Saturday, July 30, 2005

Miami vise

The managers of the Miami Herald acted harshly, rashly and timidly when they decided to fire columnist Jim DeFede in the emotional aftermath of a shocking suicide in the newspaper’s lobby.

There was enough tragedy for one day when Arthur E. Teele Jr., who was described by the Washington Post as “a spectacularly skilled and spectacularly flawed Florida political legend,” shot himself to death Wednesday in front of a potted palm the Herald’s marble lobby on Biscayne Bay. An explicit, four-column photo of scene was (appropriately) the centerpiece of the newspaper’s front page the next morning.

Five hours after the mortally wounded politician was rushed to the hospital, Mr. DeFede, a long-vigorous voice at the Herald, was fired at about 11 p.m. for admitting he had taped without consent one of two desperate final telephone conversations he had with Mr. Teele. It is illegal in most cases in Florida to tape a call without the permission of the other party.

In a television interview after his dismissal, Mr. DeFede said he knew it was illegal to tape the call but that he acted instinctively when he realized Mr. Teele was possibly suicidal. “The only reason the Herald knew about the tape was I came forward and told them,” Mr. DeFede told CBS4 News in Miami. “I realized I made a mistake and it was not something I should hide. I went to my bosses and said, ‘This is what happened. Where should we go from here?’”

According to an interview with Mr. DeFede reported by the Washington Post, the journalist says he discussed the incident with management after “being assured by one of the paper's lawyers, Robert Beatty, and by publisher Jesus Diaz that he had attorney-client privilege.” The Post quoted Mr. DeFede as saying the attorney promised, "The Herald will support you."

Later that night, Mr. DeFede was on the street.

The abrupt cashiering of the columnist has sparked a firestorm of protest and second-guessing, including an instantly posted blog where hundreds of journalists have added their names to a petition urging the Herald to reinstate Mr. DeFede.

I am adding my name to the list, because, first and foremost, there is reasonable doubt about whether Mr. DeFede actually broke the law. I also think the punishment didn’t fit the crime, if indeed there was one.

In its state-by-state guide to the laws affecting the activities of reporters, the Reporters Committee for the Freedom of the Press says at least one appellate ruling in Florida found “business telephones are not the type of devices addressed” in the law that prohibits unauthorized taping. Further, RCFP reports that the law does not necessarily require the consent of a person “who does not have a reasonable expectation of privacy in that communication.”

When a sophisticated public figure telephones a high-profile columnist of the biggest newspaper in town before committing suicide in the lobby of the newspaper, the caller could not have had a “reasonable expectation of privacy in that communication.” In fact, Mr. Teele’s actions suggest he very much wanted to make a dramatic public statement.

Notwithstanding Mr. DeFede’s professional role and legal obligations, he reacted the way one human being might respond to another in a moment of crisis. Though his judgment may have been flawed, his intentions were pure when he made the snap decision, in an emotional and terrifying instant, to record a call from a distraught man he says he regarded as personal friend.

Mr. DeFede deserved to be cut some slack.

Instead, he was hastily tried, convicted and executed by mangers who themselves were understandably unhinged by the horrifying event that had unfolded, literally, at their front door only hours earlier.

If this was a single, aberrant incident, then the Herald’s managers owed it to Jim DeFede, and themselves, to consider a less drastic alternative than the corporate equivalent of capital punishment. There were many ways for Mr. DeFede to admit his error, accept his punishment and move on, leaving him to shoulder any personal legal consequences.

The paper could have denounced his act, punished him with a suspension and put him on final warning not to do it again. This would have left the Herald reasonably in the clear from a legal point of view, while upholding its reputation as a law-abiding, fair minded and compassionate institution.

So, what was behind the rush to summary judgment? Some say it was Mr. DeFede’s criticism of the management of the newspaper and its owner, Knight Ridder. “From inside the newspaper, Mr. DeFede became one of its most stinging critics,” reported the Washington Post. The conspiracy theory is too facile.

Another possibility is that there is more to the story than meets the eye. Could Mr. DeFede have been warned in the past about improperly recording calls? We have no way of knowing and, to be absolutely clear, I am not suggesting this is the case. If those were the circumstances, however, then management would have had no choice but the one it took.

If this was an isolated case of poor judgment by Mr. DeFede, then the simplest interpretation of events is that management acted impetuously, impaired in the heat of the moment by fear and misplaced, displaced anger.

Was management worried about legal liability? As discussed above, the legal risk is arguable.

Was management fearful of economic consequences in the form of criminal penalties or a civil damage suit and the legal costs associated with them? If I understand the statute correctly, the victim of an illegally recorded call can be awarded no more than $1,000 in compensation. Given that the victim is dead and that he and his estate suffered no evident damage as a result of the taping incident, the risk of a viable lawsuit seems limited. An amount equal or greater to the legal fees saved by rapidly firing Mr. DeFede probably will be expended to defend the Herald against any wrongful-termination lawsuit the columnist might be motivated to file.

Was management worried about bad publicity? What could be worse than this?

In its haste to jettison Mr. DeFede, the Herald has eroded significantly the bond of trust and loyalty with its employees that makes any business effective, be it a major metropolitan newspaper or a hamburger stand.

Loss of confidence in the employer is particularly corrosive in the newsroom, where a cautious and cowed staff is antithetical to the conditions required to put out a compelling product that serves its community and remains economically vibrant.

The management of the Herald didn’t do itself much good in dispatching Mr. DeFede with such dispatch. And it didn’t do right by him, either.

Friday, July 29, 2005

Haggis and publishers for lunch

With newspaper publishers fuming helplessly over predictions that online competitors could take a $4 billion bite out of their profitable want-ad revenues, Craig’s List has quietly increased its market share to a stunning degree across the country.

The market share of total U.S. Internet visits to Craig’s List increased by 73% in the last year, according to new statistics released by Hitwise, an independent market research firm.

The biggest advance was 2,345% in the San Francisco area, where the list was established in 1995 by Craig Newmark, an unassuming computer engineer who wanted to help his friends locate apartments or jobs. Today, the list will help you find everything from used moving boxes to true love.

Craig’s share is up by more than 400% in Fresno and Providence, up by more than 300% in Dallas and New Orleans, and up by more than 200% in Atlanta, Austin, Denver, Las Vegas, Minneapolis, Phoenix and Seattle. More details in the table below, though you may need your reading glasses to navigate the fine print.

Craig’s compendium of free online ads (he does charge for help-wanted ads in a few markets to pay his modest-size staff) cost Bay Area publishers some $50 million to $65 million in want-ad revenues as of the end of last year, according to knowledgeable estimates.

But the story in San Fran is nothing compared to what may lie in store for newspaper industry as a whole. Some 8.6% of newspaper revenues could vanish within two years as $4 billion in classified-ad revenues flow to eBay, Monster and free online sites like Craig’s List, according to McKinsey & Co.

Although the loss of auto, real estate and employment ads would blow a major hole in the top line of the industry’s $46.6 billion in annual sales, the impact on the bottom line would be even more devastating. That’s because classified ads are, by far, the most lucrative segment of the business.

The newspaper industry’s response to the threat has gone from denial to anger to dismay and, finally, angry denial of its dismay. Only the Tribune Co. has articulated a bold, if dubious, strategy to fight back by launching its own free-ad sites in 12 cities.

Meantime, Craig and his business partner, eBay, continue to colonize not only this world but the galaxies beyond by beaming used-car ads into space. The only thing that might slow down Craig is the haggis he ate a few days ago in London. His blog features this picture of a sausage filled with an intimidating mix of oatmeal and unpsecified animal innards.

Even if Craig is eating the lunch of newspaper publishers, it’s safe to assume they wouldn’t have wanted to eat his on that day.

Thursday, July 28, 2005

Down-size syndrome

I have been around long enough that, unfortunately, I have been on both the giving and receiving end of pink slips. I am not sure which is worse, but I think giving them is.

When you lose your job because management can’t find a more clever way to make its numbers, you are rightfully angry and afraid. Painful as it is to pack your career in a box and head off to an uncertain future, at least you know it wasn’t your fault.

But the managers who did the deed have to come in the next day, and the next and the next, to face the empty desks that symbolize the lives they screwed up. If you are any kind of a human being, and most managers actually are, you blame yourself for not finding a better way to run the business than ruining the lives of innocent, hard-working people with mouths to feed and mortgages to pay.

Sometimes, of course, it is the manager’s fault. In those cases, the managers, not their victims, ought to be the ones packing the boxes. More often, however, uncontrollable economic forces require a company to trim a division, scrap a product line or reduce headcount to negotiate a rough patch in hopes of navigating to better times in the future.

Which brings us to the newsrooms of the New York Times Co., where some 190 jobs will be eliminated; the San Francisco Chronicle, where some 120 positions will be trimmed, and the Los Angeles Times, where an indeterminate number of pending budget cuts seem to have figured in the departure of editor John Carroll. Though the numbers may be smaller, the story is the same these days at many other newsrooms across the country.

Although it is a tragedy when anyone loses her or his job, the cuts seem especially harsh when they happen in newsrooms, where journalists who are supposed to be minding the public’s business are, instead, worried sick about their personal circumstances. Having lived through such moments, including the folding of our beloved Chicago Daily News in 1978, it is hell, pure and simple.

But the economics of the newspaper business these days leaves managers with little choice. With advertising weak, readership declining and costs climbing for everything from newsprint to gasoline to paperclips, the newsroom is one of the few places you can squeeze expenses to meet the profit targets of the (mostly public) corporations that publish our papers.

Although it is no consolation to people losing their jobs, newsroom employment at the start of this year actually was slightly above the 25-year average of approximately 53,500 professionals, according to statistics complied by the superb State of the Media project.

As you can see from the graph below, newsroom headcount historically has followed the ups and downs of the economy. Employment expanded briskly in the mid-1980s, peaking at nearly 57,000 in 1990. Staffing took a nosedive, along with just about everything else, when the Internet Bubble ran out of hot air.

This year, however, headcount almost certainly will fall below the average for the first time since 1985. Why is this happening, with the economy doing reasonably well for a nation coping simultaneously with a war, a mega-deficit and record-high oil prices?

Because newspapers (and the legacy broadcast media) are unable to maintain their historic share of advertising revenues, owing to increased competition from the new interactive media that enable marketers to achieve unprecedented efficiency and effectiveness in their campaigns.

In but one example reported by Fortune magazine, Chrysler has put 18% of its $2 billion ad budget this year into online media vs. 10% in 2004. That’s $160 million fewer dollars for legacy media this year than last, or the equivalent of 7,200 reporters making $50,000 a year.

Slow on the initial uptake, the traditional media companies finally are getting serious about earning their fair share of online revenues. But even briskly growing online sales can’t offset in most cases the secular market-share erosion affecting traditional print and broadcast advertising.

With lower profits not an option for publicly traded companies, the legacy media have no choice but to nip expenses wherever they can. And newsrooms, unfortunately, are a good place to look, because columns and airtime can be filled with respectable material from the wires and other syndicates.

The irony, of course, is that smaller, more overworked staffs are unlikely to produce the compelling local products required by the traditional media companies endeavoring to evolve into more plausible competitors in the new media mix.

If the belt-tightening actually leads to a better day for the media companies, then the pain will have been worth it, except for those who lost their jobs along the way. Cutting jobs and other expenses without a realistic, long-term strategic plan to reposition these valuable businesses will lead over time to death by attrition.

Businesses grow strong only by growing. No company can right-size its way to success.

Tuesday, July 26, 2005

Dreaming of a green Christmas

Average advertising sales gains for the newspaper industry were 2.8% in the first half of the year, but not all publishers are performing equally well. One even reported a slight dip in year-to-year revenues.

That’s what you learn by reading the devilish details in the mid-year revenue flash from our friend Miles Groves of MG Strategic Research, the economist whose industry insights top the must-read list for senior newspaper execs.

Comparing “same-store” sales of several publicly held newspaper properties, Miles found that Media General’s volume increased 6.5% this year over the first half of 2004. Gains of approximately 4% each were notched by Scripps, Gannett and Lee (the latter of which includes the integration into its P&L of the Pulitzer publications).

Knight Ridder and Journal Communications were a touch under average performance, while the New York Times Co. and Tribune Co. managed to eke out respective, if not respectable, gains of only 1.3% and 1.2%.

Bringing up the rear was Journal Register Co., which reported a reduction of 0.1% in year-to- year sales. Journal Register last year promised great things when it acquired a group of weeklies in suburban Philadelphia and a $415 million portfolio of dailies and weeklies in Michigan, although the impact of the Michigan properties will not be reflected until after the one-year anniversary of the transaction in the third quarter.

First-half sales typically represent between 33% to 40% of a publisher’s annual revenues, with the major gains coming during the make-or-break Christmas season. It’s never over in the ad game until the fat man Ho-Ho-Ho’s.

Saturday, July 23, 2005

Timing is everything

Q: What’s worse than getting scooped by a competing publication on a story you have been sitting on because you were afraid you might be get hauled into court to identify the source?

A: Running the story a day late and getting hauled into court, anyway.

That’s how things went down – and I do mean down – at the Cleveland Plain Dealer, whose editor gained an embarrassing 15 minutes of national fame when he admitted he wasn’t publishing “two stories of profound importance” because his company, Advance Publications, didn’t want to go to the trouble and expense of protecting reporters who might be compelled by a court to reveal their confidential sources.

This all comes at a time, of course, when Judith Miller of the New York Times is serving a contempt sentence in a federal prison for refusing to name the sources she interviewed for a story she never wrote about a crime that evidently wasn’t committed.

The Plain’s Dealer’s determination to sit on its too-hot-to-handle stories crumbled rapidly after the Cleveland Scene, a scrappy alternative weekly, published the details of one of the stories gathering dust at the rival P-D.

The story actually is profoundly important, too. As reported first by Cleveland Scene and confirmed a day later by the newly emboldened P-D, a 2002 FBI affidavit sealed by a judge asserts that there is "probable cause" that former Cleveland Mayor Mike White was on the take.

"Once another medium identified us as a holder of the documents in question, holding back the story became moot," said P-D editor Doug Clifton, explaining his abrupt reversal. "We think that it was a public service to be done in reporting the contents of the affidavit," he added in what could be construed as a compliment to the Scene.

Until the point Doug’s paper was beaten on the scoop languishing in his “in” box, he gamely defended not publishing a story “the public would be well served to know,” because it was “based on documents leaked to us by people who would face deep trouble for having leaked them.”

Once the stories were published, Doug and the editors of the Scene were summoned before a federal judge who demanded to know who leaked the sealed affidavits on which the articles were based. When the editors refused, the U.S. attorney said he would check with his bosses in Washington to see who should prosecute the matter.

"We'll go to jail if we have to," said Doug.

If he had said that three or four weeks ago, he would have been a hero. Now, he looks like something else.

Related previous posts

Not so plain dealing in Cleveland
A license to chill
Open season on confidential sources

Tuesday, July 19, 2005

Selling sizzle with the steak

The folks who tattoo bar codes on pears see a future for laser-imprinted advertising on the sides of bananas and kumquats, too.

This is the most innovative concept I have seen since the first time I saw an ad plastered above a urinal in an otherwise-forgettable Applebee’s in Aiken, SC.

If food catches on as an advertising venue, it is only a matter of time until Pfizer slaps an invisible Lipitor ad on the side of steak, so it magically sizzles into view when you grill it.

When they do, make my "medium" rare.

Thursday, July 14, 2005

Scratching the itch to twitch

The newer the media, the younger the users. They younger the users, the faster they adopt a new medium.

These rules of thumb apply when gauging the impact of such thumb-intensive new media as text messaging.

In this era of rapid techno-innovation, the challenge for advertisers – and the media companies chasing their dollars – is figuring out how to get, and sustain, the attention of an increasingly twitchy and fickle crowd of what researcher Joe Pilotta calls “media nomads.”

Joe may not know exactly how to sell stuff to the nomads, either. But at least he knows where to look for them, thanks to an online poll he conducted for BIGresearch, an independent market-analysis company.

In the poll, Joe found that 79.8% of respondents between the ages of 18 and 24 “regularly or occasionally” use instant messaging, 58.3% use text messaging, 45.3% use iPods or similar portable audio devices, 30.6% use picture phones and 29.6% read blogs.

Full details of Joe's findings are in the table below, but remember that this was a self-administered online poll, which, by definition, is biased in favor of the technically intrepid and doesn’t reflect the behavior of any of the remaining Luddites lurking out there.

“The 18 to 24 year olds are digital nomads who have adopted new media more readily than any other age group,” says Joe. “Not only do they use new media more, they are influenced by it much more than any other age group when it comes to making purchasing decisions.”

Accordingly, marketers and media companies lusting for young consumers need to learn how to successfully blend new-media tactics with their conventional print and broadcast initiatives.

“The usage of new media among younger age groups creates a marketing dilemma for marketers who are wedded to traditional media,” says Joe. “Users of new media are using radio, magazines and newspapers more, while TV has suffered the overall negative effect.”

Research shows that young people are avid media multi-taskers. That is, they are likely to be simultaneously chatting on IM, listening to a CD and yakking on their cell phones while the TV blares in the background and they are “reading” a book for school.

So, it isn’t hard to reach them by one means or another. The hard part will be getting them to pay heed, given their increasingly abbreviated attention spans.

While none of the above is shockingly new, I was astonished to learn that 43.1% of people aged 55 or older use instant messaging and that I was not among them.

Frantically concerned that I was being left behind, I consulted one of my youthful friends, who is a mere 52. He advised me that the coolest thing nowadays is Skype (rhymes with “hype”), which combines free IM with free international phone service to 131 million-plus users.

In one quick download, I vaulted from near-obsolescence back to the bleeding edge. So, now you can skype me at admutter.

The service works great. The only question is whether the proper spelling for the present tense of the verb is skypeing, skyping or skypping.

Monday, July 11, 2005

Open season on confidential sources

Scared silly by the case that landed Judith Miller in jail for not identifying the people she interviewed for a story she never wrote about a crime that evidently wasn’t committed, editors have declared open season on confidential sources.

Issuing urgent directives on the proper handling of confidential informants, Gannett and the Los Angeles Times in the last few days have promulgated convoluted policies guaranteed to frighten and befuddle not only potential sources but also the journalists -- and the readers -- who depend on them.

At Gannett, Phil Currie, the senior vice president for news, instructed staffers via an internal website to be sure to let potential sources know exactly how confidential their identities will be. Or not.

"This does not mean each option must be discussed with the source, but each party should understand the agreement,” said Currie, as quoted by Editor and Publisher, which has been doing a superb job of chronicling the government’s depressing effort to suppress the press.

Among the options available to potential confidential sources of Gannett newspapers, said Phil, are: “(a) the newspaper will not name them in the article; (b) the newspaper will not name them unless a court compels the newspaper to do so; (c) the newspaper will not name them under any circumstances. Some circumstances, he added, “do not merit going to 'level c,' and everyone should be clear on that."

In other words, Phil appears to be saying that confidential informants can be confident their identities either (a) will or (b) won’t be protected. Got that?

At the L.A. Times, editor John S. Carroll told staffers not to put the names of confidential sources on the company’s computers. According to E&P, John said the new policy “was inspired by concern that even if reporters refused to divulge sources, prosecutors could unmask them by issuing subpoenas to the newspaper's technology support staff, or even the chief executive of the Tribune Company, which owns The Los Angeles Times.”

What, then, is the L.A. Times policy on confidential sources? Is a reporter allowed to promise confidentiality to a source, so long as it isn’t written down? If no written record exists, will the newspaper defend a reporter against legal efforts to compel him to reveal his source? If the promise isn’t documented, can’t the newspaper deny it ever existed? Will a reporter be forced to hock her pension to hire lawyers to defend her right to protect her sources? Or, should she just go directly to jail?

The policies articulated by Gannett and LAT are polar opposites. If Gannett wants all the I’s dotted and T’s crossed, this would suggest that publishers, editors, reporters and prospective informants need to execute some sort of pre-interview agreement before the sources are debriefed. The LAT, on the other hand, doesn’t want anything in writing, so there apparently would be no documented arangement, much less the details of the terms enforcing it. Either way, what’s a poor reporter to do?

Checking newsrooms from Baltimore to Detroit to San Diego, E&P’s Joe Strupp found most editors favor the adoption of something like the L.A. Times’ idea of not putting things in writing.

So far as can be determined, none of the newspapers has prohibited outright the use of information from confidential sources, but these posterior-protecting policies for all practical purposes will do just that. Beyond frightening the bejabbers out of every reporter and editor who wants to do the right thing by his employer, the public and his source, these vague and troubling policies would spook any sensible person planning to drop dime on a big story.

The modern news media long have relied on confidential sources to provide unique insights and valuable inside information on urgent matters of public interest that otherwise would not come to light. Every state but Wyoming has established a law to shield reporters under certain circumstances from having to identify confidential informants. (There is no such federal law, which is why Judith Miller is in jail.)

Until now, confidential sources have been assured by reputable news organizations that their identities would be protected at all costs – including legal fees, fines and jail for reporters held in contempt of court for not giving up their sources.

Everything changed last week when Time Inc. broke ranks with the New York Times and chose the path of weaseldom by releasing internal files identifying the confidential sources sought by the federal grand jury investigating the outing of Valerie Plame, the former covert CIA operative.

Ironically, one of the sources identified by Time is Karl Rove, the leader of the White House political braintrust. The source on this is Newsweek, which scooped the rival Time on the contents of its own internal files.

You can’t blame publishers and editors for worrying, like the Cleveland Plain Dealer, about being hauled into court and forced to identify their confidential sources. As Time and the NYT can attest, it is an expensive and emotional distraction fraught with ongoing political, commercial and legal risk.

To minimize the potential exposure to such unwelcome events, newspapers shouldn’t muzzle reporters or jettison confidential sources. Rather, they must develop clear and thoughtful controls over when to grant confidentiality, who deserves it, and whether, if ever, confidentially can be abandoned. The hasty guidelines articulated to date are so timid and vague that they only can chill future reporting.

With wise policies in place, along with a decisive commitment to defend the vital practice of using confidential sources, the press can move forward confidently once again to deliver the significant and compelling stories that only such sources can help produce.

It’s a right and a cause worth defending. And it’s why Judith Miller is sitting in jail.

Saturday, July 09, 2005

Not-so-plain dealing in Cleveland

The newspaper “is the court of last resort for anyone who's been backed into a corner,” the editor of the Cleveland Plain Dealer told his readers a few days ago. Doug Clifton knows about being backed in a corner, because that’s exactly where he is.

At the end of mildly discursive column arguing that journalists ought to be legally protected from being forced by courts to reveal their confidential sources, Doug casually mentioned his newspaper is sitting on “two stories of profound importance” that his company’s lawyers won’t let him print.

This appears to be the first official example of how the press is being chilled by the confounding prosecution of Judith Miller and Matthew Cooper for not identifying the sources they interviewed for stories they never wrote about a crime that evidently wasn’t committed and for which no one but Ms. Miller appears likely to do any time.

The Plain Dealer’s decision to sit on the two stories also clearly illustrates that media companies now, more than ever, will be forced to choose between protecting the public interest and, well, weaseldom.

Saying “the public would be well served to know” about the spiked stories, Doug described them only as being “based on documents leaked to us by people who would face deep trouble for having leaked them.”

The problem with such stories, as undoubtedly noted by the lawyers called upon to scrutinize them, is that the reporters, the Plain Dealer and its parent, Advance Publications, might be hauled into court and told to reveal the confidential sources -- or else. In the case of the reporters, “or else” means jail for contempt of court. In the case of the publishing companies, “or else” means many thousands of dollars in fines.

The attorneys said "this is a super, super high-risk endeavor, and you would, you know, you'd lose," Doug told Mark Fitzgerald of Editor and Publisher, who first brought national attention to the Plain Dealer’s less-than-plain dealing with its readers. "The reporters say, 'Well, we're willing to go to jail,’ and I'm willing to go to jail if it gets laid on me,” Clifton told E&P. "But the newspaper isn't willing to go to jail. That's what the lawyers have told us. So, this is a Time Inc. sort of situation."

Facing $270,000 in fines for contempt or court, Time Inc. chose the path of weaseldom last week when it turned over documents requested by the special prosecutor trying to learn who outed Valerie Plame, the former covert CIA operative. Although Time correspondent Cooper vowed to go to jail instead of naming the people he interviewed, he reversed course as the gavel was about to fall, saying his source had released him to testify.

In decided contrast, the New York Times and Judith Miller stuck by their sources and stuck by their guns. Which is how Ms. Miller landed in a federal lockup and the NYT is facing fines of $1,000 a day for as long as the grand jury sits. (A back-of-the-envelope calculation puts the potential fines for NYT at around $350k, plus considerably more for its army of attorneys.)

After battling for months alongside the New York Times to protect their respective confidential sources, Time Inc. surprisingly decided to give up Cooper’s notes when the U.S. Supreme Court rejected the final legal challenge to the lower court’s persistent insistence that the media start naming names.

“We believe that the Supreme Court has limited press freedom in ways that will have a chilling effect on our work and that may damage the free flow of information that is so necessary in a democratic society,” said top Time editor Norman Pearlstine when he announced the decision to identify the confidential sources. “The same Constitution that protects the freedom of the press requires obedience to final decisions of the courts and respect for their rulings and judgments. That Time Inc. strongly disagrees with the courts provides no immunity.’

The New York Times sharply, and wisely, disagreed.

“We do not see how a newspaper, magazine or television station can support a reporter's decision to protect confidential sources, even if the potential price is lost liberty, and then hand over the notes or documents that make the reporter's sacrifice meaningless,” said its must-read editorial. “The point of this struggle is to make sure that people with critical information can feel confident that if they speak to a reporter on the condition of anonymity, their identities will be protected. No journalist's promise will be worth much if the employer that stands behind him or her is prepared to undercut such a vow of secrecy.”

True to its word, the New York Times has a proud record of standing up to legal and political pressure in matters ranging from the successsful battle to publish of the Pentagon papers to the case of J.W. Simonton, an editorial writer jailed for 19 days in 1857 for refusing to tell who told him about bribery in Congress.

How could two leading news organizations facing an almost identical set of facts come to such different decisions? Reasonable men and women, of course, may differ. But perhaps Time feels more economically vulnerable than the NYT.

Even though both are publicly held corporations, Publisher Arthur Ochs Sulzberger Jr. and other members of the founding family happen to control enough NYT shares to comfortably operate the business as a public trust. Because they represent a significant percentage of the shareholders who ultimately govern the business, they can spend the money and run the risks they think are necessary.

Not so at Time Inc. As a large company owned by financial institutions managed by people with a variety of social, political and commercial agendas – not the least of which is getting the most bang for their bucks – Time Inc. and its individual executives face far more legal and economic exposure than the folks who run the NYT. Like, for instance, losing their lucrative jobs.

If the executives at Time Inc. have a reason, if not an excuse, for their behavior, what’s the story at Advance Publications, a private company owned by the wealthy Newhouse family?

Advance is a sprawling empire including 20 newspapers (Newark, New Orleans, Portland, OR), the 26 Conde Nast magazines (New Yorker, Vanity Fair, Wired, etc.), Parade Magazine, the Fairchild trade publications (Women’s Wear Daily and several more), American City Business Journals, the Golf Digest Companies and “extensive interests” in cable television.

If Doug Clifton and his colleagues are willing to put their personal freedom on the line to report their stories of "profound importance," isn't the Plain Dealer obliged to publish them in the interests of fulfilling and defending its role as a public trust? From a strictly commercial point of view, isn't the unique position of the newspaper as a public trust a major component of its formidable economic value?

As Judith Miller was packing a toothbrush for her extreme makeover as a federal prisoner, Doug wrote as fine a description of newspaper work as any you will see.

“All over this newspaper, phone calls, e-mails and letters pour in with their tales of bad things happening to good people, tales of gross governmental inefficiency or official misconduct,” he wrote. “It happens routinely in every newspaper in America, because, in the end, the newspaper, with its reporters, is the court of last resort for anyone who's been backed into a corner.”

Now, the editor has been backed into a corner, being forced, evidently, to suppress stories he believes to be of compelling public interest.

"Some people might argue that you're being chicken-shit," Clifton told E&P in discussing his dilemma. "Well, I, I can respect that."

But can he respect himself in the morning?

Thursday, July 07, 2005

Google’s high-volt vault into VOD

Google and a few of its friends have decided to short-circuit the middlemen and plug directly into your electric company to sell a full range of broadband services, including potentiallly limitless video on demand.

While cable and telephone companies long have scrambled with varying degrees of success to become full-service, triple-play providers of video, Internet and voice services, the third line into every home, the power line, has been quietly buzzing along and largely overlooked. Not any more.

Google, Hearst Corp. and Goldman Sachs have put $100 million into a private company called Current Communications Group, which says it can send and receive high-speed Internet signals to homes and businesses via the existing electric grid. The tres unlikely amigos are teaming up at Current Comm with earlier investor John Malone, the man who built Tele-Communications Inc. into a cable TV behemoth before he sold it to AT&T at the peak of ripeness in 1999.

Several small broadband power line (BPL) start-ups have spent a long time trying, without much technical or commercial success, to safely coax satisfactory Internet-protocol signals through electric lines. The plan was to provide an electrifying alternative to the enviable businesses of the high-priced cable guys and the low-tech telephone companies. To date, various flavors of BPL have moved out of the lab and onto a few hundred utility poles in a small number of experiments.

But the evident success of a 50,000-home pilot in Cincinnati has turned Current Comm into Google’s preferred partner in what appears to be no less an effort than delivering unlimited video on demand (VOD) to any home, shop or office with access to electricity.

The Current Comm deal dovetails nicely with the recent "beta" launch of Google’s Video Upload Program, whose stated mission is to give the world “a growing archive of televised content -- everything from sports events to dinosaur documentaries to news programs.” In addition to televised content, Google will “host video from anyone who wants to upload content to us.” Participants can offer their video free, or sell it by splitting revenues with Google.

Combining its search acumen, a vast video library and ubiquitous delivery through BPL, Google has a shot at delivering the Holy Grail, virtually limitless VOD. The achievement would outflank the long-promised efforts of the legacy multi-channel TV and phone companies, which continue to battle technical restrictions, the limitations of their business models and, not least, each other.

The cable companies that invented the multi-channel TV market have done an excellent job in metro areas of upgrading 1970s-era technology to provide 21st Century broadband services. Consumers today prefer cable modems by 1.5 to 1 over the slower DSL services sold by telephone companies. Capitalizing on their success in multi-channel TV and broadband, cable companies now are starting to offer voice-over-IP (VOIP) technology to provide what is known in the industry as “triple play” services.

To deliver video on demand with the depth and variety envisioned by Google, however, cable companies would need the enormous inventory, search capability, agile delivery system and billing capabilities that Google appears to be aiming to create with Current Comm. Unfortunately, the existing VOD systems used by cable and satellite providers are limited to a handful of offerings by, among other things, constrained content libraries, finite server capacity, restricted satellite availability and rigid billing systems.

With Google doing its own thing with Current Comm, the video companies will have to scramble for partners (Yahoo? Microsoft?) to cobble together the capabilities they lack. As a successful first mover in providing wide-scale, unlimited VOD, Google may be able to lock up valuable contracts for vital content in Hollywood, Bollywood and beyond. That alone would give the competition an Excedrin headache.

Telephone companies are in even worse shape than cable for competing in the VOD space. Slow on the uptake when the Internet arrived, the telcos have gotten better over the years at providing DSL services to ever-growing audiences at favorable prices. But their legacy business, Plain Old Telephone Service, is being eroded by mobile phones and VOIP, which in recent quarters have taken bites of 4% to 6% out of the POTS subscriber base.

Hoping to become full-fledged, triple-play players, the Baby Bells have vowed to replace their ancient, twisted-pair copper plant with fiber-rich systems like those deployed by modern cable operators. In the meantime, they gamely are trying to head off cable’s hegemony by marketing satellite services like Dish, which are even less capable than cable of delivering unlimited VOD. Even if the phone companies built their “Field of Dreams” networks and the subscribers came on cue, they likely would have the same problems as the cable companies in provisioning true, unlimited VOD.

None of this is to say Google is guaranteed a smooth ride to success with Current Comm. GOOG still has to build the video library, as well as perfect the systems required to index and serve inestimable volumes of varied content. Further, major questions will remain about BPL until the technology reliably serves many thousands more subscribers than it does today.

If all the moving parts come together successfully, however, Google could be worth as much as its bubblicious stock says it is. Heck, maybe even more.

Wednesday, July 06, 2005

Mass media at the tipping point

Only hindsight will reveal how close we are today to the moment that mass-media advertising morphed from being the quintessential marketing tactic to being a quaint, faint anachronism.

But the day is coming -- and it may be closer than you think. Only institutional inertia -- the fear of change and, significantly, the fear of making the wrong change -- has kept advertising revenues as stable as they have been to date.

Shrinking ad budgets, dissatisfaction with the expense and accountability of traditional mass media, and rising confidence in the interactive media are steering marketers away from the assumptions and conventions that historically have governed their behavior.

Generations of marketers resigned themselves to the inherent inefficiency of one-size-fits-all advertising best described by John Wanamaker in 1886, when he said "I know 50% of my advertising is wasted but I don't know which half." One hundred years later, the Internet and other interactive media have made the answer, and the alternatives, abundantly clear.

Sophisticated marketers now know they have to allocate ever-larger portions of their budgets to media that can be targeted, efficiently purchased and measured. The issues for them are not whether to do so but where, when and how much. As their confidence and competenece grows, the velocity of change will accelerate.

Half of senior marketing executives already plan to spend less on newspaper advertising this year than they did a year ago, according to a new survey by the Association of National Advertisers, a trade group representing 8,000 companies buying $100 billion a year in marketing communications. The poll found more than a fifth of the advertisers planned to put some of their print dollars into other media. Significantly, three-quarters of the marketers will shift their former print dollars to online.

Television advertisers are alarmed by declining viewership, as well as Accenture's projections that 40% of U.S. households will own digital video recorders within four years and that nearly three-quarters of DVR users zap most commercials into oblivion. iPods and other mobile media threaten the radio business by giving consumers extreme personal choice, including the ability to program endless hours of customized, commercial-free fare.

Marketers also know the mass media are a mismatch when it comes to reaching younger consumers. As discussed here previously, young people, who on average spend more than 8.5 hours a day on media, devote a piddling 43 minutes to print.

Although they love music, tech-savvy young people are increasingly likely to pick and choose among MP3s and podcasts, instead of listening to the radio. Although they spend appalling amounts of time watching TV, a growing number of young people take control of the experience by clicking past commercials on multi-channel TV, renting DVDs or even making their own movies.

Until approximately 10 years ago, newspapers, television and radio were not merely the best thing available to advertisers, but, practically speaking, the only thing. Not any more.

In the five years ending in 2004, the market share of the three principal mass media (illustrated below) fell at the same time that total U.S. advertising spending rose 19% to $201.6 billion. Newspaper share is down 18.8%, broadcast TV is off 15.2% and radio is down 5.6%, according to Universal McCann, the ad agency. The shares of the targetable media, by contrast, have grown by 2.4% for direct mail, 79% for cable TV and 204% for the Internet.

Markets, as J.P. Morgan wryly observed, tend to fluctuate and the advertising market is no exception. It is possible, therefore, that the data in any comparatively short period are affected by fad, fancy or atypical economic forces.

But I believe we are at or near a point of profound market disruption, which is not being adequately detected by the analysts who continue to package such prosaic projections as future want-ad demand and the seasonal pricing of prime-time spots.

The cascading confluence of events suggests the mass media model is riding a roller-coaster that is headed inexorably down. And the G-forces are accelerating.