA: Let’s see. I could ask you questions all day.

CL: Don’t do that (laughs). I can always call you back. I might be off playing bridge and might be unavailable for three hours or so, but do call because I’ve never done a story where I succeeded in asking every question that I wished I would have asked without having to call back.

Paywall pioneer Press+ merges with Piano Media

A European investment fund purchases the company for an undisclosed sum

European investment fund 3TS Capital Partners is buying American paywall pioneer Press+ for an undisclosed sum and will merge it with its European paywall company, Piano Media.

The deal creates a global digital-subscription services company that aims to expand rapidly in Europe and elsewhere across the globe, and, importantly, will have more data on what works in digital subscriptions across a diverse set of companies and countries than anyone else.

The combined companies will be led by Kelly Leach, a Dow Jones veteran who resigned as publisher of The Wall Street Journal Europe last month to take the CEO post at Piano, which operates primarily in Central and Eastern Europe.

Journalism industry veterans Gordon KCrovitz and Steven Brill founded Press+ in 2009 when virtually all news organizations had free websites. Before Press+, publishers would have had to spend serious money developing their own pay technology and figuring out what worked and what didn’t. Press+ built technology around the metered-paywall model pioneered by the Financial Times. By allowing publishers to outsource the tech operations and startup costs (Press+ takes a cut of sales) and to set their own price points and page limits, Press+ was the key driver of the paywall movement of the last few years. (CJR is one of the company’s clients.) The company now has revenue in the low tens of millions of dollars.

In 2011, when RR Donnelly purchased it for between $20 million and $35 million, Press+ had fewer than two dozen publishers.

“Before we even started it I went to Arthur Sulzberger and begged him—I wasn’t looking for a job, I wasn’t looking to start a business—to do a metered wall at the NYT because he was ruining it for all the journalists in the world,” Brill says. “He thought I was crazy. That’s (how) Gordon and I decided to start the company.”

Sulzberger would change his mind by 2011, another key moment in the mass move to paywalls, as The New York Times’ meter succeeded beyond the most optimistic projections.

Press+ now has 560 customers, mostly in North America. “It’s become the exception that a North American newspaper still has a free model,” KCrovitz says. The combined company will have nearly 700 publisher customers.

Unfortunately, the NYT, along with The Wall Street Journal (where KCrovitz formerly was publisher) and Financial Times, are the exceptions in gathering a critical mass of digital subscribers in the US.

For most newspapers, the primary benefit to the meter model has been pushing price increases for all-access subscriptions to print and digital. That led to a much-needed boost of circulation revenue across the industry that totaled hundreds of millions of dollars. But it hasn’t put a floor under the American newspaper industry, where the bump in circulation revenue may have been a one-time deal—one largely dependent on print. Few American newspapers, many of which are shadows of their former selves, have proven that they can sell enough digital-only subscriptions to support robust newsgathering operations once the print profits run dry.

Piano Media launched as a sort of national paywall in Slovakia three years ago. It got most of the major publishers in the country on board for a countrywide paywall and has expanded from there. It now offers a metered product for individual publishers.

Leach is optimistic that digital growth rates can be boosted. “When you initially put up a paywall, there’s an influx of subscribers. After that there’s going to have to be other tactics and thinking about pricing and promotion.”

Asked if most newspapers still have the resources to generate the kind of content people will pay for, something we’ve wondered for years as publishers gutted their newsrooms, Leach sighs and says, “I hope so. I hope so. It certainly varies.”

The Financial Times, for one, has such resources. It launched its metered paywall seven years ago and has shown recently that even a mature digital-subscription product can post high growth rates, though financial news has some significant advantages of over non-financial news in attracting paying customers. It now has twice as many digital subscribers as it does print subscribers.

A big part of the FT’s success has been using data to become a better marketer of its subscriptions. Press+ uses data on what’s worked for some publishers to help other publishers improve their results. They’ve been able to tell publishers that they can price their subscriptions much higher than they initially expected and show them that reducing the number of free pageviews per month increases subscriptions for each pageview reduced. They know renewal rates for print subscribers who actively use a paper’s website exceed 95 percent.

While digital subscriptions can be very profitable for Press+ and Piano Media, which have no cost of content and whose cost for installing each new meter is relatively low, they have to be profitable enough to help prop up the publishers too. In other words, their future growth depends on the ability of publishers to produce stuff worth paying for.

“For such a long time, publishers have been concerned about pageviews because they’ve been relying on digital ad revenue,” Leach says. “How do we make sure as publishers that we’re generating content that’s high enough value that there are consumers that will pay to have access to it?”

How not to report on inflation

Cognitive biases on prices obscure the big picture on food costs

“Food Prices Are Soaring and Washington Doesn’t Care,” screeches conservative site The Federalist. The New York Post blares, “Meat, poultry, and fish prices spike to all-time high.” CNNMoney declares, “Soaring prices make it hard to be a foodie.” Even anti-vax quack site Natural News joined in with “Ground beef prices hit all-time high in US.”

Then there’s The Wall Street Journal, ever looking out for the well-to-do, with “High Food Prices Lead to Trade-offs Even in Upper-Income Households,” which relates the story of a dog-spa owner who’s substituting heirloom tomatoes and fresh mozzarella for shrimp at her annual feast for 200 this year. And there was the spate of “BBQ Indexes” around the Fourth of July that said food prices were “exploding.”

You might get the impression from this cacophony of coverage that inflation is going crazy. But it’s not. When you look at the numbers and not the headlines, you learn that inflation is actually at very low levels, up 2 percent in the last year.

Food inflation, like overall inflation, is low, up 2.5 percent in the past year. But most of us have no idea that’s the case:

Food prices are volatile, which means the press can get lots of easy stories about “soaring” prices when they’re on the uptick (falling prices don’t command as much attention). But they tend revert to overall price trends, context that is almost always left out of these pieces.

People are notoriously bad at knowing what prices are doing. In 2001, the Cleveland Federal Reserve found that respondents thought prices had gone up 6 percent a year in recent years, when they were actually up less than half that. All demographics significantly overestimated inflation, but the most striking disparity in misjudgments was by income group. The poorer you were, the more you overestimated inflation.

That happens to be politically convenient for the very wealthy, who own the vast majority of the assets in the economy. Every asset is a debt debt is an asset on the other side of the balance sheet, and those debts are disproportionately held by the poor and middle classes. Policies that lead to somewhat higher inflation levels make debt easier to pay off (reducing the holding value of assets). Very low inflation or outright deflation makes it harder. In the aftermath of a crisis caused by the inability to service massive amounts of debt, low inflation is a very bad thing for the economy as a whole. See the Eurozone, which is very close to tipping into deflation.

Much inflation overestimation is due to cognitive biases that have nothing to do with the press. Price increases make more of an impression on us than price decreases do, something known as loss aversion. We also pay more attention to price increases in cheap stuff like food that we buy all the time than on more expensive things like clothes or computers that we buy less often. Research in the European Economic Review found that “perceived inflation tends to be higher during periods in which prices of frequently purchased goods (e.g. basic food products like milk and vegetables) experienced larger increases” and that “perceptions are in general not rational, average perceptions of inflation are too high.”

Media coverage exacerbates the problem, in part because, well, journalists are people too—and ones that aren’t necessarily any better with numbers—but also because of the natural journalistic tendency to search for the exception, to play up a “record” this or a “for the first time” that. This CNNMoney segment is a particularly cringeworthy example of that:

A key point to remember when covering prices is that the inflation rate is an average of the retail price changes of many, many different items. No kidding, you say. But this is an important point. It’s the difference between anecdotal evidence and statistical evidence, and lots of people who ought to know better don’t.

All you have to do to get a “prices soaring” story is to select certain items that are up big (there’s always something up big: food prices are volatile) and have them represent “food prices” as a whole. Hamburger meat is up 10 percent from last year, but bread, for instance, is down 0.3 percent. Coffee is off 1.5 percent and vegetables are 0.5 percent cheaper.

Ben Domenech, the conservative author (one hopes!) who wrote the Federalist post above, gives us a classic example of this misdirection with “Food Prices Are Soaring and Washington Doesn’t Care.” Here’s his misleading chart:

And here’s what his chart looks like when you compare wage growth with actual overall food prices:

This cherry-picking isn’t limited to bloggers. Here’s Stephen Moore, formerly of the Wall Street Journal editorial board:

Nobody believes the statistics out of Washington and often for good reasons. A 2% inflation rate. Ha. Most Americans see the rate of price increases for the things they have to buy - milk, bread, vegetables, medicines, health insurance premiums, college tuitions, gas at the pump - rising at sometimes two to three times faster than the official CPI.

Moore is chief economist at the Heritage Foundation.

The issues with news coverage are typically less glaring, but are still problematic. The New York Post and CNSNews.com both say that hamburger meat prices are at a record high. That’s just not true. In 1980, for instance, a pound of ground chuck cost $1.86 in real terms. It costs $3.92 today. A pound of choice round steak cost $8.12 back then in real terms. It’s $5.58 today.

Then there’s this Wall Street Journal story, “High Food Prices Lead to Trade-offs Even in Upper-Income Households.” The WSJ reports, “Rising prices have been battering the budgets of low-income consumers in recent years. Now, researchers say more high-income households, defined as those earning more than $100,000 a year, report feeling pressure, too.”

But the WSJ is confusing the cost of living with the standard of living. The cost of living has been rising at rates well below historical levels in recent years.

The standard of living is what the WSJ should be concerned about. Wage gains at the bottom and in the middle have been so low that they’re not keeping up with very low price increases.

But food expenditures now account for less than 7 percent of consumer spending, half the level of 40 years ago.

This misreporting matters more than you might think. The inflation question isn’t just a simple matter of whether prices are rising. It goes to core arguments about the economy, who holds power, and where policy should go.

Goodbye and good luck to all of us

On leaving CJR

Bob Kerr, a wry, witty writer with a mordant worldview that grows from an intimate connection to the working-class life of Southeastern New England, has been the metro columnist for the Providence Journal for about 20 years, part of a 43-year career at the paper that began not long after he got out of Marine Corps service in the Vietnam War.

But he’s more than an indispensable community voice. A cubicle-mate of mine a long time ago, Kerr was also a kindly and patient presence for some of us hotheads screaming into the phone or ranting about one thing or another. Every newsroom needs an anchor. Bob was that.

The other day, Kerr got a call from the human relations people at the paper. An HR person told him and a handful of colleagues that they were being laid off as part of a wider series of cost cuts imposed by the paper’s new buyer, an outfit called New Media Investment Group, an arm of private equity giant Fortress Investment Group. Kerr was told of his severance benefits, such as they were, and after about 10 minutes, the meeting, and his career, were over. Another 21 union staffers were let go the same day, in the same manner.

I’ve been at the Columbia Journalism Review for the last seven very, very interesting years. Today, I’m stepping aside, lucky enough to be moving to a new job (TBA). As a media reporter and critic, and through the writing of a book on the media and the financial crisis, I’ve had chance to give considerable thought to the disruption, transformation—or whatever you want to call it —that began to hit home just as I was coming on board here in the spring of 2007. Along the way, I’ve come to some rather firm (some would say blunt) opinions on discrete media issues, like, for instance, the false promise of free news and the cost of amped-up newsroom productivity requirements, among other things.

But I don’t pretend to know what’s going to work for the future of news. And after a recent tour of efforts to figure it out at places as different as Bloomberg, First Look, and Al Jazeera America, it is clear enough that they don’t know either. In fact, I don’t know if anybody knows. If someone tells you they do know, they’re probably a consultant.

But one thing I feel safe in saying is that the way to create value toward a sustainable future for the long term is probably not to treat the talent like a used Dunkin Donuts wrapper. Nor, it should go without saying, is the way forward to continue to cut a newsroom that has already been cut beyond recognition, to the point that serious readers can readily see the erosion in the breadth and depth of the daily report.

Indeed, as if on cue, Kerr’s departure prompted a by-now familiar spasm of encomiums and laments from readers and former colleagues, but this isn’t about the future of Bob Kerr, who, I am confident, will be just fine, but the future of news.

I don’t consider myself a glass-half-empty kind of person (though some would!), but that’s where I find myself now. I’m impressed with the rise of BuzzFeed, with its highly credentialed investigative team amid an editorial staff of 170, according to a Pew report in March. Gawker has 132 editorial staffers; Politico, 170. Huffington Post has 575, for Pete’s sake, not so many fewer than the legacy news organization that I’ll be joining soon. In all, Pew (an invaluable resource that we take for granted but shouldn’t) found upwards of 468 new digital news outlets employing upwards of 5,000 journalists.

But on one level, it’s a numbers game. The same Pew report, basically optimistic in tone, also was careful not to neglect the inescapable fact that the number of editorial jobs lost in the newspaper industry alone totaled 16,000 in the decade ending in 2012.

And, obviously, the losses have kept on coming. Gannett just did yet another round of layoffs. On August 15, after a bad second quarter that included disappointing new-product launches, The New York Times Company’s chairman and publisher, Arthur Sulzberger, and its CEO, Mark Thomson, issued a memo that promised both “significant investment and significant cost savings,” leaving the staff bracing for a new round of job cuts. A Times spokeswoman says the memo was part of continuing efforts to inform the staff about the company’s finances, and that its substance was in keeping with past statements; she declined to comment on job-cut rumors. Meanwhile some significant fraction of the 32,000 jobs lost in the magazine business has been in the news business, according to Pew.

It’s worth remembering that despite the digital growth and legacy deterioration, all the new digital jobs put together still amount to a single-digit percentage of the nation’s editorial infrastructure; newspapers alone still employ 38,000 and local TV, which remains persistently profitable, around 27,000.

One can point to ProPublica and other new outlets producing dozens, or even hundreds of longform narratives and investigations. But I would respond with numbers showing a drop-off in the publication of longform at the top four dailies over the past decade alone amounting to thousands of stories a year. Even if old media wasn’t your cup of tea in the first place, a net reduction of thousands of news gatherers, photographers, and editors can only be seen as what it is: a net reduction in public knowledge.

Almost as important, it’s where the jobs are distributed. Where they aren’t is the statehouse, city hall, the Washington bureaus of regional and local papers that used to cover local Congressional delegations, school boards, police departments, and so on. Pew, relying partly on our own invaluable Guide to Online News Startups, does note that the 438 smaller outlets include many outlets covering local communities, including the 117 members of the Local Independent News Association. Still, it’s partly a numbers game, and the total editorial staffers among them amount to 1,900, or 4.4 per outlet. Back in the day, the Projo had about double that number in the Pawtucket bureau. Further, it is a mistake to assume that even the current local outlets are growing or are even here to stay; many of them are financially fragile.

Jay Rosen, with whom I’ve agreed and disagreed in about equal measure over the years, has long decried the pack thinking in mainstream journalism that results in, say, 5,000 journalists covering the @$#%^ Super Bowl, while issues of great public importance, the ones everyone says they care about, go uncovered.

But while many have noted that the economics of the internet have not been kind to the news business, at least to its fact-gathering function, one could also argue that it has had a distorting affect on how existing resources are allocated, exacerbating the duplication problem Rosen identifies. Before, newspapers had only a vague idea of what was popular. The very precision of digital metrics, which document popularity to the last keystroke, has had almost a gravitational pull on journalistic resources. As John Herrman brilliantly describes (followed wonderfully by Alex Pareene and others), even prestigious media outlets find themselves required to come up with something, anything, about something everyone is already writing about (e.g. nude celebrity photos). This media clustering around things that are already popular is not a moral failing. It is a structural problem.

For the same reason, we will never lack for coverage of popular niche areas: technology, food, sports, and the like. Bleacher Report, for instance, has a staff of 140. Google “technology news sites” or “sports news sites” and get page after page of outlets, many producing original material about basically the same thing. And I’m not even going to talk about entertainment coverage.

One could argue that coverage of niche areas—food, real estate, macroeconomics, law—is better than in the previous era, and I would agree. But niche areas are by definition not the broader public interest, just as adding all the niche audiences together doesn’t equal the public itself.

Obviously, we need to make do with the system we’ve got—a few successful startups, the odd billionaire stepping in, remorseless financial players like Gatehouse/Fortress, and legacy companies staggering around like Wile E. Coyote after he hit the ground.

But no one should kid themselves that we’re anywhere near where we need to be. Just sayin’.

See you on the other side.

Facebook’s war on clickbait unlikely to do much good

Publishers who cheer the move should know that Zuckerberg & Co. can turn off the traffic spigot whenever it suits them

In May, Mike Hudack posted a self-described rant on Facebook about the dismal state of the media, focused as it is so often these days on lowest-common-denominator clickbait.

[W]e turn to the Internet for our salvation. We could have gotten it in The Huffington Post but we didn’t. We could have gotten it in BuzzFeed, but it turns out that BuzzFeed’s homepage is like CNN’s but only more so. Listicles of the “28 young couples you know” replace the kidnapped white girl. Same thing, different demographics…

(Vox.com) writes stupid stories about how you should wash your jeans instead of freezing them. To be fair their top headline right now is “How a bill made it through the worst Congress ever.” Which is better than “you can’t clean your jeans by freezing them.” The jeans story is their most read story today. Followed by “What microsoft doesn’t get about tablets” and “Is ‘17 People’ really the best West Wing episode?”

“Someone should fix this shit,” he concluded.

Problem is, Mike Hudack is director of product at Facebook Inc., which as seemingly every journalist on the internet rushed to point out, is as responsible for these problems as anyone. It showed a startling lack of self-awareness of Facebook’s outsized role in the media ecosystem.

Now, three months later, Facebook has taken a step toward curbing clickbait by tweaking its newsfeed algorithm. And while that’s a positive step, it’s unlikely to do much about Hudack’s plaint.

For one, Facebook has a somewhat narrow definition of clickbait:

“Click-baiting” is when a publisher posts a link with a headline that encourages people to click to see more, without telling them much information about what they will see. Posts like these tend to get a lot of clicks, which means that these posts get shown to more people, and get shown higher up in News Feed

Which means HuffPost Spoilers could have less material, an unfortunate side effect:

But the change is hardly going to spark a race to the top among content creators. Facebook is mostly a shiny, happy place. Dropping hard news or a serious think piece between baby pictures and vacation updates is more likely to draw crickets than likes. Which is why the ice-bucket challenge was all over your Facebook feed, but Ferguson and ISIS were not.

But it’s more than that. The core economic incentives of the advertising-based internet put the pursuit of pageviews above all else.

That model struggles (at best) to support serious journalism. “Bryan City Council passes first vote on $6.2M incentive for hotel developer” isn’t going to get many clicks, for instance, but “The Best City Council Ad In Existence” might. And the former, which required someone to go out and do time-consuming reporting, is far more expensive than the latter, which did not.

Which is why it pays to be in the platform business, where you let other people make the content for you. Facebook’s revenue per user was a measly $5.79 in the US and Canada last quarter, less than the cost of one newsstand copy of the Sunday New York Times in most of the country.

But Facebook had more than 200 million users, and the cost of its content was effectively zero. Its operating-profit margin was a whopping 48 percent.

For publishers that depend on Facebook to funnel them pageviews, existence is precarious. Facebook can turn off the traffic spigot at any time. The Washington Post crowed about its ethically challenged Social Reader app, but then Facebook tweaked its algorithm, and the traffic evaporated overnight.

The peril of platform dependency is hardly limited to those focused on Facebook, though. In the SEO heyday, there was the rise of Demand Media (remember them?), which gamed Google’s search results with low-quality posts well enough that within a few weeks of going public in 2011, it was worth $1.8 billion. Soon after, Google changed its algorithm, burying posts from content farms down low in search results. Demand shares have crashed 92 percent since then.

So scrupulous news publishers can’t really cheer Facebook’s decision to kneecap some of their more manipulative competitors. Zuckerberg & Co. can and will do the same to them someday, as soon as it serves Facebook’s interests.

The New York Times’ paywall has plenty of room to grow

Prediction to the contrary from Re/code misses several key factors

A year and a half ago, Quartz wrote that “The New York Times paywall has hit a growth wall.” Since then, it’s grown 23 percent.

Now, Re/code writes that “New York Times’s Digital Subscription Growth Story May Be Ending.” It’s true that the Times’ paywall growth is slowing considerably after three and a half excellent years, but it’s not ending just yet.

Re/code’s Edmund Lee reports that a McKinsey study the NYT commissioned before the paywall launch predicted that, in the most optimistic scenario, the Times would top out between 800,000 and 900,000 digital subscribers.

The problem is, the Times already hit the low end of that projection in June with 831,000 paying online readers. And the number of new customers it added in the three months leading up to that point, about 32,000, were mostly for the new NYT Now app, a slimmed-down version of the Times that costs $8 a month. It looks like the McKinsey study got it right.

A four-year-old McKinsey prediction, though, isn’t reason enough to think that the Times will plateau at 900,000 or below. For one, its market is huge and worldwide.

For another, the paywall is still growing at a healthy clip. While its new paywall offerings, NYT Now, NYT Opinion, and NYT Premiere, flopped in the second quarter, the Times’ digital subs were still up 4 percent from the first quarter, while paywall revenue was up 3.5 percent. On a year-over-year basis, digital subs were up 19 percent in the second quarter and paywall revenue was up 13.5 percent. That’s hardly hitting a wall.

Plus, there’s some reason to think there’s seasonality to paywall growth, though it’s too early to tell for sure. The second quarter was the worst quarter of the year in 2012 and 2013:

And the Financial Times is showing that it’s possible to turbocharge subscription growth even with a mature paywall.

At its current pace, the Times is still adding about $20 million a year in digital subscription revenue. It will approach $170 million for all of 2014, and will hit $200 million by 2016, if it can muster 8.5 percent annual growth, which is hardly unrealistic (particularly if it would go ahead and raise prices a quarter a week).

Online revenue alone would not sustain the New York Times as it exists today. If the Times were to become a digital-only newsroom, it’d be a $312 million business, including the $162.9 million in online ads it generated last year. But that’s only 20 percent of its current sales. In other words, a digital-only Times could just support a fifth of its current newsroom, or around 200 journalists.

Lee is right that the Times can’t abandon print yet. But he’s wrong that its digital revenue could only support a newsroom of 200. It costs a lot less to put out a website than it does to print and distribute a print paper to hundreds of thousands of people in dozens of cities. The Times spends several hundred million dollars a year—at least a third of its operating expenses—doing so.

And a digital-only Times would have more than $312 million in revenue. This year it will bring in more than $330 million in digital ads and subscriptions. But it will also have about $90 million from conferences, its news service, and rights fees. Most of that would presumably survive the demise of a print NYT, giving the paper more than $400 million in revenue. That wouldn’t support the Times’ newsroom at its (roughly $200 million) current size, but it would likely support one two-thirds as large.

There’s no reason the Times shouldn’t be able to get at least 5 percent annual growth out of its paywall going forward, through a combination of subscriber growth and price increases. But there’s no way for the NYT to make its numbers work in the medium-to-long-term unless it can post consistent digital ad growth. Digital ads have finally begun to turn around this year, but it needs much faster growth. Easier said than done.

Al Jazeera America struggles to get off the margins

A quality-first strategy faces huge hurdles

When Al Jazeera, the Qatar-based cable news giant rolled out its massive new American affiliate one year ago, creating a full-force 24-hour cable news channel—800 journalists, several studios, support staff, the works— in a move that drew cheers, skepticism, but mostly puzzlement: why?

Another cable news channel? Aren’t there too many already?

Al Jazeera America’s CEO, Ehab Al Shihabi, an Al Jazeera veteran, has a ready answer. The network would distinguish itself through one thing: its reporting. Let Fox, MSNBC and other wannabes have their opinions. Al Jazeera America would stick to the journalism, the real stuff.

“We have more live news; we are long format; we have a heavy investigative arm,” he said in an interview. “We have more news gathering in under-reported areas… It is one of our competitive advantages, the opportunity that exists. It’s not about having an agenda. It’s not about infotainment. It’s about raising the bar for the quality of journalism.”

The sentiment, heartfelt, and forcefully expressed, is the network’s reason for being, the foundation of its business plan, and the heart of its marketing campaign: “More reporting,” says a typical promo. “More bureaus. More stories. Real reporting from around the world. This is what we do.”

It’s hard to argue with the sentiment. Despite a polarized, often toxic cable landscape drenched in opinion, you’d like to think there is room for boots-on-the-ground, fact-based news gathering—original reporting, what used to be called, “the news.” For a journalist, it’s like arguing against apple pie.

But if there is indeed a market void, Al Jazeera America, or AJAM as it’s known internally, has made little headway in filling it. Its ratings have been tiny to the point of immaterial;—17,000 viewers in primetime this year, jumping to 23,000 during the early days of the Gaza war, compared to an average of 453,000 for CNN and 1.87 million for Fox News. (The figures require a few caveats, which we’ll get to.)

The network laid off more than 60 people in April, puncturing morale and creating a climate of uncertainty, according to current and former staffers. Recently, rumors swirled around the prospect of another round of layoffs, which Al Shihabi says he addressed in a recent staff-wide conference call/meeting, saying layoffs, if any, would amount to no more than 20 people.

Current and former staffers say they find the organization’s commitment to old-school, high-quality journalism inspiring, but that they’re frustrated by the ratings, the absence of a clear digital strategy and the disconnect between the TV product and the Web operation. Right now the two are separate operations—an anomaly among news organizations, which have been strenuously integrating digital with other platforms for years.

“They’re focused on substances,” says a former news employee. “They are committed to covering issues that matter. I was proud to work there. “But, this person says, the operation was designed for a pre-digital era, is not especially innovative, and hasn’t managed to adapt to new ways of getting the word out. “You can’t just say, ‘if we build it they will come….’”

Adding to the murkiness is the fact that the ultimate financial authority for the operation is a faceless group in Doha, the Budget Committee charged with allocating resources at Al Jazeera America’s parent, Al Jazeera Media Network. The whole sprawling organization is underwritten by the government of Qatar.

Even granted that the network is still young—CNN didn’t break through until the first Gulf War, a decade after its launch—a key question is whether AJAM’s visibility problems can be traced to the handicaps the network faces in getting distributed across the country, which are formidable, or whether the journalism itself plays a part.

Al Shihabi insists the problem is the former, and even those critical of the network agree.

“Al Jazeera doesn’t have a content problem,” says the former employee. “It has a distribution problem.”

David Marash, a former producer correspondent for ABC’s Nightline and anchor for Al Jazeera English, an AJAM predecessor, says that while the new network doesn’t have what he saw as the intellectual ambition of Al Jazeera English, it has handily outperformed its cable news competitors from a journalistic standpoint, particularly in the category of longform and magazine-length documentaries.

“I do think it’s distinguishable from CNN and the totally faux news channels Fox and MSNBC,” says Marash, now the host of a forthcoming interview show on KSFR, a community station in Santa Fe, NM, and the news director there. “There’s an absence of gossip journalism. There’s a higher percentage of news coverage. They do more half-hour documentaries in a month than all their competitors do in a year. The quality of the longform is outstanding, and they’ve got the awards to show for it.”

A couple of days’ spent watching the channel last week bears this out, to some degree, but also highlights some of what might hold them back. The daytime schedule offers what appears to be a fairly standard lineup of news and talk shows, with US-produced shows anchored by US network and cable news veterans Tony Harris, John Seigenthaler, and Joie Chen. It takes a while to realize this is an American production, especially given that shows are sandwiched between Al Jazeera’s main English-language, international show, broadcast from Doha several times a day. The talk shows offer sober fare and steer clear of opinionated rants—Ray Suarez’s Inside Story hosted a discussion on teacher tenure in California; Antonio Mora’s Consider This had experts talking about Gaza, Ukraine, and the like. The Stream, a social-media driven show, tiptoed toward edgy with a segment on homophobia in the NFL, but the discussion, featuring Chris Kluwe, the former punter who just settled a discrimination suit against the Vikings, was substantive and interesting. This week, as if to make up for it, The Stream is taking on poultry inspection.

Still, producing “serious” programming is harder to pull off than rants, and even the best shows didn’t differ too much from something one would see on the PBS News Hour. Not that there’s anything wrong with that, but there’s nothing especially original either. And while screaming TV fights are obnoxious, three people sitting around agreeing with each other about climate change;—as they did on the Inside Story talk show on Thursday—is emphatically bland.

The qualitative difference is more apparent in primetime, most obviously with Fault Lines, an investigative half-hour that, when I watched, showed a compelling segment on the bail bonds industry. While the piece broke little new ground, it was riveting TV and was a welcome addition to coverage of the troubled criminal-justice system, which is usually ignored.

The fact that AJAM fields a full-time investigative unit helped the network distinguish itself last week—Fault Lines had already aired a piece about the militarization of local police departments when the Ferguson story exploded from Missouri. Reporter Sebastian Walker’s segment, which focused on a bloody SWAT-type raid gone wrong in LA County, was well done and all-too-relevant.

Ferguson dominated the news the day I watched the most, Thursday (the day Obama spoke about it and the state police were brought in), but even here AJAM’s effort was notable. Its crew was in the thick of things to the point that Ash-har Quraishi, a Chicago-based reporter (the network boasts a dozen US bureaus), and his colleagues were teargassed. Joie Chen flew in from Washington to anchor the network’s flagship program, America Tonight, from Ferguson. But what was most notable was that the network stayed with the story, hour after hour, with standups well past 11pm, while competitors returned to regularly scheduled programming. That said, there was little new to report each hour.

Current and former employees say resources are stretched thin and the latest layoffs didn’t help. One senses that the goal of maintaining a qualitative edge—one that is readily visible to a casual viewer—requires even more resources than are currently available. It’s expensive.

But the biggest threats to the station’s viability are clearly on the business side, with the distribution issues a particular sore point. Al Jazeera Media Network’s decision to enter the US cable market, via the $500 million deal for Al Gore’s Current TV network, saddled AJAM with severe limitations: the network is still only available in about 60 percent of American homes (competitors like CNN are in virtually all of them), often only in premium packages and at unadvantageous positions on the dial (e.g., channels 114 and 614 in Princeton, NJ). Philip Seib, a journalism professor at the University of Southern California and author of The Al Jazeera Effect, says he can’t watch AJAM because Charter Communications, his local cable operator in Pasadena, doesn’t offer it.

Indeed, the Current deal continued to haunt the network last week when Gore himself sued AJAM’s parent for allegedly withholding “tens of millions of dollars” held in escrow.

The network is not widely available in high definition, giving the programming a murky, unpolished veneer compared to competitors (an AJAM spokeswoman says that’s not unusual with cable launches and the problem is being fixed). And just as crucially, its deals with cable operators include onerous restrictions on the amount of free video it can offer online, making impossible the kind of livestreaming that allowed its predecessor, Al Jazeera English, to established a beachhead in the US, particularly among younger viewers. The AJE live stream is no longer available in the US.

The restrictions also make it difficult to imitate the buzz-creating digitally centered distribution strategy deployed by Vice News, whose parent received an investment from Rupert Murdoch’s 21st Century Fox that valued the company at $1.4 billion. Al Jazeera Media Network’s effort to reach younger, digitally minded viewers, AJ+ has yet to catch on.

Al Shihabi, 43, a native of Amman, Jordan, who studied at Georgetown, is candid in discussing the challenges the network faces but adamant that they can be overcome. He acknowledges that the website and TV operations have operated as “silos,” with the digital side providing little marketing oomph for the network. “We are working on this one,” he says. He’s out making the case to cable operators to ease restrictions on video streaming online and to expand into markets where AJAM is not available.

The goal is for the network ultimately to be self-sustaining. And while he doesn’t say how it would happen, he did suggest a timeframe. “I need four years, five years” to build brand awareness to rival that of competitors that have been around—and marketing themselves—for decades (Fox and MSNBC were both launched in 1996; CNN in 1980).

He argues that ratings are misleading given that AJAM is shut out of a large percentage of homes and because the station is so new. Even still, he says there’s progress in this area: AJAM had more than 1.4 million prime viewers over two weeks (100,000 per night) during the Gaza conflict.

Al Shihabi says that while ratings and financial concerns are important, success will also be measured through other metrics, including impact on the public discourse as reflected in social media and elsewhere, and, most crucially, the quality of the journalism.

“We are not about chasing the audience and missing our core values,” he says. “We will stick with our core values. We will stick with the quality. I’m not going to change our core values to chase an audience. No. It’s the other way around. I believe the audience is smart enough to come around.”

Gannett cribs from Advance Publications playbook for struggling newspapers

Staff compete for fewer jobs; ‘readers become the assignment editor’

Gannett’s latest Great Leap Forward will go “digital first,” heavily emphasizing metrics to guide coverage. It will have significantly smaller newsrooms with a few more reporters and a lot fewer editors, in part because it is centralizing production work like copyediting and page design in regional hubs. All newsroom jobs have been redefined and current staff must apply for new jobs. And, of course, there are the buzzwords and the chirpy editors’ notes to readers. Assignment editors become “content coaches.” Managing editors are now “content strategists.” A diminished newsroom is a “bold new structure.”

Sound familiar? It’s essentially the do-more-with-less playbook pioneered by Advance Publications, owners of The Times-Picayune, the Cleveland Plain Dealer, and other regional papers. There’s at least one big difference, though, between Gannett’s move and the Advance model. “We don’t have any plans for reducing print,” says Kate Marymont, Gannett’s vice president for news, in an interview.

Maybe not, but the internet does.

The latest move comes as Gannett prepares to hive off its newspapers into a separate company, isolated from its more profitable broadcast and digital properties. Serious cost-cutting has become an annual exercise for Gannett and other newspaper companies in the last several years, as advertising revenue has plunged. With no end in sight to the ad declines, with circulation revenue stalling after a bump from paywalls and all-access plans, and with chain papers soon to be without the cross-subsidy from their higher-margin corporate cousins, the cutting seems destined to continue.

For Gannett, its latest “newsroom of the future” is being piloted at six papers: the Nashville Tennessean, The Indianapolis Star, the Pensacola News Journal, the Asbury Park Press, the Greenville News in South Carolina, and the Asheville Citizen-Times in North Carolina.

In Nashville, The Tennessean recently hired Stefanie Murray, who served as editor in chief an alum of Advance’s pilot project, AnnArbor.com, as editor, a position it now calls “vice president of content and engagement.” The Tennessean has 89 staff members, who will have to duke it out for 76 new positions. Nevertheless, Murray told readers, “I’m confident you’ll love the end result: we’re promising a stronger, more interesting Tennessean delivered by a highly engaged group of journalists who care about Nashville.”

The number of reporters will increase from 37 to 43, but editors will decline from 17 to 10, and there will be a big emphasis on “scientific principles” to guide coverage. “We’re going to use research as the guide to make decisions and not the journalist’s gut,” Murray told Poynter.

Marymont, Gannett’s VP of news, at least understands that the journalist’s gut is a key part of the equation. “Data is only helpful as to the deeper understanding that you can bring to it,” she says. “We certainly are not looking for clickbait. We’re not trying to drive empty clicks. We’re trying to build loyal returning customers by giving content we know they want by following over period of time.”

But editors are much of the “journalist’s gut” in a newsroom—not to mention the guardians of quality—and editing will be seriously diminished under the new model.

“I think one of the big changes is that as the reporters become more attuned to their metrics and what readers are telling them, and become more expert at analyzing that data,” Marymont says, “the link between reporter and conventional assignment editor isn’t as necessary. Readers become the assignment editor instead of the more conventional assignment editor of the past. We’re converting roles to coaches. They don’t need people looking over their shoulder, they need help growing their storytelling skills. Instead of assignment editors, we’re going to have content coaches.”

What are content coaches, exactly? “In the past, assignment editors had to do lots of things. They had to be writing coach, assigning coach, managing visuals. The coaches then are kind of not assigned to specific reporters. They’re assigned to whatever is their area of expertise. By dividing it this way, we can have specialists who can really, really help improve their game.”

In Indianapolis, the editor is, apparently, still called an “editor,” and he might have benefited from someone looking over his shoulder on his letter to readers. Star boss Jeff Taylor refers to some variation of “expanding” or “increasing” staff 10 times before stuffing this at the bottom:

To accomplish this, we will reduce the number of managers and streamline and reposition some jobs in our production process.

The Star, like The Tennessean, will cut about 15 percent of its newsroom. To learn that, though, we must turn to the Indianapolis Business Journal. The IBJ reports that “the cuts include five of the Star’s 11 photographers and the entire staff of the copy desk.” The 124 staff members will have to reapply for 106 new jobs.

“It’s like we’re getting ready for the Hunger Games,” says one Star staffer. “It’s awful. Worst I can recall.” That’s saying something, since the Star has been through quite a lot. In 2000, it had 275 journalists, a number that will have dropped by 62 percent when the latest layoffs are complete.

“Every job has been redefined,” Marymont says. “That’s why everyone applies for a new job. There are some smaller number of jobs, so not everyone will find a job.”

In Florida, the Pensacola News Journal will have a “patriotism reporter” (salary starting at $25,280), while outsourcing its production to Nashville.

But it’s hard to tell if Gannett papers will have things like city editors and sports editors. “I can’t say every site has a sports editor,” Marymont says. “Some will, some won’t. They have to decide.”

In the Carolinas, Joshua Awtry, who edits one paper in North Carolina and another 62 miles away in South Carolina, was at least admirably forthright in his editor’s letter, putting the layoffs up high. He told CJR’s Corey Hutchins this recently:

To me the future is not about low-hanging fruit and, you know, click-bait’s a trendy word, but click-bait-style headlines … we can do that and we could grow pageviews tomorrow. That’s not what I’m in the game for. I want to make a difference in our community.

Gannett’s papers, of course, have grave problems, like virtually all newspapers. But they’re only going to be exacerbated by yet another round of layoffs. This is a company whose newspapers had $314 million in operating profit last year, a number that will be down significantly this year but will still likely be in the $200 million to $250 million range.

These layoffs will not result in large amounts of savings. The Tennessean, for instance, has 37 reporters right now, who probably cost it about $2 million a year. The entire newsroom payroll will probably be under $5 million, generously assuming average salary and benefits of $65,000.

The new cuts will save the paper a few hundred thousand bucks a year, perhaps. This at a paper that reportedly earns more than $10 million a year.

Plus, Marymont says there will be some hiring at Gannett’s regional production hubs, though she said she didn’t know how much.

In a column a few days ago, the Tennessean’s Murray touted USA Today’s Social Media Tuesdays as an experiment “wherein the staff is able to get information only from social sources.” That would be crazy if it were true. Fortunately, it’s not.

Social Media Tuesdays at USA Today are for acting like readers can only access their stories via Twitter, Facebook, and the like. Reporters are not banned from picking up the phone, getting gum on their shoes, or any of that.

A good copy editor would have caught that one.

First Look runs headlong into journalism’s two big problems

Growing pains at the Omidyar/Greenwald venture

When Pierre Omidyar, the eBay billionaire, announced the creation of a news organization featuring, for starters, investigative heavyweight Glenn Greenwald, media expectations were set soaring—even here—and understandably so.

In a disrupted and desiccated landscape for journalism, The Intercept promised something fresh: an accomplished technologist with deep pockets combined with a new-look journalist, Greenwald, a lawyer-turned-blogger who combines world-beating scoops of global importance, like those from the Snowden files, with iconoclastic views on journalism itself.

But at the end of the month, Omidyar and his nascent umbrella organization, First Look Media, announced a reboot: pulling back on plans to develop an omnibus mass-market product with many different sites, and instead trying to build out just Greenwald’s The Intercept, which has reporting on national security and surveillance issues since February, and another site, to be launched in the fall, covering politics, finance, and culture and headed by former Rolling Stone writer Matt Taibbi.

“Nine months in, First Look is Still Very Much a Startup,” says the post’s candid headline.

As it turns out, First Look is grappling with the same fundamental problems facing other news startups across the spectrum—how to make money and how to be distinctive—and, so far, hasn’t had much progress in finding a solution to either.

And here we should disclose that CJR gets funding from Omidyar via his philanthropic Democracy Fund.

When First Look was announced in January with a sleek animated video, the organization described an expansive operation that would include an omnibus flagship publication that would cover everything from politics to sports to culture, along with a flotilla of magazines led by prominent journalists covering specific subjects. The video promised an extensive support system not unlike those provided by mainstream media in its heyday, along with a separate technology company that would explore ways to turn journalism “innovation into commercial opportunities.”

In an interview, John Temple, recently hired with the title of president of audience and products of First Look, reporting to Omidyar, says the company has a committee working on a business model but that process is just getting started and isn’t necessarily the first priority.

“The critical measure of our success is whether we’re making a difference; are we having an impact, are we helping our society and holding powerful institutions accountable—that’s a significant and important measure of success,” he says. “The business model is important to us…. [but] it’s just too early.”

Indeed the company is still just getting organized. Far-flung, even for a new media-concern, First Look is building out office space in San Francisco, New York’s Flatiron District, and smaller office in Washington. It’s not based in any particular place. “We don’t need a headquarters quite yet,” says Temple, who works from San Francisco. Greenwald works, famously, from Rio de Janeiro,, Poitras from Berlin, and Omidyar from Honolulu. The bulk of the editorial team will be housed in New York.

The company employs about 45 people, Temple says, including 25 on the editorial side, the latter number expected to double by the end of the year.

A spokeswoman declines to comment on the progress of the technology venture described in the video.

The organization is still amorphous—“we don’t actually use an organizational chart internally; I don’t have a business card,” Temple says—but the editorial hierarchy shapes up this way.

“The Intercept” is edited by former Gawker editor John Cook, who oversees three “founding editors,” Greenwald, Laura Poitras, the documentarian and collaborator with Greenwald on the Snowden stories, and Jeremy Scahill, a national security specialist, formerly with The Nation; as well as the rest of the staff of about 10 others including former Washington Post blogger Dan Froomkin and Peter Maass, a national security specialist and war correspondent.

Cook reports to Eric Bates, a former Rolling Stone editor who holds the title of executive editor of First Look, as will Taibbi, who worked with Bates at Rolling Stone and has begun assembling a staff for his as-yet unnamed publication.

Bates in turn reports to Temple, as does a second executive editor in charge of audience and engagement, Bill Gannon.

A business side staff including a chief revenue officer and business development chief also report to Temple on some issues. For now the structure is made up of interlocking committees studying various issues, including technology, and business models, all of which include Temple.

Temple was brought on as a specialist in startups and in reaching local audiences. A Vancouver, British Columbia, native, he worked his way up the former EW Scripps chain to senior newsroom positions at the now-defunct Albuquerque Tribune, where he was managing editor, and the Rocky Mountain News where he ran the newsroom, started a couple of civic journalism ventures, and was a company vice president with business-side responsibilities. After the paper folded in 2009, Temple was consulting in Las Vegas for Brian Greenspun, of Greenspun Media Group, who pointed him to a blogpost by Omidyar discussing his intention to start local news site in Honolulu. Introduced by Greenspun, who knew Omidyar socially, Temple wrote Omidyar an email with some suggestions for the new site, an exchange that ended ultimately in Omidyar hiring Temple to lead Civil Beat. (The site, which might be seen as a proto-First Look, uses a subscription model, among other things, for revenue. Well regarded journalistically, its financial prospects are unclear. Speaking for Civil Beat, a First Look spokeswoman declines to share subscription figures but says, the operation has “seen growth year over year. They always saw building Civil Beat in stages and viewed this as a long term project.”) After a stint in a managing editor’s job at The Washington Post running digital operations and local news, followed by a fellowship, he joined First Look.

First Look’s early going has been fitful, as Omidyar’s blog post acknowledges. One staffer tells me the organization has indeed been suffering “growing pains,” but says morale is high and credits Temple with “speeding things up, which is great.”

For a half-launched startup, the site has drawn more than the usual amount of criticism, for everything from advancing a neoliberal, privatizing agenda, to potentially pulling its punches, to not publishing enough.

But more generally, there’s a sense that First Look has so far failed to live up to sky-high expectations.

The criticism is somewhat the result of circumstances beyond the editors’ control: Snowden files that needed to be published before the site was fully ready to launch. It’s certainly not a bad problem to have, journalistically, but as a result, the Intercept has published only sporadically, offering a mix of left-of-center commentary on national security and surveillance issues punctuated by a few superb blockbusters from the Snowden files and other sources.

Temple pointed to pieces of such importance that The New York Times and other sources were compelled to follow the site. The most recent, revealing the alarmingly expansive nature the government’s anti-terrorism database, provided so much detail that the story prompted the government to conclude that the Intercept had tapped a second whistleblower to complement Snowden. Indeed the story generated a separate a mini-controversy over whether intelligence PR officials had leaked it to Associated Press first to spoil the Intercept’s scoop.

But periodic blockbusters, while a boon to the public interest, don’t add up to a cohesive editorial offering or provide the basis for a media business.

In part, the letdown is a problem of First Look’s own making, starting with the animated video that laid out sweeping, and laudable, goals while offering the vaguest notions of how they would be accomplished. Nine months in, that hasn’t changed.

And while finding a business model is a distant prospect, First Look is struggling with a more immediate problem: defining how its (occasionally great) journalism differs from that of other (occasionally great) reporting from high-end mainstream outlets like, say, The Washington Post, which shared the 2014 Public Service Pulitzer with the Guardian, Greenwald’s previous outlet, for breaking the Snowden revelations. Indeed, aside from the occasional edginess of word choice, the Intercept’s best work is distinctive mainly for its great reporting and solid writing. Not that there’s anything wrong with that. But the question remains: what innovation does the Intercept represent? And is the concept of journalism innovation overdone in the first place and shouldn’t sustained excellence be enough?

After Omidyar’s recent post pulling back on the project’s ambitions, Jay Rosen, the NYU prof and a consultant to First Look, said in a comment to a post on his blog that Omidyar’s recent pullback shouldn’t be surprising.

“The kind of moves you see in Omidyar’s update are the way it’s going to be for a while as First Look tries to develop a distinctive approach that can work,” wrote Rosen, who declined comment to me. “It’s harder to be distinctive than it looks.”

The great newspaper spinoff

A wave of media deconsolidation sends legacy publishers off on their own

It’s hard to recall a spate of media deconsolidation like the one in recent months, as companies shed their publishing divisions.

Time Warner unloaded its magazine division, Time Inc. Meantime, Tribune spun off its newspapers, as has News Corporation, with EW Scripps, Journal Communications, and now Gannett planning to follow suit soon. The Grahams sold the Washington Post and kept their education and TV businesses. The New York Times Company has done the reverse in recent years, selling About.com and its Red Sox stake to focus on its namesake paper.

There will be no cross-subsidization for these newspapers and magazines, much less synergy. Indeed, some executives couldn’t resist milking their erstwhile cash cows one last time on the way out.

Tribune Media is the worst of the bunch in that respect. It loaded up its struggling newspapers with debt to pay itself a special $325 million dividend, kept their real estate, and then spun them off without their stake in lucrative digital classified businesses. These are moves straight from the private-equity asset-stripping playbook—something akin to kicking grandpa out of the house when he gets sick and then running up his credit cards.

Time Warner sent off Time Inc. with its stable of magazines and an unnecessarily high $1.3 billion in debt, roughly half of which went to a special dividend. Never mind the billions of dollars in cash the magazines had sent to the mothership over the decades.

Gannett’s newspapers will start debt-free, which is the least that company could do after bleeding them dry for decades. But they won’t get the benefit of the digital classified businesses that helped offset the obliteration of a key print revenue source. Those will go into the new broadcast company.

Rupert Murdoch comes off looking like a saint here, of all things. He spun off News Corp.’s publishing arm with no debt and a whopping $2 billion in cash. The new Journal Media Group, formed with Scripps and Journal Communications papers, will have no debt but just $10 million in cash. It’s unclear what cash, if any, Gannett’s papers will get.

In a sense it’s surprising it’s taken this long for newspapers to be tossed overboard. They’ve been irksome to executives who tend to be focused above all else on growing earnings per share and overall revenue. Investors tend to want growth or at least stable, predictable profits—they’re not much interested in declining assets with uncertain futures. Even if papers figure out a digital revenue source that staunches revenue declines, it’s hard to imagine these ever being businesses with serious growth potential. The monopolies are now in Silicon Valley, and journalism doesn’t scale like Facebook.

All of these new companies are still profitable, largely because they’ve cut costs so dramatically. You can’t cut your way to growth, though, and it’s unclear if these companies will have the cash to invest in many new opportunities.

Tribune Publishing, for instance, earned $94 million on $1.8 billion in revenue last year, a profit margin of just 5 percent that nevertheless was its highest in at least four years. The stock market is valuing it at a price-to-earnings ratio of just 6.3 (the market median P/E is above 20), which essentially means investors expect profits to continue to decline, which would be a good bet. Put another way, the price tag of Tribune’s papers is now $533 million. That’s for the Los Angeles Times, Chicago Tribune, Baltimore Sun, Orlando Sentinel, and four other major dailies.

On Wall Street, there’s been a big move away from conglomerates in the last couple of decades, the idea being that there are people who want to invest in Cheez Whiz, for instance, but who don’t want to invest in Chesterfields. Apparently, there’s a hardy band of investors out there who will plunk their money into legacy publishing stocks but who don’t want more stable broadcast assets.

Call them value investors or call them crazy, only time will tell.

Guardian reporter battles the British power elite

One of the biggest media stories in history was right in front of Nick Davies, and he almost missed it

Hack Attack: How the Truth Caught Up with Rupert Murdoch
By Nick Davies
Chatto & Windus
448 pages
Hardcover, £20

In 2008, Nick Davies put out a book arguing that the British press had become passive conduits of propaganda and public relations. It was the serious newspapers and broadcasters that concerned him then. “Nobody needs a book to tell them that tabloids are an unreliable source of information about the world,” he wrote, relegating to an afterthought his reporting that tabloids were hiring snoops who broke the law to get information. One of the biggest media stories in history was right in front of him, and Davies almost missed it.

Hack Attack is Davies’s account of how he finally nailed it, following the story all the way inside Scotland Yard, News Corporation, and 10 Downing Street.

This book is a major achievement: A master class in investigative journalism made all the more fascinating by the wealth of color that’s like something from another era. One reporter snorts coke with high-end prostitutes to build up sources and expenses it, at his editors’ urging. Another gets the nickname Onan the Barbarian after trying to con nudists into performing sex acts and is videotaped in his own. Charlie the Sniffer Dog, whom the Sun uses to find drugs on celebrities, causes a panic when someone lets him into the paper’s own newsroom. We learn of a one-armed blagger (someone who gets someone’s private information by pretending to be that person) called Mickey the Mouse, a corrupt cop named “Drunken” Duncan Hanrahan, and a feline-obsessed phone tapper who changed his name to Phil Catt.

Then there are the details we already knew about (thanks mostly to Davies’s reporting in The Guardian) but which still have the power to shock: The private eye and axe-murder suspect rehired by News of the World after leaving prison for planting cocaine on a woman, and the paper’s subsequent interference with cops investigating him for his partner’s axe murder. The hacking and blagging of the royal family, the prime minister, and national security officials. The blatant destruction of evidence, with News Corp. executives ordering the deletion of hundreds of millions of old emails, as Davies and lawyers representing hacking victims close in. The overt payoffs to key witnesses, and the lucrative columns given to top Scotland Yard officials responsible for the pitiful initial investigation. The 2007 hiring of Andy Coulson, shortly after he resigned in disgrace as editor of News of the World, as spokesman for the Tories, and his ascent to 10 Downing Street three years later. And, of course, there is Milly Dowler. The murdered 13 year old’s phone messages were hacked by the News of the World, which withheld potentially critical information from the police while it chased the story.

The stories that prompted this systematic lawbreaking weren’t exactly Watergate material, either: “Bonking headmaster … Dirty vicar … Miss World bonks sailor … Witchdoctor … TV love child … Junkie flunkie,” read the slugs in one hacker’s files.

It was a sociopathic culture. “You are going to do things that no sane man would do,” one tabloid journalist told Davies. “You’re in a machine. Everyone was drinking everyone’s blood.”

What Davies did not yet know when he wrote Flat Earth News was that the criminal activity on Fleet Street, and the failure of authorities to fully confront it, revealed a rottenness at the core of Britain’s most powerful institutions, caused largely by fear of a foreigner who controlled 40 percent of the country’s newspaper circulation and its largest pay TV network.

“The mogul, for the most part, does not have to make threats or issue instructions… If there’s a bull in the field, everybody steps carefully,” Davies writes. “The fear gives him access; the access, gives him influence. Real power is passive.” There was never a better argument against media consolidation.

It was in promoting Flat Earth News that Davies got tuned in to the hacking scandal. In early 2008, he went head to head on the BBC’s “Today” program with News of the World managing editor Stuart Kuttner, who insisted that an earlier episode in which his employees had hacked the royal family and gone to jail, had been a one-off incident. That was false, and it angered a listener who knew better. That source phoned up Davies, met him in a London hotel room, and told him that not only was it not true but that Scotland Yard had failed miserably to investigate the extent of the hacking. Davies, now had a tabloid story worth pursuing.

It wasn’t until more than a year later that Davies nailed down enough information to publish his first piece, “Murdoch papers paid £1 million to gag phone-hacking victims.” The pushback was immediate and fierce. Scotland Yard claimed the report was false and would go on covering up the truth for years. Rebekah Brooks warned darkly about Guardian Editor Alan Rusbridger’s (nonexistent) “love child”, and The Times of London, Murdoch’s respectable paper, threatened to run a story accusing Rusbridger of paying for hacking. The rest of the press largely ignored the news or jumped on Scotland Yard’s denial. Davies and Rusbridger were hauled before Parliament for a grilling.

Stonewalled by the police and by News Corp. and helped none at all by the rest of the press, Davies became an activist for his story, passing burner phones to skittish sources, urging hacking victims to sue and others not to settle (News Corp. offered big money to pay off anyone who got close to disclosing key documents in court), sharing information with The New York Times and others to get them to do stories, and plotting with members of parliament and plaintiff’s attorneys to force documents into the open. He eventually found someone who offered to bankroll the legal efforts of several victims: Max Mosley, the Formula One chief who held a grudge against Murdoch and the News of the World for reporting on his cavorting with prostitutes.

Much of this would be verboten by American newspaper standards, of course, which generally forbid reporters from becoming active participants in a story, but it’s unclear if Davies would have been able to get the story otherwise. Regardless, the import of the story and the extent of the coverup clearly justified extraordinary measures.

In the end, it was the Dowler story that blew the scandal wide open. Murdoch shut down the News of the World and lost a multibillion-dollar bid to increase his stranglehold over British media. News Corp. paid out hundreds of millions of dollars in settlements to its victims, and several of its journalists are now convicts. Politicians were finally freed to condemn Murdoch, and for a time it seemed as if the spell had been broken.

But Murdoch still exercises inordinate clout, as evidenced by the overwhelming legal firepower he deployed to get Rebekah Brooks, who oversaw two newsrooms roiling with crime and then covered it up, acquitted of all charges. His son, James Murdoch, has not been charged in the coverup. As with many corporate scandals, the people at the top are insulated from prosecution by plausible deniability. Andy Coulson falls, but Rupert Murdoch is richer than ever and bidding to become even more powerful.

You can’t blame Davies for that. He’s done as much as one journalist can possibly do.

The backstory on native advertising

Why the ad technology revolution that was supposed to help publishers actually devastated so many of them

Back in antiquity (five years ago), when I ran a popular Web 1.0 content site called Beliefnet, we used to cockily predict to investors that our advertising rates were going to rise every year. We knew this because the prestigious market researchers told us so. And their logic seemed flawless: More and more ad dollars were going to shift online, and improved ad targeting technology would improve CPMs.

We all know why the first trend didn’t lead to a windfall for publishers (the money did move online, but most of it went to Google, Facebook, and Yahoo). But why haven’t ad tech improvements provide a windfall for most content publishers?

The answer is a revolution in how advertisers view the importance of what content is surrounding their ads. Many advertisers now care more about who sees their ads than where they appear. Context no longer matters so much.

That poses huge problems for publishers who invest in costly forms of content creation (sometimes known as “reporting”)—and it partly explains the escalating acceptance of native advertising. Debates have intensified about the pros and cons of native—a study this month showed that native risks harming publishers’ brands—but it’s worth understanding how publishers got into this position.

For most of modern media history, advertisers spent with a media outlet for two reasons: to reach a certain type of person and to have their brand rub up against the publication’s brand.

For the first goal, it was an inexact science. If your pimple cream wanted to reach, say, 17-year-old teenage girls, you’d advertise in Mademoiselle. If your local hardware store wanted to reach middle-age guys in town, you advertised in the newspaper. Truth is, it was pretty inefficient for advertisers, since they were also paying for the many other readers of the newspapers who didn’t care much about lawn care. But it was the only option advertisers had.

The publications could tell themselves that the advertisers wanted to be alongside the great content, but really advertisers were mostly viewing context as a proxy for reach.

Of course the internet blew up that formula: Advertisers can target their ads to particular demographics with precision.

At first, it seemed this targeting might be fine for publishers. For instance, in the early days of Beliefnet, we could charge pharmaceutical advertisers more for the health section than the religion section of the site on the assumption that the readers of health content were more sickly. And we could target health-content readers even as they went to other parts of the site. Sure, it created perverse incentives for us to produce twice as much health content as religion content, which was awkward since we were, well, a religion website. But it worked for a while.

Then technology evolved further in a way that proved harmful to publishers.

Google got better and better at providing advertisers the audience they wanted based on search results, obviating the need for many advertisers to place banners on websites. Facebook did the same.

Then came the birth of programmatic ad buying, which meant that advertisers could reach their precise target audience with little regard to where the ads appeared. Using a variety of technology, programmatic buying enables advertisers to find the cheapest, most cost-effective inventory, including with “real-time bidding.” Now, an advertiser goes to an agency and says, I’d like the best possible rate for reaching 25-year-old single men, and the agency will provide them with inventory throughout the entire internet. The key is getting the best possible rate. They can basically scour the Web—where volume continues to grow rapidly—for the cheapest way to reach that type of person.

That’s not to say that advertisers don’t want to reach certain types of readers. But a marketer can now reach “New York Times readers” without ever actually advertising in The New York Times, and for less money than sending a check to the Gray Lady.

The result is that all this great new targeting technology has put downward pressure on ad rates for publishers.

This is all a bit strange for anyone who experienced the old ad system in which advertisers were hyper sensitive about what content was going to be adjacent to their ad. Newsmagazines had to be careful not to put upbeat ads next to disaster coverage. At Beliefnet, we had Christian advertisers request that their ads not appear in the Wiccan section. (We used to joke that we should charge them more to appear in non-Christian areas since they might rack up some religious conversions over there).

Now, all sorts of well-preserved brands have their ads appearing in all sorts of second-rate places. And they don’t seem to care! Many advertisers don’t know where their ads appear.

The main response from publishers has been native advertising. In effect, native ads can be seen as a last-ditch effort on the part of publishers to make context relevant again. Advertorials, after all, have to be alongside other pieces of content to work well.

Tragically, too many publishers have deployed native to make it seem that the ads are editorial content, not merely physical companions. In dropping standards so rapidly, publishers have ended up trading the one thing they had left—their credibility with readers—for a few scraps of CPM.

Is it hopeless? To be sure, there are some publishers who still manage to pull off the traditional pitch about the value of being next to good content. Being in Vanity Fair still rubs your brand with both panache and scratch-and-sniff fragrance. And publishers are valiantly trying to convince advertisers that their ads will really, truly be more effective if they’re on high quality sites. Some big media companies are trying fight fire with fire by creating “premium programmatic exchanges,” which might prop up rates for a bit.

There is also, believe it or not, a public policy remedy. The programmatic buying relies on the ability of ad tech firms to freely cookie users without them knowing how their information is being used. If content creators had united politically, they could have pushed the Federal Trade Commission to impose proper right-to-know disclosure rules that would have benefited consumers and, as a side effect, helped content publishers.

Some companies have gotten so good at generating pageviews cost-effectively—using social media, user generated content, aggregation, photo galleries, etc.—that they outrun the declining ad rates by increasing their ad volume. Alas, that doesn’t work so well for companies that are trying to invest in, say, local reporting or other types of labor- intensive techniques.

Perhaps some new technology will develop to shift power back to publishers. But mostly it means that media businesses that want to invest some money in high quality original content are going to need to develop other revenue streams in addition to or instead of advertising.

The digital revolution has made it possible for advertisers to become more efficient in how to spend their money. Damn.

The NYT’s new paywall products flounder

Early problems for the paper’s new apps

The New York Times’ expanded paywall offerings are off to a poor start, and its three-year run of higher circulation revenue may be at an end.

The Times’ digital-subscription strategy has been a huge success since it launched in March 2011, tallying 799,000 subscribers by the end of last month. But the high growth rates for the $195-a-year product, which have saved the paper’s bacon, were leveling off, while print circulation continued to dwindle and digital ads went backward. The Times needed a new source of growth.

So the paper launched NYT Now and NYT Opinion last quarter to try to goose digital subscriptions with cheaper offerings, and it debuted Times Premier to get more revenue from some existing subscribers. It didn’t really work.

The Times added just 32,000 subscribers in the second quarter and increased paywall revenue by $1.4 million, or 4 percent. Its costs, meanwhile, increased by $18 million, driven by investment in its digital products, including the new apps.

Here’s Times CEO Mark Thompson’s statement on the results:

But, while we expected the portfolio to take time to build, we want to accelerate the rate of growth in subscription sales, so over the coming months, we will refine some of the offers and the way we market the portfolio to accomplish this.

That’s executive-speak for “it was a bust.”

It’s true that its gain was better than it would have been without the expanded offerings, which the Times says accounted for most of the 32,000 new subscriptions.

And some of this is seasonal. The second quarter has historically been the Times’ weakest period for digital-subscription growth, as this chart shows:

But the Times is projecting flat circulation revenue for the third quarter, despite a hike in print delivery prices. That signals that the paper has raised print prices as far as they can go, at least for now. The revenue gains from those price increases aren’t overcoming the circulation declines, and digital gains aren’t enough to make up for it.

The Times’ digital-subscription growth looks particularly weak coming days after the Financial Times reported enormous digital-subscriber gains, and paid digital circulation now more than doubles its print circulation. The FT, whose pioneering meter (which lets readers see several stories a month for free before erecting the paywall) is nearly seven years old, saw its digital subscriptions jump 33 percent to 455,000. The NYT’s digital-subscriber count was up 19 percent from a year ago, despite the addition of low-cost products.

Here’s FT.com managing director Rob Grimshaw talking to The Audit’s Dean Starkman last month:

The gain on subscription side has been enormous, because what we found was, as soon as we pushed hard on this, and we turned the dials on the model to the point where many people were coming up to barriers, a lot of people went through, and more than that, they were happy to come through at price points that were far above what any of us had anticipated.

The NYT may well be able to tweak its model and increase subscribers more substantially. But these products aren’t likely to be major sources of growth. A better bet, and one the Times still hasn’t taken for some reason, is to experiment with pricing its core subscriptions. It needs to raise the cost of digital subscriptions, at least to cover inflation.

The good news for the Times is that digital ads are heading in the right direction again. They were up 3 percent last quarter. That’s not enough, but it continues the turnaround that started last quarter after two years of declines.

Bloomberg struggles to break out of the box

Justin Smith’s ambitious digital transformation hits some bumps

When Justin Smith arrived from The Atlantic to last fall to take over the sprawling media group at Bloomberg LP, the move was greeted by hosannas in the media and journalism circles.

Here was the young, digitally savvy executive credited with playing a crucial role in pulling a 156-year-old monthly from the brink of extinction coming to an immensely profitable company bristling with technological knowhow but struggling to break out of its narrow financial niche and into the media mainstream. Soon after arriving, Smith issued a memo announcing a “hundred day strategy process,” toward a new plan that would raise Bloomberg’s visibility beyond financial circles and, perhaps, help transform the media industry itself.

That was 200 days ago. Since then, the launch of a key product has been delayed, an important designer has bolted, and some Bloomberg editorial staffers are expressing frustration about the pace of decision-making and confusion over the project’s aims.

“It’s still not clear what we’re trying to do,” said one Bloomberg Media executive who is familiar with the planning. “What do we want to be when we grow up?”

Smith arrived last fall to take charge of—and expand upon—a jumble of media assets that include a sprawling TV operation said to post losses of around $100 million a year (an improvement from a few years ago, when losses exceeded $300 million); Businessweek, which posts losses of some $30 million annually; a large radio operation; digital video; Bloomberg Markets, a financial monthly; Bloomberg Pursuits, a luxury magazine; and Bloomberg.com, which publishes selections from the thousands of stories generated by Bloomberg News, a massive newsroom of 2,400 journalists primarily producing for Bloomberg’s famous financial-data terminals.

Smith has described his plans in internal memos and public pronouncements that, amid rather thick digital/managerial rhetoric (“Our strategy calls for building out a portfolio of new digital assets that better align our content offerings to global business audience segments”), spell out broad goals, including “broaden our audience,” spearheading digital “innovation,” and “grow global business TV.”

But the broad goals still don’t add up to a rationale for the enterprise. Bloomberg LP is already immensely profitable by selling a single product, its famous—and costly—terminals, rendering normal financial targets, and the value of casual Web traffic and TV viewers, moot. Bloomberg executives say increasing “impact” is an important objective, leaving open the question of what that means, and the main one: impact to what end?

In March, Smith made a long-anticipated presentation of his strategic vision (missing the 100-day target by a couple of months), including a lengthy Power Point presentation, to members of Bloomberg’s management committee, which includes, among others, the ex-mayor; Bloomberg CEO Dan Doctoroff; Matt Winkler, top editor of Bloomberg News; and Tom Secunda, who runs the company’s massive terminal operation, which generates 85 percent of Bloomberg LP’s revenue.

The detailed strategy presentation was not widely shared internally, though some elements have leaked. According to people with knowledge of the strategy, it has three main elements: 1. Fix the sprawling and money-losing television operation; 2. Ramp up Bloomberg’s conferencing business; 3. The centerpiece, separating Bloomberg content into five editorial “verticals” across a range of digital platforms (Web, mobile, etc.): a general business site, Bloomberg Business, that will replace Businessweek.com; technology; a luxury site drawing on the company’s Pursuits magazine; and Bloomberg Markets, which would draw on mostly financial coverage produced by the vast Bloomberg News operation. Last, a Bloomberg Politics site has already been announced, to much fanfare, featuring the high-profile Washington journalists Mark Halperin and John Heilemann, authors of Game Change. Halperin and Heilemann are expected to anchor a daily politics show after the close of markets.

The first setback surfaced when designer Richard Turley, the creative force behind buzz-creating covers at Bloomberg Businessweek, abruptly decamped last April to take a job at MTV. His departure was accompanied by a torrent of regret and praise from the media press, which ran greatest-hits tributes to his most “awesome” covers. Turley didn’t respond to telephone calls seeking comment.

Then the launch of the business vertical, Bloomberg Business, which had initially been targeted for September, was pushed back to the end of the year.

But the biggest problem, some inside the company say, is that basic goals of the project remain opaque. “There’s a leadership vacuum,” says the executive.

In an interview, Smith said he has been quite clear about the aims of the enterprise, which he described as three-fold: influence (which includes growing the digital audience), innovation, and “commercial success,” in that order. [innovation, growing the digital audience, and broadly achieving “commercial success.” UPDATE: the sentence was changed to clarify Smith’s comments from a lengthy interview.]

Smith says signs of restlessness are natural given the scale of the effort and the change it represents. “We’re creating numerous startups within the company,” he says. “It takes a couple of months to get stuff done, especially when you’re doing things a bit differently than you have in the past. Not everyone is going to be thrilled with the pace. But the real proof in the pudding is when we launch these new properties…We’re trying our best to communicate as actively as possible.”

He says that while Turley’s loss was a blow—“we absolutely love Richard”—the magazine’s new creative team headed by Rob Vargas has “stepped into his shoes with intelligence, wit, and grace.” Citing well-received covers after Turley’s departure, he says, “Rob and the team have proven all the critics wrong.”

As for the delay of the business vertical, Smith says that was merely a function of a decision to speed up the launch of a different vertical, Bloomberg Politics, to October.

“There’s a lot going on, and we’re in the top of the first inning of implementing it,” he says.

To be sure, Smith retains supporters among Bloomberg staffers who sympathize with the difficulty of trying to shift a famously closed, insular, and rigid corporate culture to the more open and free-flowing sensibility of the Web.

“It’s not really a super-fast moving organization,” a sympathetic staffer says. “It’s still a work in progress but he’s a pragmatic guy … they’re shifting more toward being a much more Web-friendly organization.”

Smith’s arrival generated great hope among staffers frustrated by Bloomberg’s near invisibility on the mainstream media stage, and yet any attempt to expand the company’s reach beyond the business news terminals will be fighting both the company’s history and its culture.

Former New York mayor Michael Bloomberg founded the company in 1981 with a laser-like focus: to provide financial data, analytical tools, and an early messaging system to Wall Streeters via a single product, its famous two-screened terminal, “the Bloomberg,” aka, “the box.” Launched long before the mainstreaming of the internet, the Bloomberg was—and is—in fact an intranet, a closed system, with its own keyboard, language, and command system, available only, at considerable cost, to a limited audience of well-heeled subscribers. The box is a world unto itself. It is precisely not a mass-market product, and it remains the soul of the company, presided over by Secunda, a minority owner and early Bloomberg partner who has direct access to the mayor, and actually, as he told Fortune earlier this year (($$)), doesn’t agree that the company needs to diversify at all.

Even after Bloomberg added a news operation in 1990 with the hiring of editor Matthew Winkler, then a Wall Street Journal bond reporter, the organization grew up in something of its own media orbit, with its own peculiar stylebook, The Bloomberg Way, a dry, just-the-facts writing style (that occasionally produces famously puzzling headlines), and a narrow mission: to churn out thousands of stories a day to serve terminal subscribers, mostly traders and other financial professionals.

The latest effort to bolster Bloomberg’s media brand, has been preceded by several others. Indeed, for the last decade or so, Bloomberg has been embarked on an ambitious, and expensive, campaign to extend its journalistic reach into culture, arts, politics, even sports—so far with little to show for it. A parade of high-profile media talent has entered Bloomberg’s news operation from The Wall Street Journal and elsewhere and effectively disappeared from view. The organization has won a string of journalism awards, but has not broken through with the Pulitzer Prize it covets. The company hired media maven Norman Pearlstine to great fanfare in 2008; he quietly left this year. Andrew Lack was hired from NBC News that year to boost Bloomberg’s huge TV operation; on Smith’s hiring, he was later bumped up in the hierarchy, but the network’s ratings remain too small to measure. The Bloomberg Way has not translated well to the Web, and the influence of the newsroom on the public discourse remains limited. When Winkler wanted to call attention to Bloomberg News’ freedom-of-information campaign against the Federal Reserve, he published his op-eds in The Wall Street Journal.

If the media operation has a bright spot, it is Businessweek, bought for a nominal sum in 2009, where star editor Josh Tyrangiel has generated buzz with provocative covers, albeit with the occasional dud. Still, that has yet to translate into financial success and the loss of Turley affects the magazine most directly.

Smith’s successes at the Atlantic’s parent, Atlantic Media, have not been questioned but with the Atlantic’s revenue in the $40-million range, its budget represents a rounding error for Bloomberg—a money machine— which churned out 2013 revenue of $8.3 billion and staggering profit margins of more than 30 percent. And when it comes to the news economics of the internet, the question isn’t so much whether digital operations can be profitable—they can—but the degree to which they can scale.

One question going forward is who will staff the five verticals, and who will control their content. The giant Bloomberg News staff, for instance, has as its primary audience Bloomberg’s 318,000 terminal subscribers and is under the iron-fisted control of Winkler, while the new financial vertical, Bloomberg Markets, under Smith’s terrain. Tyrangiel has been promoted, and after taking a break from Businessweek, is now formally in charge of Bloomberg TV, the magazine, and the verticals.

Another challenge will be navigating Bloomberg’s famously byzantine internal politics, which have become even more so now that the ex-mayor has returned to the company after a dozen years occupied elsewhere. His role so far is undefined, fuzziness that has already led to erroneous reports about what he is actually doing at the company. A Bloomberg spokesperson says merely that he is “the owner.” And while Doctoroff has made it clear that a primary goal was to make Bloomberg’s non-terminal businesses, including the media arm, pay for themselves, the ex-mayor is said to be concerned more about having impact on the public discourse.

As for Smith’s operation, it is not entirely clear the degree to which profitability, or even loss amelioration, is a goal. Smith declined to specify revenue targets or to define “commercial success” beyond the profitability of the entire company, which is already extremely profitable. At any rate, Smith says the profitability is not the only metric, and that traffic, TV ratings, audience engagement, and the like are central to judging the operation.

“Our goal,” he says, “is to lead the industry.”

How Forbes got to $475 million

That’s what a Hong Kong investor has agreed to pay for a firm that two years ago had trouble paying its rent

Integrated Whale Media Investments of Hong Kong is now the majority owner of Forbes Media, valuing the company at a whopping $475 million.

What the buyers get is a dwindling print magazine, digital growth, and the Forbes brand, which has been seriously diluted in the last four years. It’s hard to imagine an American investor paying half the price.

Fortunately for the Forbes family (and for Bono), the brand apparently still has outsized allure for rich people in Asia. The $475 million valuation, if it’s accurate, is an enormous number for a company that projected late last year that it would take in $21 million in earnings before interest, taxes, depreciation, and amortization in 2013, according to a pitchbook obtained by Ken Doctor. Ebitda doesn’t include the cost of servicing debt, and Forbes’ is large enough that it went into technical default in 2011. It also had trouble paying its rent in 2012.

Its business fortunes have turned since then, but that has come at the expense of Forbes’ journalistic credibility.

It may be hard to recall now, but Forbes was a journalistic force not so long ago. Now it has a boss who says things like “content marketing just might be the full employment act for journalists.”

Four years ago, Forbes acqui-hired Lewis DVorkin and installed him as chief product officer. DVorkin implemented the model he had pioneered at True/Slant, where writers get paid by the traffic they bring, particularly repeat visitors.

This model allows Forbes to have a far larger stable of writers than it could ever employ under more traditional models of work that are subject to things like minimum wage laws. It’s sharecropper journalism. Writers effectively are tenants on Forbes.com, and Forbes gets a big cut of what they bring in. Or it gets everything: The median Forbes writer gets zip.

Forbes has just 40 staff reporters, but it churns out 400 pieces of content a day thanks to its 1,200 contributors. Four hundred of those are “paid freelance contributors,” who must write at least five times a month and interact with commenters. Sixty of them make more than $45,000 a year from Forbes, which means 85 percent of them make less than that. Throw in the unpaid contributors and that moves to 95 percent.

Effectively, Forbes has been paying people with its brand equity. But when you do too much of that, you dilute the brand.

Forbes has blurred the lines more than any other mainstream publisher between journalistic content and marketing/PR. Flacky garbage written by marketing executives and consultants is barely distinguishable at first glance from reported stories written by staff writers. This effect reached its nadir in this exchange reported by Pando Daily’s Erin Griffith:

A curious “interview request” arrived in my inbox today: A Forbes contributor would like to include my opinions in his post about equity crowdfunding. I was flattered for a minute, but then I realized what was really happening here: An executive who has been given a journalist’s platform is now asking — through a publicist — for a journalist to do his work.

I love the irony. Forbes has outsourced the production of content to non-journalists, who are now turning to actual journalists for content. And the topic? Crowdfunding. It’s a snake eating its own tail.

The pay for traffic system incentivizes writers to put out irresponsible clickbait like “Is The CDC Hiding Data About Mercury, Vaccines, And Autism?” (UPDATE: Emily Willingham takes issue with my criticism. See her comments below and my responses). It also results in most-read lists that look like this:

These kinds of things may increase your engagement and clicks, but they’re nothing but bad for a high-end brand like Forbes:

Even Jeff Jarvis doesn’t like it:

Now, when I see a link to Forbes on Twitter, I don’t know whether it is going to take me to (1) the good work of a Forbes journalists, (2) the good work of a Forbes contributor, (3) the bad work of one of many Forbes contributors, or (4) the paid and wordy shilling of a Forbes advertiser…

Thus, I hesitate three beats before clicking on a Forbes link. That is the definition of a devalued media brand

But while the strategy has been terrible for its journalism, it’s been decent for the bottom line. Forbes.com traffic has boomed under the strategy, with unique visitors nearly tripling and the company’s overall ad revenue up about $13 million since 2010. Ken Doctor reported earlier this year that Forbes.com’s ad revenue in 2012 was $42 million, and the company projected that to rise to $86 million by 2018. It estimated overall revenue last year at $144.6 million, with ebitda of $20.8 million. That would be a 14.4 percent ebitda margin, or about what The New York Times Company has.

Though it’s surely higher now, that $42 million in digital revenue is surprisingly small for a business site with hundreds of millions of pageviews a month. It implies an average CPM in the high single or low double digits. And that’s despite its aggressively annoying practices that goose ad revenue by auto-rolling video ads and showing interstitial ads every time you visit the site:

Put another way, back in 2009, David Carr reported in The New York Times that Forbes.com brought in an estimated $70 million to $80 million a year. In 2010, Dennis Kneale wrote that when he was Forbes’ managing editor, the site took in $75 million in 2005. Ad Age reported in 2009 an outlandish estimate that Forbes.com revenues were $288 million, which it at least prefaced with the line that “Internet revenue is even tougher for outside observers to estimate than web traffic.” The Forbes brothers themselves were projecting that the site’s revenue would surpass the magazine’s by 2007 to 2009 (while online ads recently surpassed print ads, overall revenue is still lower online).

In other words, in the ever-optimistic projections of Forbes, its online revenue might reach 2005 levels in 2017 or so.

Perhaps it will. Forbes has taken the path of least resistance in the internet media economy, where most of the risk is shifted away from the corporation: The workers are entrepreneurs, (almost) nobody has a job, and the owners make a mint collecting rents on their platform.

That’s not good for journalism or for the public, but it’s not a bad business model.

The Tea Party is timeless - Richard Hofstadter’s Anti-Intellectualism In American Life reviewed

How misinformation goes viral: a Truthy story - Conservative media’s reaction to an Indiana University project shows how shoddy information can quickly become an online narrative

Do you know Elise Andrew? - The creator of the Facebook page “I fucking love science” is journalism’s first self-made brand

Goodbye and good luck to all of us - Dean Starkman on leaving CJR

When quitting goes viral - Thanks to social media, resignations get a global audience

This Is How Joanna Coles Changed Cosmo (Refinery29)

The British reporter-turned-editor has made good on her promises to bring politics to the magazine, win some very big-deal journalism awards, and secure the most interesting exclusive interviews

Awareness, #Awareness, and Ray Rice (The Classical)

The coverage of Ray Rice’s punch is not translating into offering information on domestic violence


Greg Marx discusses democracy and news with Tom Rosenstiel of the American Press Institute

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Who Owns What

The Business of Digital Journalism

A report from the Columbia University Graduate School of Journalism

Study Guides

Questions and exercises for journalism students.