Doomed To Failure: News Media’s Billionaire Business Strategy


May 12, 2013

The truth is, we don’t really know how well most of the nation’s news media properties are doing. The vast majority are closely held private companies or part of giant balance sheets occluded by subsidies from other, totally unrelated enterprises.

The privately-held properties are varied in size with just as varied in management ability: From Tribune Corp.’s ham-fisted senior executives to General Media’s Oracle of Omaha. Examining the progress of these companies is like a new form of Kreminology where we watch circulation numbers like tractor production reports and layoff notices like evidence of the latest famine.

Among publicly-owned companies, we know barely more of their operations. Earning reports for the oft-scourged Patch.com and Huffington Post are hidden beneath a mountain of modems while Woodward and Bernstein’s Washington Post floats atop a river of questionable for-profit college tuition money.

The new digital darlings aren’t faring much better. Shiny new ventures like Buzzfeed and Business Insider are built upon legions of twenty-somethings trying to make their New York Media Dream come true. While the new media content producers are too inexperienced to know their jobs provide little future and less security, the founders trumpet their latest venture capital rounds and build Potemkin advertising vehicles while proclaiming themselves The News Future.

In all cases, occasional escapees publish tell-alls of management sins, but most of those fortunate to get over the wall and into decent society just try to blend into well-paying PR jobs and keep their mouth shut. It is a world of defensive postures where after a decade of bleeding everyone is just trying to be the last one out of the Warsaw Pact before it truly collapses.

Those of us on the outside know it’s bad, but there is so little data or information to know the level of badness that we’re left to pick through frightening anecdotes of demented business thinking.

There’s the metro daily losing $80 million a year, the newspaper that held together a wounded city inexplicably losing its daily print edition, the Pulitzer Prize-winning paper turned into a developer’s mouthpiece, and, and, and… the list keeps getting longer.

Since the height of the Industrial Revolution, news has been a business of media barons and Fleet Street lords. We take for granted that the helmsmen of the press are supposed to be bigger than life with who paint with extra wide paintbrushes. The news rolls out, they compete for our loyalty and readers take it all with a grain of salt.

Yet through it all we depended on news organizations to give us authoritative accounts, infused with insight gained from experience and a deeper knowledge than there was space on the screen to convey. But the combination of cutbacks, slashing and just plain terrible business acumen–across an entire industry!–has bled out the best talent, the very ones who could help publications gain back lost audiences and convince readers that they really need news organizations at all.

From Ida Tarbell to H.L. Mencken to Mike Royko to Jim Murray, we savored not young derring-do, but expert craftsmanship. While some news enterprises still hold on to those expensive greybeards, most publications have opted to employ freshfaced “content producers” who can fill pages, run on caffeine and just enough money to pay the rent rather than ask hard questions, build rolodexes of sources and make careers out of explaining our incredibly complicated world.

It’s become a total shit show, to put it mildly.

But through it all news media retains glamor and some elements, or potential at least, of power. So somebody’s still interested.

And so now news is moving into the age of the billionaires.

The venture capital firms that made a bad bet on media at the turn of the last century were the first to unload. Off went the San Diego Union-Times, the Tribune Company, the Chicago Sun Times, the Creative Loafing alternative newspapers, the General Media publications. But then more big metro dailies and news magazines needed to be rescued, like the New York Times (Carlos Slim), Newsweek (Barry Diller), The Atlantic (David Bradley) and The New Republic (Chris Hughes).

Oligarch ownership is not in and of itself a bad thing–after all there are well-meaning rich people out there–but the circumstances of the sales and the purchasers’ backgrounds tend to not portend well for struggling news enterprises.

Let’s be clear: When a news publication is purchased by a rich guy that made his millions in a totally unrelated industry, it is unlikely the new owner will bend themselves to focus on staunching the red-ink and moving extraordinarily complex news businesses into the black.

There’s more than enough evidence to support how media and other business lines don’t mix well. Remember when Gulf + Western bought Paramount? When AOL bought Time Warner? When Yahoo! thought it was becoming a “media company”?

With few exceptions, today’s oligarch media owners are not proving themselves any better than their swashbuckling forebears. In Chicago, the national center of rich-guy media ownership, we have poorly-branded, uncentered news organizations that are still laying off employees, and trying a milliondifferent things just to get a foothold. In New York the Post is operated by grab-your-attention-at-any-cost editors and Hearst’s Chronicles in San Francisco and Houston have become part of Demand Media’s crap-for-eyeballs operation that leverages their once-great news products.

Still though, we don’t really know how well these businesses are doing. Their editors, publishers and owners all tell us things are fine and profitability is just around the corner. Until they close.

For us news consumers, our bullshit meters are way in the red. We see how poor the content is, how little value it adds to our lives and we wonder, who the heck do they think they are they fooling? And then click on to the next website.

The final act, as it always is with billionaires and venture capitalists, is to just turn out the lights. Maybe there’s an interim period where they cut checks to keep their butterfly collection going, as Rupert Murdoch clearly does for his New York Post, but inevitably the top-heavy, no-business-acumen leadership drive their news organizations into the ground as they struggle to keep their golden age empires and high standards of living.

It doesn’t have to be like this. There are plenty of models of successful news media, but they’re boring, staid and profitable. McGraw Hill’s industry newsletter division has had healthy profits for decades. Reed Elsevier’s stable of information products, including Lexis Nexis, chug along just fine. And while Bloomberg is a private company, it behaves like a growing company, making investment and hiring the best people it can find.

What’s the difference between McGraw Hill and most other news companies? They determine what their audience wants, they provide it for a fee and then anything else, like events or advertising, is considered gravy.

The “providing it” part is where most news veterans would protest. Making news costs money, they say, a great feature story can cost tens of thousands. Yes, but do you know what your audience really wants? And what they’re willing to pay?

The answer you get from news executives, from the smallest small-town daily to the top of the New York Times, tends to be, “No.” They don’t. Articles are produced and thrown against the wall to see if they’re received well, like testing pasta against the kitchen wall. Maybe this one will be liked, maybe this one won’t. Publishers, ignoring the Long Tail, media’s most important concept this century, continue to roll out new general interest publications with little heed to the new reality.

There’s a precedent for this in retail. As recently as the 1980’s a plurality of goods in big cities were purchased in massive department stores, emporiums filed with every imaginable desire. But then “category killers” like Best Buy, The Gap and Linens ‘n’ Things came, and eviscerated the department stores’ best profit lines. Department stores, who relied on an interlocking series of subsidies–get women in to buy cheap sheets, but snag them on the first floor with expensive perfume–were decimated and ended up merely a set of brand names offering the latest sales, as Ron Johnson recently discovered.

Major metro newspapers, reduced to making their profit on massive inserts, are the media equivalent of department stories while the likes of Grantland.com and Ain’t It Cool News are the new Best Buys. Ask yourself which group knows what part of their editorial draws their audience and you’ll predict the one with a profitable future.

Most of today’s news organizations, reduced to trading in on their glamor for billionaire backing, still have no impetus to really find out who their audience is, because billionaires are sold on the glamorous, big audiences of yesteryear. But soon, after years of red ink, no real solutions, continuing declining readership and no clear way out, the rich guys will either shut things down or sell them to the next set of chumps, who will probably have less patience than earlier oligarchs.

Not until news media’s billionaire owners make the really hard choices–like casting aside fame and glamor for green eyeshades and much smaller paying audiences–will they even have half a chance at making it into the next decade.