Content Bridges

Comparing Performances: Dennis FitzSimons and Alfonso Soriano

George Mitchell's report reinforced our ire. Even the biggest baseball fans among us look with both suspicion and disdain at the recent exploits of the game's stars. We spit out unbelievable numbers, "$1.3 million a year for a banjo-hitting second baseman who was doing steroids?" With Tribune trying to finally close its deal to go private amid last-minute banker worry, we have another comparison we can make.

Let's take Alfonso Soriano, the slugger the Cubbies picked up on the free agent market a year ago for the cool sum of $136 million for eight years. And let's take his ultimate boss, Dennis FitzSimons, CEO of Tribune.

Soriano hit .299 last year, but he did pop 33 homers and ended up with a slugging percentage of .580.

Fitzsimons, after the year that was, must feel like a sluggee, though the bruises may be salved by his going-away present, a $38 million payoff in severance and stock effective today.

His batting average was worse than Soriano's, and, while there may have been a double or two in there, no one's seen any homers busting out of the Tribune Tower in recent memory.

Instead the back of his baseball card would show:

----Today, Moody's reduced its Tribune debt ratings -- further into junk territory -- for the second time in the last couple of months.
----Tribune's pre-private market cap is about $3.8B. Just as one comparison, consider that the company paid $8 billion for Times Mirror -- now just part of its portfolio -- in 2000
----For the last full quarter, Tribune's publishing revenues dropped 7 per cent. That's under-performing a struggling industry.
----On his watch, Tribune was probably the highest-profile company caught in the circulation fraud scandal. Just today -- trying to tidy up ahead of the sale -- the company settled federal fraud charges, agreeing to pay a fine of $15 million, in addition to some $83 million it has paid in restitution to wronged advertisers. The company acknowledged that  "senior managers and subordinates systematically inflated paid circulation numbers reported in the newspapers' books and records, under-reported the number of copies of the Newspapers that were returned unsold, and falsely represented to the Audit Bureau of Circulations (ABC) that the inflated numbers were accurate."
----He leaves a highly nervous company with unasked employees who are coming to "own" a company burdened with $13 billion in debt and declining revenue lines as far as the eye can see.

Who can blame the Trib staffers for feeling a bit wary. It's like dad's leaving home and telling the kids, "Here's the checkbook. There's enough to pay the bills as long as you don't buy anything new, and the weather doesn't get any worse. I'm out of here."

Alfonso's beginning to look like a bargain.

The Fitzsimons memo and (Chicago Tribune columnist) Phil Rosenthal's excellent take on the CEO's tenure, here. Content Bridges on Tribune here

Kevin Martin's Misguided Missile

I don't think Kevin Martin got enough attention when he was a kid. He seems to have a penchant for blowing things up -- newspaper/TV cross-ownership, the cable industry brotherhood -- to get attention, and he's getting plenty from Congress, irate Republicans upset about new regulatin' and irate Democrats sending out petition letters by the millions in the name of "diversity."

So Martin should get some kind of award (if those pesky writers weren't striking the awards shows; maybe he can take on that controversy next) for getting some new conversation going about media's place in this ever-digitizing world. That'll have to wait though.

Most immediately, those in the newspaper and local broadcast industries and their customers will try to figure out what today's relaxation of cross-ownership in top 20 cities means. The short story is that it probably won't mean much for at least one to two years as the political winds work to erode the decision and court challenges are worked through.

Martin's move to relax cross-ownership at first seems like a smart idea. I've noted that his justification seems right on to me:

“Consumers have benefited from the explosion of new sources of news and information. But according to almost every measure newspapers are struggling. At least 300 daily papers have stopped publishing over the past thirty years. Their circulation is down, their advertising revenue is shrinking and their stock prices are falling. Permitting cross-ownership can preserve the viability of newspapers by allowing them to share their operational costs across multiple media platforms."

Newspapers are struggling, not yet failing because they entered the time of troubles with 20% margins that are now fading. But some are failing -- note yesterday's draconian cuts at the Çhicago Sun-Times. And more will fail, given the print ad and circulation revenue trends. Much of the business that's gone away ain't coming back. And he's right that future successful media need to adopt multiple media platforms -- for both news creation and ad selling -- to be successful. That's what the start-ups of 2007 have done. Ironically, he's ahead of both newspaper publishers and local broadcast execs in getting this.

Martin's argument, supported by news publishers, is that the cross-ownership prohibition no longer makes sense in the digital world. Intellectually, I've got some sympathy for that argument. Removing it though has a very practical consequence. Those that own local broadcast stations and daily newspapers have a great leg-up on anyone trying to enter the business fresh -- tens of billions in ad revenue. So practically, taking out the prohibition lets them use that combined cash flow to build a new business.

If Martin's missile has a smart warhead, it's one the FCC has no business firing. It's not the job of the FCC to help out struggling publishers. Rather the FCC's role here has something to do with the public airwaves and about fostering the diversity of newsgathering and opinion.

The cross-ownership relaxation likely will do little in support of promoting more journalism, more reporting or more diversity in the voices heard or subjects covered. It would, if it worked, help journalism producers -- newspaper publishers or broadcast companies -- reduce costs. Think one management, one production system, one newsroom, one ad sales staff. Reducing costs certainly would allow news companies to hire more staff and produce more news, but most would more likely first and foremost increase profits.

That's especially true because I think today's newspaper and station owners may not be tomorrow's.

Martin is plainly in front of flailing legacy media, who even when given the chance to combine operations (with grandfathered cross-ownership properties) haven't done it. He's saying to them: "Boys, get with it."

What Journalists Can Learn From Screenwriters Strike

The dots are getting more interesting to connect. Consider the TV and film writers strike. What sparked it? The concern that digital revenue will soon surpass what writers have been taking through traditional channels led to the strike. And since it's really tough to estimate digital revenues -- and digital profits -- in the next several years, it has dragged on. When the two sides don't really have a solid foundation on which to bargain, and too little trust in each other, it's hard to make a deal.

So today's story in the L.A. Times, by Joseph Menn, put a quite interesting spin on the strike and one that should resonate among news journalists. The story, headlined "Striking writers in talks to launch Web start-ups," put the issue clearly: "Dozens are turning to venture capitalists, seeking to bypass Hollywood and reach viewers directly online". Of course, this is the delayed promise of the web. Creators -- think screenwriters, songwriters or journalists -- create. Their intended audience is not all the middlemen betwixt and between, the agents, the studios, the publishers. Their intended audience is, well, the audience. TV watchers, music listeners, news junkies.

The Internet is the medium that connects the two -- creators and audience -- much more directly than was previously possible in pre-digital days.

The screenwriters are turning to venture backers, and creating an alternative to being beholden to the studios:

"What effect this would have on the strike is unclear. So far, the percentage of the guild's 10,000 striking writers who are in discussions with venture capitalists appears to be small. Any deal of this kind, however, could put pressure on the studios and help the writers' public relations campaign. Writers who are talking to venture investors say the studios would suffer a brain drain if high-profile talents received outside funding and were no longer beholden to them."

In the music world, reeling from declining CD sales and uneven payment for downloads, Thom Yorke's Radiohead unleashed an experiment with its audience, asking it to pay directly, from zero to $212, for the group's latest CD. "It feels good," said Yorke.

These are new, high-tech business enterprises on the one hand and old-fashioned guilds on the other. Create good work, place it smartly, live well and prosper.

Let's see how these dots connect. Face it. Until the last year or so, journalists saw little alternative than to work for big, well-established, professional-salary-paying media companies. But then the companies started shedding higher-priced talent in cost-cutting --  better to remove a $80k FTE than a $40k one -- and lots of journalists are being turned free. It didn't first feel like freedom of course. It felt like a layoff. But within the last year, middle-aged, middle-income job fears have given way, in part, to new models, new beginnings. Some were pushed (or incented) by buyouts. Some began to understand the allure of building something rather than feeling imprisoned in enterprises in which conversation focused on decline. Journalists are beginning to join Free Agent Nation, a term author Daniel Pink apparently coined in 2001. .

Look at some of the sprouts popping up this year. Politico, led by leading journalists from the Washington Post, Time and the New York Times, launched. ProPublica's been announced. Led by former Wall Street Journal managing editor Paul Steiger, ProPublica's been hiring leading editors and journalists to produce high-profile investigative projects -- seed funded by angels -- and then place them on the web. It is in metro areas though that the needs for more local reporting and with the potential for dozens of start-ups that we're seeing more urgent action. The newest entrant is MinnPost, Joel Kramer's fledging regional effort in the Twin Cities. It has corralled a few dozen bought-out and/or enterprising veteran journalists and gone direct to a new audience ("20,000+ monthly uniques, 20,000 daily page views, 600 paying members," he told me today).  Paul Bass's New Haven Independent builds on his two decades+ experience in journalism. (He describes here the Independent's  founding.) There are many others, start-ups of all kinds, some seed-funded by ambitious Knight Foundation attempts to jumpstart something good as the old world crumbles.

We're at the beginning of this re-ordering of the entertainment/news world. The old order is crumbling, and mortar just starting to be applied to the bottom bricks of what's coming next. Yes, journalists face a more difficult time in some ways than screenwriters and songwriters because journalism's traditional business revenue is fading faster, and the new revenue models are just coming on line. But maybe that means the opportunity to reform and reformulate will come faster too. It's worth all journalists stepping out of our own craft and learning from the "guilds" next door. The models won't be exactly the same, but we've got more in common than we ever would have believed.

Mr. Murdoch, "Tear Down This Wall!''

Well, it's not the '80s, Reagan's gone along with out-sized newspaper profits, and we don't hear that particular wall-busting clamor from the masses.

But it's clear Rupert will have his way with his new prize, the Wall Street Journal. These things drag on for months, but now semi-officially, the deed is done. More than 50% of the votes approving the sale of Dow Jones to News Corp are in, according to the Journal today.

The pay wall separating the Journal from the global reaches of the free web should be perforated soon. Just last week, both CEO Rich Zannino and news consumer head Gordon Crovitz got out of the way, helping clear the path for the guys with the digital picks and sledgehammers. (There will be two to three dozen more to go, according to Richard Perez-Pena's good overall take on the WSJ turnover.) Taking down the wall will be one more major step in declaring the ascendancy of advertising over "paid circulation," with that term now sounding almost quaint. News content on the web apparently doesn't want to be free -- it pines to be, who'd a thunk it, "ad-monetized." The whole connection of readers to news content, long made through quarters and monthly payments, is about to be broken, with advertisers paying nearly the whole freight for the journalism business.

News of all kind, online and print, is going free.

Just this week, Reuters -- long a stickler in receiving license fee payments for its content -- announced an ad revenue share deal with the New York Times' International Herald Tribune, and AP's been doing lots more rev share deals, too. Last month's Audit Bureau of Circulation decision saying "paid" really means whatever a publisher wants it to mean further means that paid print circulation as a model is further weakening.

The Ocean of Free is not one news publishers are eagerly diving into, but the big, hairy guys, the new mainstream mass media of our age -- Google, Yahoo, MSN, AOL -- are making them jump, before they get pushed. Now they'll test just how much in ad dollars they wring out of the newer media and freer print distribution.

No doubt, like the the NY Times foray into paid with Times Select (the experiment it ended this fall), the WSJ.com pay wall has retarded online reader attraction and retention. Techcrunch just reported that the Times' traffic boost has been huge -- 64% up in unique visitors to  19.4 million and 52% up in page views to 181 million. The Journal's own bump should be even more impressive, since it would be going from a walled site to a free one, while the Times just dropped its hybrid model.

The revenue question for the Journal is all about climbing a couple of hills. The first is easiest to see: making up close to $75 million in online subscription revenue. That could take more than two years. The second is tougher to get visibility on: how much will a free WSJ.com lead paying print subscribers to drop that sub. If that happens, then a significant support of the business overall -- circulation makes up 21.7% of the Dow Jones' Consumer division revenue -- will erode as well. That's been the concern of some of the Dow Jones naysayers.

Certainly, the continuing erosion of print subscribers -- around 2.5-3% annually now for three years -- is due in part to newspaper content being available free online. For the Wall Street Journal, making its site free will inevitably have a pinball effect on overall circulation revenue and overall profits. So in the short run, the Journal will take a hit, the only question is how a big one. And in the long run, well in the long run, we'll all be Kindled, spindled and digitized beyond belief.

More Content Bridges on the Dow Jones takeover, here

 

Nine Questions for Publishers This "Media Week"

"Media Week" takes place in New York this week, as public newspaper company (GCI, TRB, NYT, GHS, MNI, DJ, WPO, LEE, SSP) CEOs talk about the state of their companies with Wall Street financial analysts who cover the trade. As a sign of the times, the number of those analysts covering newspapers has been diminished by a couple this year. Why? More of the newspaper industry is going private -- witness some of the ex-Knight Ridder titles and soon the Tribune company -- and anyhow the investment story being told is losing any sense of suspense. Parsing decline is not much of a pastime.

Life for newspaper CEOs is tough duty these days. For them, participating in Media Week must be like going to a friendly dentist's office. You can trade pleasantries, exchanging first names, but the activity just isn't fun. We can now listen to these sessions via webcast, available on companies' investor pages or on seekingalpha.com (by company ticker symbol).

Too often, the questions we hear just pick at the carcass of the problem, questions like. "How much of the real estate turndown is caused by particularly bad conditions in Florida and California," or "What's your capital spending plan next year?" Not unimportant questions, but there are too few questions that get to the core issues.

I'm not a member of the financial analyst community, and I don't want to make these CEO times any more difficult, but I would like to see a few more pointed questions asked -- the kinds of questions that journalists themselves are now quietly asking behind the scenes. They are tough questions, but ones that are to the point of the survival of print journalism companies as know them today.

Here's nine of them. What's yours?

1. When I open up my Sunday paper, I see smaller sections, fewer stories, but still loads of circulars. With national and large regionals moving more ad dollars to the web, do you see any slackening of preprint revenue in 2008?
2. We've been hearing for more than two years that the circulation decline will ebb as your company cycles through the elimination of marginal (giveaway, distant+) sales. Will 2008 be the year that the cycle has run its course, or is a further 2-4% daily and Sunday decline expected? The new ABC rules let you define "paid circulation" very broadly, setting about any price you want. How has the new rule changed your marketing plans for 2008?
3. With the continuing circulation declines, how much longer can you sustain the premium pricing for mass market reach that's propped up margins? In fact, what's your median ad increase -- by category -- for 2008?
4. We've heard a lot about the Yahoo Hot Jobs bump. Can you tell us in dollar or percentage terms what it will add to revenues next year? We've heard that phase 2 of the Yahoo agreement will allow you to integrate with Yahoo's sophisticated ad matching systems. But we've also heard that these ad sells will mainly be used to double remnant inventory pricing (currently at $1-3 CPMs). What kind of inventory do you plan to use Yahoo for and, here, too, what kind of dollar or percentage increase in revenues will happen next year? How do you compare the Yahoo Bump with the Google Bump, as so far gotten from the recently expanded program in which Google sells print newspaper space through its auction system?
5. In an era of inevitably declining print revenues, does your company have a plan to transition as quickly as possible from print to digital, so that you won't be forever burdened with high legacy costs while building the online business? Can you tell us about it?
6. Cost-containment is key in this transition. How much of your cost-cutting is attributable to newsprint and ink, how much to streamlining (production, advertising, circulation, publishing) systems and how much to staff reduction?
7. FCC Chairman Kevin Martin, in pushing cross-ownership relaxation, has said that "Permitting cross-ownership can preserve the viability of newspapers
   by allowing them to share their operational costs across multiple media
   platforms." While Belo and Scripps have both taken divergent actions regarding print and broadcast assets, can you tell what you think of Martin's notion and of your own specific plans to both slash operational costs and create true multimedia platform journalism companies?
8. What kind of contingency plan do you have for a recession?
9. What do you tell executives who say, "It'll last until I retire"?