Retiring WSJ Managing Editor Says High Profits Created Newspaper Industry’s “Golden Age”

Today is the last day on the job for Paul Steiger, who has been the managing editor of The Wall Street Journal, for the past 16 years. That’s an impressive run by any standard.

Last Saturday the Journal published his valedictory on the front page under the headline “Read All About It: How newspapers got into such a fix, and where they go from here.” (Sub. still required)

It is a marvelous recap of where we've been and a forthright how-we-got-here, a no-tears tree-top look at the newspaper industry. Having been writing about the industry and its love-hate relationship with technology and consolidation since 1973, I have found that journalists are often the least objective when writing about their own industry. He smartly captured the ebb and flow in a way that the vast majority of Journal readers-- who have not followed every wrinkle and trend -- would understand.

But in the midst of this guided tour guided, Steiger makes an observation that would surprise many media reformistas. First he describes what journalism was like when he started out:

As a kid reporter in the '60s, I heard tales from newsmen and photographers about how, just a few years earlier, they had sat in cars, engines running and radios tuned to police bands, trying to get an edge in covering the next murder. The national and international news would be handled by the wire services. Lurid local photographs on page one were what sold newspapers in that era.

A certain fast-and-loose, devil-may-care attitude often prevailed. I remember walking past a photographer's open car trunk and noticing that he carried a well-preserved but very dead bird among his cameras and lenses. The bird, he explained, was for feature shots on holidays like Memorial Day. He'd perch it on a gravestone or tree limb in a veterans' cemetery to get the right mood. Nowadays such a trick would get him fired, but in the 1950s, this guy said, there was no time to wait for a live bird to flutter into the frame.

But then, he says, something happened. Starting in the 1960s the industry “morphed into a series of mini-monopolies. This came about first as “mounting costs forced a shakeout -- mergers and newspaper closings that typically left one city paper preeminent in the morning market and another in the evening.’ Then the evening papers ran into troubles, “crushed by a phenomenon that can be summed up in two words: Walter Cronkite. More and more families gathered in front of the tube at the dinner hour.”

This is how Steiger characterizes the results of a newly prosperous newspaper industry:

Many of these information behemoths invested heavily in quality, expanding their reporting locally, nationally and internationally. This was good business as well as a boon to readers, because it raised barriers to entry for would-be competitors.

The result was a golden age of American journalism. In New York, Washington, Chicago and Los Angeles, of course, yet also in Boston, Philadelphia, Miami, Milwaukee, Atlanta, St. Louis, Des Moines, Louisville, St. Petersburg and more, daily papers were willing to send reporters far afield in pursuit of stories exposing corruption or explaining the world. Newspapers opened or expanded Washington bureaus and added reporters abroad. Some stationed them not just in London, Moscow and Tokyo but in places like Sydney and São Paulo.

As their financial strength and staff size increased, they became fearless in pursuing corruption.

The “golden age of journalism.” Profitable newspapers had the resources to invest more into their product. Intuitive? Or counterintuitive?

Isn't competition what we seek as the mechanism to ensure that the juices flow? Shouldn’t more competition – not less—be associated with the golden age of journalism?

Although he is not writing about competition per se, in his chronology Steiger provides some answers:

• “The news operations of the three main television networks in those days followed a similar pattern. As profits grew, they added to staff and launched foreign bureaus and investigative projects. The Sunday-night magazine program CBS launched in 1968, "60 Minutes," set a new standard for expensively produced and deeply reported video journalism.”

• “Cable TV added a new worry, because here was a medium that could target smaller, exclusive audiences and thus pose a greater challenge to print.”“Then in the 1990s came the digital networks and the Internet, unleashing forces that would ultimately undermine newspaper business models that had been so supportive of journalism.”
  
  
• Finally: “The decisive blow may have been Google's, with its powerful search engine that would either give you a quick answer to a question you had or steer you to sites that could. The irony, of course, was that some of the most useful of those sites were newspapers’.”

More could be added to Mr. Steiger’s description of the forces and trends. But the basic pieces are there. So, what are the lessons learned?

First, that profitable organizations have the wherewithal to spend to maintain and improve their products or services. I've written about this before. Some may take the money and run—a short term maximization philosophy. But many—probably most judging by Steiger’s list of newspaper cities—will look for longer term profit “optimizing” strategies. And for two or three decades that worked well for the newspaper publishers and their millions of stockholders.

Second, competition works. But critics and regulators must recognize the shifting boundaries of the market. Competition for newspapers was coming not necessarily from other newspapers, but from media that were partial substitutes: broadcast television, then cable networks, then online providers. They were and are competing for advertiser revenue, consumer personal consumption expenditures—and consumers’ time. Cumulatively they have taken a toll.

(Paul Steiger is now editor in chief of Pro Publica, “an independent, non-profit newsroom that will produce investigative journalism in the public interest.”)

Sirius/XM Merger Proposal: The two sides of the pancake.

The two satellite radio providers, XM and Sirius, announced a proposed merger yesterday. The FCC, which must approve such a combination, quite reasonably went on record as having reservations. Chairman Kevin Martin added that “the hurdle here, however, would be high as the commission originally prohibited one company from holding the only two satellite radio licenses."

What’s reasonable here? On the one hand, aside from the statutory license restrictions (no small matter), the merger would on the face eliminate competition that had been very fierce in this alternative to traditional terrestrial radio. On the other hand, despite signing up millions of subscribers each, both are losing prodigious sums of money. But that is in part due to the profligate spending on programming, such as Sirius’$500 million commitment to Howard Stern or $107 million for NASCAR, while XM with more subscribers, committed $55 million for Oprah Winfrey. If they had spent less on expensive programming perhaps they would be profitable.

On the other hand (whoops, is that the third hand?) if they hadn’t spent big on high visibility programming, then they might not have aggregated 14 million subscribers paying $12.95/month.

By one important measure, such a merger reduces competition less than it first seems: Subscribers to one service cannot listen to the other. Although the two services compete for subscribers, the radio sets sold for each service works only for that service. Thus, once a consumer chooses which service they want (or buy a car outfitted with one radio), the barrier for switching services is high, as the costs of the receivers is relatively steep compared to AM/FM receivers. To the extent that a merged service would provide the best of both, many subscribers would benefit. (Losers may be the higher profile talent that has sometimes been able to bid one service against the other).

Another reason why perhaps it should go through is that it is already being bad mouthed by the National Association of Broadcasters (NAB). Predictably the NAB must oppose it, as satellite radio is competition for its traditional radio membership. It quickly issued a statement that included: "In coming weeks, policymakers will have to weigh whether an industry that makes Howard Stern its poster child should be rewarded with a monopoly platform for offensive programming. We’re hopeful that this anti-consumer proposal will be rejected."

This, of course, is the same Howard Stern that until a year ago was the pride and joy of an NAB member. (or if not exactly “pride”, at least a profitable “joy.”). And the same NAB that has lobbied for freedom of mergers in local television and radio.

But there is a point here: Satellite radio is not a medium to itself. Its competition is free terrestrial radio, including the expanded—but still under utilized—HD radio. The NAB must see a merged XM/Sirius as a more formidable competitor than two money losing entities.

Bottom line: This should be a tough sell for approval, but it's not a one way argument. One approach: Let the two merge, but sell one of their licenses. The surviving firm can carry what they have room for on their one license frequencies and let a new compeitor in the sky. Perhaps the model for a new competitor would be for less expensive programming at a less costly subscription fee.

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Columbia Forum Yields No Answers But Highlights Ambiguities on Media Ownership Issue

The mini-symposium at Columbia Journalism School yesterday on Media Reform: Is it Good for Journalism? was barely a toe-in-the-water event. Still, for anyone who was seriously interested in both sides of the pancake of the so-called media reform debate, it provided more grist for the mill than the three day one dimensional pep rally that the movement holds annually, mostly recently last month in Memphis.

The usual suspects made the usual speeches. Keynoter Walter Cronkite, looking a tad unsteady in gait but at 90 years old was nonetheless sharp on his message, delivered in that familiar deep and smooth voice. He lamented the cuts in newsrooms and repeated that good journalism was important for democracy. It occurred to me that it is not likely we will ever again have a news personality on the order of Cronkite. He was the CBS Evening News anchor when we had only three choices for television news—and because the three newscasts were usually broadcast at the same time, we had to make a choice of which one to watch. Uncle Walter was the top dog of the three in the 1970s. There were no replays (and, note for those under 25, there were no VCRs or PVRs). Disaggregation (read "lots of alternatives to choose from") means fragmentation.

FCC Commissioner Michael Copps also stayed in his role. Apparently not one to use the up and down channel button on his cable remote, he continues to look to re-impose the failed structural remedies on broadcasters in the heyday of television regulation: Let's bring back the Fairness Doctrine and those every three year competitive license renewal hearings, the better to hold the local stations accountable to government bureaucrats for a determination of what they think is the “public interest." That may have made sense in the days of scarce spectrum but not in an age of nearly unlimuted bandwidth.

Given the short time and the many panelists (nine of us had a shot in two groups over about two hours), it was hard to get much more than a flavor for how rich a true debate could get. I contributed some of the points I made in a recenty entry here asking what is even meant by "ownership consolidation" or "quality journalism." Moderator Dick Wald, summing up my panel, concluded that what was missing was data. True, there was little in this session. I tried to bring in a few specific points— only one person in the audience (Columbia’s own Eli Noam) knew that the five largest media companies (as measured by revenue) among them owned only one newspaper in the U.S. So these ”media powerhouses” as they are frequently called cannot be blamed for any perceived loss in quality print journalism. But I reminded Wald afterward that there was a plethora of data. The problem is that it does not all point in the same direction, suggesting that answers are complex and nuanced.

Indeed, probably the most useful take away from the afternoon was a comment by Tom Rosenstiel, the director of the Project for Excellence in Journalism. Local ownership, the Center’s research has found, does not translate into high quality content. And large chain ownership does not default to lower quality. There are better and worse local owners, better and worse large corporate owners. Based on the Center’s own empirical research over the years on the quality of television journalism, Rosenstiel reminded the audience that good journalism or poor journalism was not a function of the ownership structure per se but of the values of those who controlled whatever entity.

Case in point: Sitting next to me was Frank Blethen, publisher and part of the family that owns the Seattle Times. His family’s stewardship of that paper over decades makes a strong case for local ownership. But two of us, myself and later Norman Pearlstine, most recently editor-in-chief at Time Inc., referred to the gross abuse of power of Walter Annenberg, a Philadelphia boy who owned the Philadelphia Inquirer and how it evetually became one of the top newspapers in the country only after being acquired by the Knight Ridder chain, based in Miami.

Rosenstiel also was on point when he observed that the publicly owned chains have a tendency to add people and resources to improve the weak properties they buy, recognizing that there is some correlation between bigger audiences (and therefore profit) and higher quality. Yet the same chains are known to cut back expenses at acquisitions where they feel that there is too much being spent for too little return, therefore being open to the charge they bring down some measure of quality. (You can find an example of just this phenomenon on pages 16-17 of the 3^rd edition of Who Owns the Media?, referring to two newspapers acquired by Gannett). On the one hand. On the other hand.

Jack Shafer, editor-at-large for Slate, was his usual voice of reason. He reiterated his point from a recent Slate column that the media reform movement should be viewed as a media regulation agenda. He reminded us of the (failed) attempt of the Nixon Administration to use the license renewal process for two television stations owned by the Washington Post Co. to blackmail the newspaper into easing up on its Watergate reporting. Although Commissioner Copps later said that reinforces his call for a ban on cross ownership, he misses the point: Whenever anyone is beholden to the subjective whims of a government entity for its survival it may feel constrained in being critical of that government. The media reform folks have it backward: If they regulated broadcasting in this way they are more likely to stifle voices than to unleash them.

All in all, the audience of about 300 listened respectfully, asked a few questions and filed out. I doubt if many minds were changed. Hopefully at least a few left with a better sense of the complexity of the issue. Dean Nicholas Lemann has got the ball rolling. But is there an encore?

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What Media Consolidation? Whose Quality Journalism? Response Below

I was asked by a documentary film maker if I would agree to be interviewed for a film on the media ownership issue, specifically the FCC hearings that are being held around the country. I was asked:

Our major focus is how consolidation affects journalism. Is quality journalism declining, morphing, getting better? Does it have any affect at all?

My response follows:

Well, I remain a bit hesitant. I'm perplexed by your question of whether, as the result of consolidation, quality journalism is declining, morphing or getting better.

First, I'm not sure what consolidation you refer to. The one that has liberated me from the hegemony of the 1960s three national TV networks that were the airwaves in the time of the FCC 's Newton Minow's "Vast Wasteland" speech? Or is it the 2007 television landscape in which those three networks have half the audience ratings they had then and indeed the now five companies that own broadcast networks, combined with all their owned cable networks, have a smaller prime time market share than in the 1970s? Maybe the 1970s when each of those three networks each carried 30 minutes of evening news (at the same hour so I could only watch one-- there were no VCRs or PVRs) or 2007, when I can not only watch them but three others that go on 24/7 with news and info, not to mention services such as New York 1 or New England Cable News that keep me apprised on the local developments?

Second, I'm not sure if the range of "diversity" fits into your notion of quality. I do recall that the media critics of the 1950s and 60s and 70s and into the 80s complained that there was little diversity in television. So I guess they would have been celebrating the arrival in 1986 (concurrent with the FCC loosening ownership limits from 7 to 12 TV stations) of the Fox Network, which brought a noticeably different brand of programming (e.g. "Married with Children"). And I was sure they would cheer cable’s Fox News Network, which, rather than duplicating what we already had brought a noticeably diverse approach. But I think neither brought cheers from the critics-- just from the viewers. I suppose critics meant the kind of diversity they liked, not the taste of the great unwashed. Be careful what you wish for I always say.

Was the quality journalism standard the period of Hearst's Yellow Journalism? Or when Tammany Hall ran New York City and City Hall reporters were in their pockets? Or, again, was it the 1960s, when the Philadelphia Inquirer, owned by local publisher Walter Annenberg, ran such a rag that he would not let his editors show any photos of gubernatorial candidate Milt Shapp on the front page because he disliked him? No, I would guess you are thinking of the quality that became associated with the Inquirer after the Miami-based Knight chain bought it, hired Gene Roberts from The New York Times, and started winning a string of Pulitzer Prizes. (I guess we could also consider Col. McCormick's Chicago ("Dewey Beats Truman") Tribune or William Loebs Manchester Union Leader as standard bearers for locally owned journals.)

Or maybe you were referring to the quality journalism on the 7000 radio stations-- mostly AM-- that existed in 1970, when the leading pop stations in Philadelphia, New York, Chicago, LA, Denver, Seattle, etc. were all using the same top 40 play list they bought from national syndication services. Then again, maybe the Golden Age of radio journalism dates back to 1937, when four radio networks and their owned local stations accounted for 50% of industry revenues, much more than the four largest radio groups have today. Or was it 1947, when 94% of all radio stations were part of only four networks?

Probably any quality radio journalism is the product of the 20% of all 14,000 radio stations we have today that are non-commercial, getting most of their identical programming created for them from two national networks in Washington (NPR) or Minneapolis (APM).

And, you may notice, I haven't even mentioned the Internet, YouTube, Yahoo's Kevin Sites in the Hot Zone series , Huffington Post, Buzz Machine, BuffaloRising.com, Pegasus News, Backfence.com, Al Jazeera's streaming TV and the BBC, too, for a start.

So in the end, what I need to know is, what is your benchmark for "consolidation" and what is your standard for "quality?"

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