Sunday, December 09, 2007

Rupe and Sam to the rescue

The new brooms poised to sweep through Dow Jones and the Tribune Co. aren’t arriving a moment too soon.

Although no one, including most likely the incoming proprietors themselves, knows exactly what Rupert Murdoch and Sam Zell will do, at least they’ll rescue their companies from the decades of bland, unimaginative and ultimately unsuccessful corporate stewardship that, history suggests, is a decidedly unnatural way for a newspaper to operate.

The impending arrival of Messrs. Murdoch and Zell is sending shudders through both companies, where pressmen and publishers alike are worried about everything from the comparatively trivial disruption of their daily routines to whether they’ll still have jobs in six months. You have to feel for the people working at those companies, and, having been there myself, I do.

But DJ and TRB, like the rest of the industry, are overdue for a shakeup. So, you have to give Messrs. Murdoch and Zell a ton of credit for their willingness to wade into the triple-dip crisis of declining circulation, collapsing ad revenues and shrinking profits – especially at a time in their lives when they could be enjoying extremely comfortable, stress-free retirements.

As natural-born entrepreneurs, each will take a clear-eyed look at the daunting realities of their businesses and, true to the DNA that makes them who they are, will start taking some serious, innovative action. With luck, more changes than not will be for the better.

In so doing, these two gents will be taking their companies back to the way newspapers used to be before they went corporate. Back, that is, to when bold, passionate and visionary – and sometimes crazy, corrupt and evil – individuals ran nearly all of the country’s newspapers.

From the time the first colonial printers foreshadowed Google’s business by leveraging their scarce and superior technology to aggregate and distribute information for the benefit of the readers and advertisers who paid handsomely for such services, newspapers typically were owned by individuals who had not only a desire to make money but also sought an out-sized voice in their communities.

Bad as it could be when a publisher abused his power (and many did), the swashbuckling ownership that characterized the industry from its inception to the middle of the 20th Century infused it with the innovative verve and commercial strength necessary to adapt to the disruptive technological and demographic challenges that were as formidable in their days as the ones we are experiencing now.

Newspapers lost most of their entrepreneurial edge in the 1960s when companies like Gannett (1967), New York Times (1969), Washington Post (1971) and Dow Jones (1976) sold some of their stock to the public – in many cases to satisfy the demands of multiple generations of heirs who, though perfectly thrilled to be members of a famous publishing clan, also wanted to get their mitts on some extra cash.

As you can see in the table below, the average publishing company that has been around for more than 100 years has been publicly held for less than a quarter of its lifetime. And most of the best years for those companies occurred when they were still in private hands. Coincidence? You be the judge.

Although DJ, NYT, WaPo and some of the other publicly held newspaper companies have two-tier stock structures that give the founding families certain continuing control over their businesses, every publicly held publishing company – like all public companies – is forced at the end of the day to answer to Wall Street. And Wall Street’s unrelenting demand for predictable and sustained profit growth means that newspapers, once a wonderfully independent and idiosyncratic lot, had to grow up and go corporate.

In the last five decades, newspapers came to be run by bean counters and soothsayers whose idea of leadership was to do everything possible to ensure that the operating performance of their companies never varied from between 9.8 to 10.2 on a 10-point scale of predictability. For the most part, the top industry jobs came to be populated by people more skilled at managing than innovating – and who, despite their formidable analytical, administrative and public relations skills, had no more feel for newspapering than for running tire stores or meat-packing plants.

The growing remoteness of corporate newspaper managers from the realities of the market wasn’t a problem in the pre-Internet era, when business was good and there was scant competition to prevent newspapers from racking up regular increases in ad rates, gross revenues and profits.

When the terms of the game changed, as they did radically with the arrival of the Net in the mid-1990s, the corporate managers could not understand what was happening. As their carefully crafted business models fizzled, the most creative ideas that most newspaper managers could muster was to cut staff, cut page sizes and cut circulation. But chiseling is not a growth strategy.

While Messrs. Murdoch and Zell initially may order plenty more cuts of their own, they know there is no substitute for building audiences and sales. Because they, unlike their immediate predecessors, won’t be subject to quarterly kibitzing from Wall Street, they can invest some of their profits in the sort of long-term, revenue-building initiatives that have been in short supply lately among publishers.

Beyond the particulars of whatever efforts Messrs. Murdoch and Zell undertake, their most important contribution will be to instill a long-lost sense of daring and mission to companies that have suffered under dangerously timid, myopic, uncreative and demoralizing management at perhaps the most pivotal moment in their rich and fabled histories.

Get ready to rumble.


Anonymous Anonymous said...

A footnote: McClatchy stock, which has been hit harder than most in the last few years, as you've written, is now trading in the neighborhood of its price when the company first went public in the late '80s.

10:03 PM  
Anonymous Anonymous said...

An interesting reflection on the state of newspapering. I appreciate the acknowledgment that private ownership brings both passionate, creative individuals and crazy, self-serving, corrupt agendas to the helm. The core argument, though, about the accountability to wall street is the central problem facing journalism. As a young journalist, I fear the craft I have chosen is vanishing, so it is good to see an optimistic perspective. I think, though, that certain private owners -- and I'm thinking more of smaller, locally controlled companies -- have the same disconnect with the business of journalism that some of the corporate journalists have and also have "no more feel for newspapering than for running tire stores or meat-packing plants."

11:40 AM  

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