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March 11, 2012
David Warsh, Proprietor


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She Who Fights and Runs Away….

For 150 years, daily newspapers have been suppliers of real-time narrative to industrial democracies around the world.  They no longer enjoy readers’ undivided attention — but then they didn’t for most of that time. First magazines, then radio, newsreels, television, and recently the Web cut sharply into their mindshare, periodically unsettling but not displacing newspapers in the hierarchy of authority.

Recently the advent of search advertising has cut real newspaper revenues, perhaps in half, for many years to come.  Yet print newspapers are still the way we establish the horizon of day-by day events. Because of their nature – daily, finite, permanent, and convenient – they are likely to remain the source of this baseline for  years to come.

So pity The Washington Post, right?  While the leadership of The New York Times newsroom jets off to Austin, Texas, for the South by Southwest “interactive” conference this weekend (“much warmer, far less wealthy, infinitely-tweeted, beer- and barbecue-drenched version of Davos for Future-of-Media types,” according to Capital New York), the editors of the Post last week have had their noses rubbed in the past, and not just because the publication of  Leak: Why Mark Felt Became Deep Throat, by Max Holland, throws new light on the complex motivations of the disappointed aspirant to the top job at the FBI who was at the heart of the story of Watergate. Vanity Fair last week published an article about retrenchment at the paper, “Ghosts in the Newsroom.” In it, Sarah Ellison wrote,

The desire to compete as a journalistic enterprise on a national or international level – to do so comprehensively and consistently – seems to have been beaten out of the Post.  The disaffection on the newsroom floor is audible and undisguised.

The deeper situation at the Post is probably just the reverse. You wouldn’t have thought it possible that a seasoned reporter like Ellison (who once covered the newspaper industry for The Wall Street Journal) could write about a newspaper without discussing Google and the invention of search, but that is Vanity Fair for you, the journal of choice for nostalgia buffs.

The Post is clearly moving to preserve its independence.  It is the Times which seems at risk, thanks to a go-for-broke strategy.

The news business is turning into a race among old champions and new entrants, more quickly than most people realize.  In the last few years, Bloomberg and Thomson, both data-base businesses, have moved into news in a big way. Bloomberg, which started life as a library of bond prices, built its 2,000-person news service from the ground up over the last twenty years. Thomson, which began life in 1934 with a single Canadian newspaper, grew to a chain that included the Times of London, before getting out of the newspaper business altogether, in order to invest in financial services and legal publishing, Ten years later Thomson came roaring back into the news business through the purchase of the similarly extensive Reuters service. (A somewhat fuller account is here.)

Michael Bloomberg and David Thomson are each worth around $20 billion – perhaps a dozen times more than all the Sulzbergers (of the Times) and Grahams (of the Post) put together. Both companies have gone on hiring binges recently, luring top reporters with promises of unspecified glories yet to come, signaling their intention to enter the mainstream business one way or another. David Thomson has told his editors that he wants Pulitzers, and, presumably, so does Michael Bloomberg, currently in his third and last term as Mayor of New York.  Proclaiming a new editorial approach is merely the first step  As Michael Wolff pointed out the other day, the Financial Times, now owned by the publishing conglomerate Pearson, is probably the next big paper to go on the block.   The New York Times’ market capitalization is about $1 billion, that of the Post about $3 billion.

What are the newspapers doing about maintaining their independence? The Post has been cutting costs and buttressing its unassailability.  Warren Buffet, a long time investor to the company, took Ellison to lunch to explain the logic of a “moated business”: a profitable one upon whose territory others can’t encroach.  What the Post has going for it is a large and prosperous local market. He might have added that a high penetration rate – many people read it, thanks to relatively low prices – keeps advertising rates relatively high. Add to that an intelligent and resolute chief executive, Katharine Weymouth, granddaughter of the legendary publisher Katharine Graham. It just lacks the dominant advertising monopoly it once enjoyed – and the swagger that accompanied near-monopoly profits. Logic says that once its costs are brought in line, the Post should be nicely profitable again, and other geographical franchises – Los Angeles and Chicago in particular – should eventually be strong as well.

The Times often seems to be doing just the reverse. As a national paper in competition with the WSJ, it has many close substitutes, among readers and advertisers alike.  Its  strategy seems downright reckless: keep staffing high, expand various sections, price aggressively (a daily paper costs $2.50, vs. $2.00 for the WSJ), and deepen the Web presence.. Late last year chairman and publisher Arthur O. Sulzberger Jr. unexpectedly propelled chief executive Janet Robinson into an early retirement, paying her nearly $24 million, according to a proxy statement mailed last week – apparently to assure her silence. The company sold its regional papers a few days later.

If these were the only considerations, you would have to admire the Times’ digital daring.  Its website is superb. Its desire to compete as a journalistic enterprise on a national or international level is as strong as ever. And the daily newspaper itself, as former executive editor Bill Keller said the other day, is what it is – a glorious aspiration, never quite achieved, against which all other efforts must be judged.

It is the revenue stream that is lacking.  The Times hasn’t paid a dividend since December of 2008.  Its stock is selling for around $6 a share. (The Post, with about a twentieth as many shares, closed at week at $387. It pays a $9.80 dividend.)  Sulzberger cousins own around 40 percent of the Class A stock (and an overwhelming proportion of the controlling Class B shares).  Carlos Slim, the Mexican cell telephone magnate, owns 17 percent; Fairpointe Capital, 11 percent; T. Rowe Price, 7.2 percent; and BlackRock, 6.4percent. The Sulzberger cousins are not the Bancrofts, who sold the Wall Street Journal to Rupert Murdoch; a sense of public trust is in their DNA.  But neither can the cousins afford to own and operate their newspaper for free.

The owners of the Post have shown that they know what they must do to survive; in scaling back their ambitions, they may maintain their autonomy. (I am leaving its Kaplan Inc. educational services subsidiary for another day.) The Times has expanded instead of prudentially cut back.  They are living on moonbeams. The golden age of newspapers is definitely over. The exciting days of a great transition have begun.

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3 Comments

  1. Nate wrote:

    I don’t think comparing the NYTimes and Wapo stock prices is exactly adept. Wapo’s stock and dividend isn’t remotely driven by the newspaper, which has a smaller circulation than the NYTimes by the way. The growth is entirely driven by Kaplan, which you mention briefly at the end. It seems to be you’re overestimating the influence of their newspaper.

    People have been declaring the end of newspapers for the past decade if not more. I’m still waiting for it to happen.

    Monday, March 12, 2012 at 12:17 am | Permalink

  2. Nate wrote:

    I should also mention that if you take away Kaplan from WaPo, the NYTimes and WaPo are on equal footing in terms of revenue. I would actually be willing to bet that profit at the Times would be higher as well.

    Monday, March 12, 2012 at 12:19 am | Permalink

  3. Larry Kart wrote:

    I get your economic point, but aren’t you talking about two different ways to produce a P.O.S. newspaper? If you’re right, the Times’ will be economically unsuccessful eventually, but that paper is IMO (and I’m far from alone) journalistically a mess right now and has been a mess at least since the days of the Wen Ho Lee affair, the advent of Howell Raines and Maureen Dowd, WMD, etc. — this for reasons that have something to do with the paper’s economic malaise but more to do with the anxiety and poor editorial judgment that can spring from it. You say the Post will survive and may even thrive economically, but is there anyone who thinks that inside the walls of its “moat” the Post now is or will be doing a decent job journalistically for the community that lies within those walls? And if it isn’t, then what reason do we have to care about its survival? I mean, the Post’s employees and management are supposed to be feeling good because (to switch metaphors) they’re throwing everything on board that burns into the boiler, a la Phileas Fogg in “Around the World in 80 Days.” But Fogg’s goal was to win a bet; that in the end the ship would be reduced to a smoldering hull but one that would have served his own economic viability was just fine with him. For a newspaper, though?

    Monday, March 12, 2012 at 3:51 pm | Permalink

2 Trackbacks/Pingbacks

  1. [...] She Who Fights and Runs Away…., by David Warsh: For 150 years, daily newspapers have been suppliers of real-time narrative to industrial democracies around the world. They no longer enjoy readers’ undivided attention — but then they didn’t for most of that time. First magazines, then radio, newsreels, television, and recently the Web cut sharply into their mindshare, periodically unsettling but not displacing newspapers in the hierarchy of authority. [...]

  2. [...] She Who Fights and Runs Away…., by David Warsh: For 150 years, daily newspapers have been suppliers of real-time narrative to industrial democracies around the world. They no longer enjoy readers’ undivided attention — but then they didn’t for most of that time. First magazines, then radio, newsreels, television, and recently the Web cut sharply into their mindshare, periodically unsettling but not displacing newspapers in the hierarchy of authority. [...]

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