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January 14, 2007
David Warsh, Proprietor


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Closed Standard: The Secret of The Wall Street Journal

The Boston News Bureau and What Became of It

“Kicking over Waste Baskets and Whacking His Cane on a Desk”

The redesign of The Wall Street Journal has gone pretty well, despite the first-day foul-up. The company planned to give away the January 2 edition of the paper as a free sample at newsstands, but many little distributors didn’t get the word. A certain amount of local commotion was the result: some customers leapt to the conclusion that the company had left the $1 price and barcode off the front page inadvertently, in the confusion of the new design.

The new version of the old newspaper — narrower, more dense and compact than before — provides a glimpse of the future.  There’s 20 percent less paper, 10 percent less news, but still a satisfyingly bewildering array of articles and features. You could spend an hour or more with its weekend edition, if you had the time and inclination.

True, a better guide to what most newspapers will be like a few years from now probably can be found in today’s Financial Times. The FT is thin, carefully focused on its audience, well reported, tightly written, thoughtfully edited, relatively high-priced, sparse in ads and, for at least a while longer, financially precarious. As with many other papers, rumors of a sale come and go. Who knows what its owner, the Pearson media conglomerate, has planned?

The WSJ, on the other hand, published by Dow Jones, is a very special case.

At a time when other papers are struggling to make money from their Web operations, nearly 800,000 people are paying a $99 per year subscription fee ($59 per year for print subscribers) to get access to the WSJ‘s online version.

What’s the secret of its success?

It is relatively simple. Long before the Internet, before Bloomberg put an extensive news report in a desktop terminal along with its proprietary history of bond prices, there was the Dow Jones ticker. People of a certain age will remember the device, which was found wherever business was taken seriously — a miniature printer mounted waist-high in a metal console, through which a long roll of paper (the broad tape) streamed throughout the day, spinning out in purple ink a record of breaking news, transaction prices and little items prepared for the next day’s WSJ.

In other words, Dow Jones has been an electronic publisher since the 19th century. Indeed, even before the WSJ, there was the Boston News Bureau. Online news is much older than you think                                                     

Charles Dow and Edward Jones (and Charles Bergstresser, whose moniker was insufficiently euphonious to be made a name partner) provided real-time news from the very beginning of their venture, in 1882. (The details here are drawn from Lloyd Wendt’s thoroughly entertaining centenary corporate biography, The Wall Street Journal: The Story of Dow Jones and the Nation’s Business Newspaper.) Early bulletins from Dow Jones were reproduced by stencil, mimeograph-fashion, then delivered to customers around Wall Street, at intervals of as little as fifteen minutes, by a corps of messenger boys.

Gradually, the Dow Jones presses increased in size until, in the summer of 1889, the partners produced the first edition of the WSJ.  At the same time, they doubled the number of hand-delivered bulletins, to an average of one every eight minutes. News arrived in New York by telegraph from Boston, Philadelphia, Washington, Chicago and London.

Meanwhile, Clarence Barron, perhaps the most talented financial journalist of his day, had quit the Boston Transcript in 1887 to found the Boston News Bureau.  The news service would cover the Boston and New York stock markets on an hourly basis:  things happened fast in the age of electricity, telephones and railroads. No messenger boys for Barron, though — at least not for long. He would use a telegraphic wire to distribute bulletins to subscribers — scrambling over icy rooftops to restore his connections when his competitors went dark in the Great Blizzard of 1888.

(The wire itself went back to 1867, and a one-time Princeton University physics professor named S.S. Laws who invented a system that would track fluctuations in the Exchange price of gold on a narrow moving paper tape with a noisy little printer that was quickly dubbed a ticker. Laws himself was soon reported to be making $300,000 a year. It was a frantic Laws-system operator in the midst of an equipment failure who first gave young Tom Edison a job in New York.  The WSJ, however, didn’t start its telegraphic service until 1897, when it had patented, with Edison’s help, an alternative means of delivering the news, namely the broad tape. The newspaper opened a Washington bureau the same year.)

“Quick as a flash!” blared Dow Jones’ first advertisement. “We give quotations, telegrams, cables and all kinds of news affecting the markets / Page printers are the latest electric device / News carried by electricity printed by electricity / Arranged on a page easily read and filed / No banker or broker can well afford to be without our Financial News Service.” (Just in case, the company continued to offer messenger delivery until after World War II.)

By 1902, Dow was sick, Jones had quit, and Bergstresser wanted to travel. Dow Jones was for sale.  So Clarence Barron and his Boston Business Bureau bought the WSJ for a down payment of $2,500. Barron promptly put his wife in charge of the business (he had recently married her after fourteen years of living in her genteel Boston rooming house) so that he could concentrate on reporting the news. But the editors he dispatched from Boston to New York floundered, and in 1912 Barron himself moved to New York to take over the business. A later writer described the scene, which apparently was repeated fairly often:

“He was portly, with dancing blue eyes and a full white beard.  He strode into the room, kicking over waste baskets and whacking his cane on a desk to attract attention. He berated them all for their sins and mistakes and told them he intended to straighten them out, at once. They could obey him or they could get out.”

That was the beginning of the modern Wall Street Journal.   The paper has had other saints besides Barron, notably Bernard “Barney” Kilgore, the managing editor who in the early years of World War II invented the distinctive look and feel of the Journal‘s approach to news, opened satellite printing plants across the United States, and turned what had been a barely profitable financial newspaper in the Northeast into a thriving national daily — the first, until The New York Times and Gannet’s USA Today joined the club in the 1980s. This Kilgore achieved partly by hiring as many of his fellow graduates of DePauw University as possible (“that damn Methodist high school in Indiana,” as described by one of the displaced Easterners] in order to put his distinctive Midwestern stamp on the paper’s reporting — gracious, muscular and free of jargon.

Kilgore’s distinctive layout, too, communicated a serene and confident view:  the two-column “What’s News”  digest of the rest of the paper; the three (and only three) by-lined authoritative stories on the front page every day (and a fourth on the back page of the paper); multi-tiered “selling” headlines; a special place in the center of the front page reserved for the famous “A-hed,” an off-beat story intended to serve as a foil to the rest of the page. But Barron’s commanding mien, if not his bluster, has been perhaps an even more salient part of the company’s management style, right down to the present day. Labor relations are famously tense. Like any highly successful newspaper, the WSJ has a distinctive, complex, often contradictory culture.

For more than a century, then, the “ticker” and the WSJ have evolved in tandem. The Truth in Securities Act of 1933 and the Securities Exchange Act of 1934, responses to the crash of 1929, proved to be a golden opportunity. In requiring public companies to report a welter of information previously kept under wraps, the authorities created a flood of information. No other publication had the audience to merit reporting anything like the whole of it, some of it in the paper, most of it on the Dow Jones wire.

Scale and scope worked together. The broader the coverage of the news in the paper, the more penetrating its financial news. Salesmen fanned out to sell the ticker. Advertisers flocked to pay the newspaper’s steadily rising rates. With every passing year, editors had more resources at their disposal.  For a time in the 1940s, the paper’s editors had toyed with dropping “Wall Street” from their name, after their pollsters advised them that it could prove a handicap to further growth. Why not, say, the “National Journal?” Kilgore snorted in a memo, “[The pollsters] cheerfully admit, however, that they are uninhibitedÉ by any consideration of the property value of the present name. They look at it only from the point of view of public reaction.” Even in the 1940s, the editors were burnishing the brand.  By the 1960s, it paid off in explosive growth among the newly investing middle class.

In the 1970s, the WSJ duplicated the rapid national expansion of the 1950s, creating Asian and European editions. Heirs of Boston’s blue-blooded Bancroft family, into which one of Barron’s daughters had married, proved to be extraordinary stewards of their ownership position. Dow Jones chief executive Warren Phillips explained the secret of his readers’ loyalty: “The news service is crucial to the quality of the WSJ. The ticker’s demands for fast, accurate coverage of the whole spectrum of business and financial news are the whip and the spur which keep the reporting staff at peak performance.”

Then, in the 1990s, came the computer revolution. The ubiquitous ticker itself simply disappeared from offices around the world — but not, of course, the Dow Jones News Service.  Its stream of output simply moved into computer terminals, and showed up as a continually augmented directory, instead of a steadily moving tape. Like everyone else, Dow Jones was entering a tumultuous period, in which the emergence of new technologies enabled some fairly great mistakes.

With its Telerate pricing data subsidiary, the company tiptoed up to the edge of electronic markets, hesitated expensively, then stepped back, while Reuters moved sharply ahead. Dow Jones stood by while former bond trader Michael Bloomberg turned his access to price histories into a major competitor, too, first through a battery of analytic devices, then by hiring WSJ reporter Matthew Winkler to create a tough-minded new news service for the paperless world. As victim of a successful strategy of market segmentation, the WSJ lost ground to the Financial Times in the battle for the desktop in treasuries and central banks around the world.

But all the while, the Dow Jones ticker — all the more powerful for being invisible — kept contributing to the paper and piling up stories in the company’s electronic files.  Before long, the newspaper “morgue” — its library of stories — had turned into a “data base.”

It is the ticker and its history that is the secret of why the On-line WSJ makes so much money on the Web, $80 million worth of annual subscriptions, while virtually all other newspapers are unable to turn a penny. The intersection of these several revenue streams supports a formidable fixed newsgathering cost. Dow Jones today distinguishes between its Consumer Media group (The Wall Street Journal, Barron’s, the Far East Economic Review) and its Enterprise Media Group (the Dow Jones News Wires, the Online WSJ, Factiva retrieval service and the recently acquired web-based MarketWatch), but the fact is that many of its two thousand or so news professionals serve the print paper, the online paper and the newswire (600 journalists on the print paper alone). The newswire moves up to 12,000 items a day, covering all asset classes; based on reporting from nearly 90 bureaus around the world.

In contrast, Dow Jones’ liveliest newspaper competitor, the New York Times Co, publishes the Times, the International Herald Tribune, The Boston Globe and 15 other daily newspapers; and operates around 35 Web sites, but enjoys almost none of the same interlocking fields of fire as the WSJ. Times Co. recently agreed to sell its nine network-affiliated television stations for $575 million, in order to concentrate on newspapering and its new digital businesses, including About.com, which it bought for $410 million in 2005.

With something like 1200 editorial employees, perhaps 350 of them reporters, the Times has felt under growing pressure to discover “synergies” between its new businesses and old.  Last year it moved to put its most popular columnists and some blogs behind a firewall. Times Select is free to subscribers to the newspaper, but all others pay $49.95 a year for online access, plus 100 clips a month from the archive. The good news is something like 175,000 people have agreed to pay for it (another 325,000 existing Times subscribers get it for free.) That’s something like $9 million in revenue. The bad news is growth has leveled off — and so popular Times columnists like Thomas Friedman, Paul Krugman, Maureen Dowd and Nicholas Kristoff have lost millions of readers around the world who used to read them for free.

None of this lost on Dow Jones, of course. WSJ publisher L. Gordon Crovitz told a media conference last fall.  “We all know that producing accurate, timely and authoritative news requires large, professional and talented news and editorial departments. These news departments do not come free of charge.” But there was a distinct resemblance to crocodile tears when he continued, “I am very concerned that many other publishers with high-quality news brands have devalued their brands by trying to charge in one medium (print) while giving away access to brands and content in another medium (online). But I understand that it’s very hard to change strategies.”

Crovitz knows that the dilemma — to price? or not to price? — works both ways, however.  By charging for its online content, the WSJ operates more than ever like a club, less like a general-interest newspaper, than its uptown rival. It’s not just the name “Wall Street” any longer that puts a ceiling on the newspaper’s appeal, restraining its “public” dimension; now it is hard cash that sets it apart from all other newspapers on the Web.  The same problem afflicts the enormous Bloomberg empire to a far greater degree. Who cares how good their news operation is, if no one can read them except their paying customers?  

The moral is that Times may have entered the new age with a significant disadvantage, given that Dow Jones has been publishing online for more than a hundred years. But then the Times has always sought to be more of a public-interest newspaper than the Journal.  Theirs is an open standard, ambitious to appeal to all; the Online Journal, like its print progenitor, was designed for a paying few. As good as its news product is, it is, in some sense, a closed standard.  The Times can cope in this competition, but they will do better if they recognize, from the start, the limitations of the Journal‘s strategy and their own strengths as an open standard.

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