The Trouble With Tea

May 25, 2011

Mark Twain famously said that he didn’t belong to any organized political party.  He was a Democrat.

I thought about that trope when I read this morning about the surprising upset of Republican Jane Corwin by her Democratic challenger Kathy Hochul, in a very conservative  Congressional district in upstate New York.   Only this time, it’s not Twain’s party that doesn’t have its act together.   And this race was illustrative of the dastardly challenges the Republicans face in winning back the House and the Presidency in 2012.

Hochul–who trailed by a wide margin a few weeks ago–managed to make the race a referendum on Wisconsin Rep. Paul Ryan’s plan to privatize Medicare.    But as surprisingly effective as that strategy seemed to be,  there’s little doubt that the Democratic upset wouldn’t have happened without a guy named  Jack Davis, a Tea Party candidate who got 9 percent of the vote.

Think of what this means for the Presidential race in 2012.  First, the Republican base–surprise!–doesn’t mind the welfare state so much when it starts to affect their pocketbooks, which could greatly constrain the rhetoric the eventual nominee.  But the more intriguing notion is that the race is likely to have a Tea Party representative.  It just seems very unlikely that somebody–Michelle Bachmann?  Ron Paul?–won’t jump into the race, if only to burnish their credentials as a future Fox News personality.

Does anybody think Mitt Romney or Time Pawlenty can beat President Obama by 9 points in Ohio?


A Tyrant’s Grief. Ours, Too.

May 1, 2011

So let’s assume that Col. Qaddafi’s mouthpiece has the basic facts right, and NATO airstrikes did indeed kill three of the ruler’s young grandchildren today.  Predictably, the Russians–having abstainted from the vote authorizing the use of force by the coalition–condemned the action as “disproportionate.” 

Military ethics is murky territory, and matters of proportionality seem particularly vexing in this even murkier conflict.  A people rise up against a megalomaniacal tyrant;  the tyrant responds with brutal force; the global community attempts to counter with force of its own–force which has other “proportionality” issues relative to that which has been applied in neighboring uprisings.

But what is most striking to me about all of this is how quickly the humanity gets sucked out of the whole discussion.  Again, taking the reports at face value, three innocent little kids got bombed to death.  They didn’t get to choose their grandfather any more than any of the rest of us did.  It’s heartbreaking.  And there’s nowhere in the “public square” to express that.


Attention Non-Profit Newsies: Alan Mutter Thinks We’re Fantastic!!

March 30, 2010

Alan Mutter is one of the keenest observers of today’s topsy turvy media landscape.  I am therefore pleased that he payed me a compliment on his highly trafficked Newsosaur blog today:

An amazing number of smart and sophisticated people continue to harbor the fantasy that philanthropic contributions can take over funding journalism from the media companies that traditionally have supported the press.

At least I think it was a compliment.  You see, as a co-founder of  The Texas Tribune, I am one of those fantasy-harboring loonies who believes that non-profit journalism is important.  But, now that Alan—who I consider a friend—also considers us smart and sophisticated, I suppose we should all be able to call the whole thing off and get back to our day jobs.

Or not.  Alan gets so many things right that I can’t resist arguing the other side.  I think he is gloriously, deliciously, spectacularly wrong here.   Alan’s logic runs aground on the shoals of three m’s:  math, model, and motive.

Math

Alan asserts that replacing the $4.4 billion spent in American newsrooms will require an $88 billion endowment, which he points out is a gargantuan proportion of the $300 billion or so of annual charitable giving in the U.S.  There are at least three problems with this statement.  The first is that it confuses a balance sheet concept (endowment) with an income statement concept (annual giving).  In the parlance of Econ 101, Alan has confused a stock variable with a flow variable.  Fox news anchors are known to resort to this trick when they want to make our government seem more profligate than it is (no easy task, that).  It’s a little like confusing the federal debt with the deficit.  If you take a big number and multiply it by 20:  shazam!  It’s a bigger number!  An endowment is built up over a number of years, and so comparing it to annual giving is mixing apples and pomegranates.  And besides, none of the non-profits I know is considering raising an endowment any time soon.

That leads to problem number two.  A tiny fraction of non-profits of any type receive meaningful support from an endowment.  And other than foundations, none of them lives entirely on an endowment’s  investment income.  Consider any non-profit in your community:  it likely operates primarily on a combination of earned income and annual giving.  If it’s lucky, it has an operating reserve to shield it from rainy days and enable it to take care of special opportunities.  It it’s really, really lucky, it might receive 10% of its operating budget from the income off its endowment.

Third, none of us sophisticated, non-profit dingleberries is proposing that our efforts will replace commercial news.  We do assert that what I call “Capital J” journalism is in trouble, because it’s not very profitable.  Turns out that it never was.  But now that, as Google’s Marissa Mayer asserts, every article on a paper’s web site needs to be a standalone profit center, the jig is really up, and we’re trying to figure out how to help.

You’ll never confuse what you read on Voice of San Diego or Pro Publica or The Trib with content you can get on TMZ, TV Guide, Epicurious, or ESPN.  We in Fantasy Land are trying instead to help shore up what Alex Jones calls “the iron core” of journalism in his book, Losing the News. Jones’s analysis reveals that this core of serious content constitutes about 15% of newspaper content,  so let’s say it accounts for 15% of newsroom costs, as well.   If we had the unhappy task of replacing all serious newspaper journalism with what non-profit skeptics refer to derisively as “handouts,” we’d be staring at a $660 million annual problem.  No doubt that’s real money, but consider this:  according to Alan’s numbers, it’s about what people give to environmental causes in a year.  In handouts, that is.

Model

But the $660 million number still overstates the size of the issue.  No two non-profit journalism organizations have exactly the same business model, but almost all of us are doing our best to practice what I call “revenue promiscuity.”  At The Tribune, in addition to philanthropic support from wealthy individuals and foundations, we’re also chasing corporate sponsors for our events and for our web site.  We’ll  bring in about 15% of our expenses in subscriptions to Texas Weekly, a newsletter business we own and are working to expand into a string of highly valued niche titles.  Our intermediate-term goal is a $3 million annual budget, split roughly equally between membership, corporate support, and specialty pubs.  We’re a long way from that, but are making progress—and note that we’re not assuming any foundation support at all.

If organizations like ours can find non-handout sources for two thirds of our budget, Alan’s $88 billion problem becomes more like a couple hundred million.  That’s considerably less than ballet companies raise in the U.S. every year.  But the real point is this:  not only will philanthropy alone not save journalism, it can’t likely support even the majority of our modest efforts.  We need to run our businesses like businesses, even if our goal is public service rather than profitability.

Motive

Alan closes his post with these valedictory remarks to us fruit loops:

While there is a pressing need to save the press, a major shift in the philanthropic paradigm seems unlikely, especially in an era in which most folks – with the notable exception of a fortunate few – seem to be tightening their belts.

So, let’s stop dreaming about a visit from the Non-Profit News Bunny and get serious about discovering some realistic possibilities.

It’s a common refrain.  I hear it from my friend Jeff Jarvis all the time (I have this mental image of Jeff in the classroom of his “new models for news” course, crying “THINK HARDER, DAMMIT!” to a group of j-school students with their eyes tightly clinched).  But like lots of common refrains, I’m tired of it.  Here’s why.

First of all, it’s not an either/or proposition.  Fantasy Land could easily quadruple in population without meaningfully diluting the talent pool trying to figure out ways to make money in the news business.  And although I admire his since of urgency, I should remind Alan to look at one of his own slides—the one that shows newspapers losing media spend share every single solitary year since 1959. Although the combination of the Great Recession and the digital revolution has caused the line on Alan’s chart to auger in recently, this is not exactly a new problem.

Second, the “think harder, dammit” refrain assumes that market solutions are inherently superior to non-market solutions in every situation, even though the existence of public goods (think clean air, national defense) is discussed in the early going of a  basic economics course.  My mentor in business was fond of saying, “get the big picture right.”  It seems to me that the big picture at hand is that when atoms become bits, content consumers win and content producers get hammered into cost-cutting smithereens.  If some of that content happens to be vital to the functioning of our society, I simply think it’s prudent to look around for other means of funding it.

Finally, Alan’s admonition for all of us wingnuts to get back to work  reflects a view of capitalism which is totally opposite my experience as an investor.  I can say with great confidence that markets are more efficient than not, that there is more than enough investment capital looking for profitable places to go, and that nobody had to yell “think harder” at Larry Page and Sergei Brin.  I can say with even greater confidence that the world is a better place because investment capital tends to flow where it garners the highest risk-adjusted returns.  This just in:  the business of serious journalism news ain’t  in the top 100, probably never was, and certainly won’t be again.   Commercial efforts will persist because they just will.  But expecting investors to continue to fund for-profit, Capital J journalism just ‘cuz:  doesn’t that sound a lot like charity?  And for the love of  Zeus, please don’t talk to me about “patient capital” and “lower return expectations for noble causes.”   It’s all just another form of philanthropy, but with the added confusion about whether service to God or Mammon is the order of any given day.

I’m about two years into my foray into non-profit journalism, and I’m more firm than ever in this conviction:  public media, privately funded, will be a bigger part of the media landscape in ten years than it is today.  This will require the inhabitants of Fantasy Land to do a good deal of consciousness raising in the general public for membership support, and among foundations and major donors to give us the runway we need to establish sustainable business models.

We can use all the help we can get.  Alan, we’ll leave the light on for you.  And let me know if you see that Bunny!


“Noise in Da Hood” in Slate

December 24, 2009

The best piece I’ve seen on the dismal state of hyper-local, via my friend and Community Impact Newspapers honcho John Garrett.  A sample:

Such are the unholy collisions between “local news” and computerized news gathering. The problem for the new localists is that local news doesn’t obviously “scale,” a term of art that folks who put together business plans throw around to refer to businesses that get a lot cheaper to run as they grow. To cover more ground you generally need more bodies, a real buzzkill in a news industry that is desperately trying to stay afloat by doing … well, less with less. So what we see in the local news efforts is something like the creepy apocalypse of a 1950s science fiction story, in which, with the people gone, computers take over the few tasks that remain to be done in the barren landscape, hoping by algorithms to take the bits of local information that are out there and put them together into sites that can be built on the cheap.

Also, my new instant favorite compound adjective:  “sub-trivial.”


So Much for “Web-Native”

December 20, 2009

Well, that didn’t last long.  Destination web sites taking it right in the kisser.  These pictures say several thousand words.


Escalation of Policy, De-Escalation of Rhetoric

December 14, 2009

Whodda thunk that one of President Obama’s great contributions during his first year would be to tamp down the spikes of Presidential rhetoric.  Certainly not I.

Sayeth Hendrick Hertzberg in The New Yorker, about the President’s speech at West Point last week:

His grimly businesslike speech was a gritty, almost masochistic exercise in the taking of responsibility. What he had to say did not please everyone; indeed, it pleased no one. Given the situation bequeathed to him and to the nation, pleasure was not an option. His speech was a sombre appeal to reason, not a rousing call to arms. If his argument was less than fully persuasive, that was in the nature of the choices before him. There is no such thing as an airtight argument for a bad choice—not if the argument is made with a modicum of honesty.

Someone else commented this week that this plank of the Obama Doctrine constitutes something akin to widening of means and the narrowing of ends.  My apologies to the author, but it’s a good thought.


Whitewash

December 4, 2009

Dear Mayor White-

I have observed with real admiration your Senate campaign team’s facility with all things web.  It’s really quite impressive, as is the breadth of your early fundraising numbers.  Particularly, 1980 new contributors in Q3 bespeaks a real breadth of early support.  I commend you.

But now, feedback you didn’t ask for.   It seems like that to have a chance against Gov. Perry, you are going to have to play up the fact that you are serious, competent guy.  But all the faux, email-y, text-y, hype-y suspense around “will he or won’t he” makes you seem less of each.  First it was silly but quaint; now it’s just insulting.  Hopefully such nonsense will all stop tomorrow.  And I’m sorry I didn’t respond to what I assume was your wife’s message encouraging to send a text somewhere so I’d be among the first (and of course, very last) to know.  The thought of paying AT&T the vig on those digits was too just much.

It’s waaaay too early to be overhandled, Mayor.  Plenty of chance for that later.  As Garrison Keillor said about the McCain campaing in 08, we are voters.  Not fruit flies.


Central Texas and the NYT Food Stamp Map

November 30, 2009

The NYT continues to do as much as anyone with data-driven stories.  Today on A1 was a feature about the rise and concomitant de-stigmatization of food stamp usage across the country.   But the interactive map on the NYT web site tells the stories behind the story.

In Texas, the Rio Grande Valley is predictable  tale of woe; Hidalgo County has the largest percentage of food stamp recipients of any county in the U.S. with over 500k residents (29% vs. a national average of 11.5%).

Closer to home, the story is more surprising.  Travis County, which most of us tend to regard as a relatively insulated economic island, didn’t fare so well.  Between 2007 and 2009, food stamp usage went up 50% in Travis, a rate of change that landed it in the 82nd percentile across all counties in the nation (average was 34%).  Adjacent Williamson County–home of Dell–is far worse, still:  up 100%, ranking it 48th out of 3,136 counties nationwide (98th percentile), and the third largest of the bottom 50 counties.

So, poverty-wise:  what’s the matter with Central Texas?  Kudos to the NYT for providing the starting point to investigate the question.



Wanamaker’s Revenge

November 27, 2009

My friend Alan Mutter has an annoying habit of actually analyzing data rather than waving his hands at it.  Recently, he did his trick on the latest numbers out of NAA, which remain dismal (16 straight quarters of decline).  The most breathtaking piece is the precipitous disappearance of classified advertising from newspapers:

Among the classified categories, automotive and real estate advertising, two long-time pillars of the newspaper advertising model, each was down by 43% in the third quarter, compounding drastic declines in recent years.

Auto sales, which nearly hit $1 billion in the third quarter two years ago, were $321 million in the same period in 2009. Realty advertising, which topped $1 billion per quarter as recently as two years ago, declined to $358.6 million in the third quarter. It will take a long time for either vertical to return to its former strength, assuming they ever will.

Recruitment advertising, which surpassed $2 billion per quarter at the peak of the Internet bubble in 2000, all but dried up in the third quarter of this year, falling nearly 64.7% to a mere $175 million. Employment advertising is not simply at its lowest point in history, it is all but gone.

For those few of us who obsess on this stuff, the fusillade of ugly stats has taken on the feel of waves of body bags returning from Southeast Asia in the 1970s.  It’s both sickening and desensitizing.   But stepping back, here’s a way of thinking about these numbers in a broad-rushstroke sort of way.

At its peak, the newspaper industry probably had $15-18 billion in operating profits (30% of $55-60 billion in revenue).  The NAA numbers show the likely permanent disappearance  (due to the advent of cheaper substitutes, not merely “the uber-culpable “broader economic conditions” which the NAA is so fond of scapegoating) of about $10 billion in what were essentially pure profit dollars–60% + of peak industry profitability, before one even considers the slides in display and circulation revenues.

It’s oversimplifying the case a little, but it’s close enough:  $10 billion in newspaper classified ads has been replaced by less than $100 million in Craigslist revenue.  Last time I checked, 97 of the top 100 online classified sites belonged to the Craigslist newtwork.

So start with a very capital-intensive industry which is capped at mid teens operating profits percentage, and then consider two macro trends:  (1) for every buck in display advertising that disappears in print, something less than a dime comes back online; and (2) sightings of faithful newspaper readers born after the inauguration of a certain Georgia peanut farmer are about as rare as credible video footage of Sasquatch hitting golf balls in the Big Thicket.

But, I digress.  The classified franchise was  exceedingly valuable to newspapers because classified readers were the portion of the newspaper audience closest to actually transacting.  And especially in an absence of alternatives, the effectiveness of a newspaper want ad was was ultra-measurable:  whether you were advertising a used Toro or the Deputy Assistant Vice Presidency of the Southwest Iowa Region, you knew precisely how many people had responded to your ad.  Unlike legendary retailer John Wanamaker near the turn of the twentieth century, you knew damn good and well whether your advertising dollar was well spent:  it was close to the transaction, and its return was imminently measurable.

Today, we call those lead generation businesses.  And newspapers are simply not well positioned to be in the lead gen business.  If you want to see what well positioned looks like, check out the S-1 on file for Quin Street,  run by my business school classmate Doug Valenti and a competitor to AV-owned All-Star Directories (as always, I must remind that I speak only for myself, and not for AV,ASD, The Texas Tribune, or anybody else).

If mucking around SEC filings isn’t your thing, I’ll let you in on a secret:  Doug is laser-focused on matching big communities of buyers with sophisticated and price-sensitive populations of sellers.  The future of journalism?  Meh.  Not so much.  Ditto the teams at Sawbuck Realty and Responselogix.  Even though both are the beneficiaries of investments from A.H. Belo–and even thought the latter is run by an ex-Knight Ridder exec–neither company could spell journalism if you spotted them the consonants.  It’s simply not their raison d’etre.   They are all about creating liquid markets of buyers and sellers, period.

For a while, I was walking around saying that Wanamaker was right:  half of his ad spend was wasted.  Now, I’ve begun saying that he was wrong:  he was wasting a lot more than that.  And most of it he was spending with newspapers.  So this is what I mean when I say that public service journalism is is a public good.  And as such, it’s too important to be left exclusively to market forces.  Nothing I’ve seen in the data suggests that investment capital will strike a love match with the newspaper industry when investment capital does what it does naturally, which is to seek the highest risk-adjusted returns.     If you believe, as I do, in the importance of public service journalism, you simply have to examine non-market alternatives for producing it.  Call it Wanamaker’s Revenge.


The Chicago News Cooperative

November 23, 2009

Richard Perez Pena writes in the NYT about the new news venture, begun by ex Tribune journalists.    The barely suppressed animus between the Tribune and the CNC staffers is understandable, especially given the long relationships involved, the intractable financial state of the the Tribune Company, and the bare-knuckled history of journalistic (or practically any other kind of) competition in Chicago.

At one level, it’s totally legit that these two teams view the world differently.  One thinks that serious journalism is more likely–over the long term–to find support from market forces than from any other model.    The other believes that market forces are insufficiently reliable to produce enough of the stuff.  But let’s face it:  the Tribune team comes off sounding awfully disingenuous when it claims–or at least implies–that its public service mission hasn’t been compromised by its resource challenges.  Such a position strains credulity in a way and to an extent that no journalist would accept from the subject of one of his or her stories.  It also belies bitch sessions which are taking place nightly (sometimes creeping forward into late afternoons) among long-time newsfolk at saloons nationwide.

If the two teams really wish each other well–and if they both believe, as the leaders of newsrooms often proclaim–that their first obligation is to the public, then they will publish or at least link to one another’s material liberally.  I predict they will find that the sun will continue to rise and the earth will go on spinning.   And who knows:  maybe their public will keep them both in business.