the audit

A reply to Clay Shirky

Who doesn't distinguish between investing in journalism as opposed to print
June 19, 2014

NYU’s Clay Shirky calls Ken Doctor and me shills and nostalgists for our respective coverage of Aaron Kushner’s investment in The Orange County Register, and goes on to write that the “toxic runoff from CJR and Nieman’s form of unpaid PR is poisoning the minds of 19-year-olds.”

Young journalism students are still concerned about print’s future, Shirky writes, because folks like Doctor and me are “adults lying to” them about its prospects, an act akin to “child abuse,” in large part because we and our readers don’t like the implications of our secret knowledge that the future is largely digital.

More likely, the kids these days are wondering whether they’ll be able to pay their student loans in a miserable industry with few viable business models beyond the one they themselves don’t use. They might also wonder why leading thinkers like Shirky for years contributed intellectually to newspapers’ current state by opposing paid content long ago, coming around when it was all but too late.

Because if any of these 19 year olds have read Doctor or me at all on the state of the business (and something tells me very few of them have), they’ll know not to hang their hopes on the future of print.

I’ll let Doctor speak for himself, but we’ve both been very clear about the existential problems of print (as Shirky well knows) and the news industry’s dependence on it. Doctor puts it well, “My quest remains the same: finding new and more sustainable ways to pay good journalists to do their work.” I’d add: whatever the medium, though preferably a digital one.

The praiseworthy aspect of Kushner’s project for me and for CJR was his big investment in journalists, not in reams of paper. We’ll not apologize for that.

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But Shirky can’t see the journalism for the dead trees.

And that’s the foulest part of Shirky’s screed: He’s glad, he says, that Kushner’s experiment (apparently) has failed. At a time when everyone was gutting their newsrooms, Kushner bought a newsroom with somewhere between 180 and 200 journalists and nearly doubled it in a little more than a year. Hiring reporters and editors, and lots of them? Was he crazy? Probably! But you have to give the man a hand for trying.

Shirky admits that I wrote that Kushner’s strategy would likely not end well, in part because of the overemphasis on print, but he complains that it was buried at the bottom of the story. Fair enough, though I thought we had tipped our hand with the headline, which was, “An ink-stained stretch.” In retrospect, perhaps we should have brought in Shirky to guest-edit it.

The really terrible thing is that both Chittum and Doctor understood from the beginning what made Kushner’s plan a disaster. They just couldn’t bring themselves to give it to their readers straight. In the same piece where he lauds Kushner, Chittum waits til 2/3rds of the way through to point out that the core of Freedom’s strategy “has been unsuccessful most places it’s been tried”, and buries his most important observation — it will probably fail — at the very end of the piece.

In a follow-up, the digital seer turns mind reader, giving my year-old piece an edit (turning it into something that no one would read) and writing this:

…you knew that Kushner’s plan was terrible, and you knew why it was terrible, but you pulled your punches, because you didn’t like the implications of the things you knew, and because your readers would like them even less.

Journalism has been groping for, and coming to, some kind of consensus on the way forward for a few years now, but this kind of thing doesn’t help. Nor does this.

But more importantly, Shirky is flat wrong that the hard paywall was the “core of Freedom’s strategy.” It wasn’t. Improving the quality of the paper was. Second, mine wasn’t an inverted-pyramid news story. It was a magazine piece, where it’s entirely appropriate to put your conclusion near the, well, conclusion. Third, if I had really been out, for some reason, to trick readers into thinking Kushner’s strategy was a sure thing, I probably wouldn’t have told them anywhere in the story that it was unlikely to work.

“Nothing will work. But everything might. Now is the time for experiments, lots and lots of experiments” as Shirky himself once wrote.

“Except,” he should have added (if I may add my own edit), “those I don’t think will work.”

Shirky would have you believe this is a simple story of a “terrible” strategy that has failed completely. But it’s not so neat. He actually misses the biggest flaw with my piece: The lack of information about Kushner’s financing. That’s often a problem when reporting on privately held companies, and it was here, as well. In the end, it is excessive debt—not the print-focused strategy—that is sinking Freedom. That doesn’t mean the Kushner strategy would have worked with more capital, but it does complicate matters.

Thanks to a Freedom investor presentation from November snagged earlier this month in the OC Weekly, we now know more about those numbers, as I wrote last week. The deal was basically an LBO financed with a large amount of debt. Kushner and partners didn’t have the capital to finance the big newsroom, ad staff, and print production investments, pay off the debt, put $33 million into the pension fund, and then launch expensive moves into Long Beach, Los Angeles, and Riverside. Kushner promised a “really long-term commitment,” but you have to have the capital to do that.

According to Kushner, the first full year of his ownership saw double-digit circulation revenue gains and even print ad increases. But the overall revenue gains weren’t enough to cover all these costs, especially the debt. The problem with sussing out exactly what happened here is that, again, it’s a private company and doesn’t have to disclose anything it doesn’t want to.

The thing is, as Doctor informs Shirky, print still matters, 20 years into the Web era. Calling it “nostalgia” is silly. I do virtually all my reading digitally, but tens of millions of people don’t, and they support what’s still far and away the largest newsgathering infrastructure. Print newspapers surely throw off more profit—still—than all digital news outlets have revenue. The key to any future for newspapers—and I’ve said repeatedly over the years that there may not be one for many or most of them—is managing that decline while building up their digital business. Sunday papers will be around for a long time. Monday papers will not.

If I were, say, on the advisory board of the newspaper company, I might have advised a little more caution and patience. But I’m not, which is why my advice is limited to questions about strategy in a magazine profile. Shirky should know a little something about this. He’s on the advisory board at Digital First Media, the management concern that took its newspaper operating company, the Journal Register Co., through two bankruptcies bankruptcy [CORRECTING: a second bankruptcy was by a JRC predecessor] and fired its entire Thunderdome digital team to appease its financiers. [Adding disclosure: Digital First’s CEO, John Paton, recently joined CJR’s Board of Overseers.] That particular company—aggressively—held itself out as the very avatar of experimentation. And, you know, we didn’t particularly believe in the model, but no one around here applauded when it ran into trouble. Who does that?

We haven’t heard word one from Shirky on DFM, his client, much less on the 19 year olds it presumably led astray.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.