Sam Zell on the Newspaper Biz

November 28, 2008

Portfolio has a transcript of Zell’s conversation with Joanne Lipman at a recent conference hosted by Quadrangle, a media-focused private equity firm.

A few of the choicest bons mots:

To NYT publisher Arthur Sulzberger:  “If you want to be a charitable trust, be a charitable trust. If you don’t want to be a charitable trust, then you’ve got to focus on producing a return for investors’ capital, and it’s just that simple.”

Well, obviously, the newspaper business and advertising, generally, has gone off a cliff. And it didn’t go off a cliff in October or September. It went off the cliff in January. When we looked at the historical numbers, we saw an average erosion of about 3 percent. At the time we underwrote the transaction, we used a 6 percent erosion.  And the last time I checked, 19 percent erosion is bigger than 6.

We did not have a single salesperson on commission. In other words, every single newspaper had a cadre of salaried salesman. Now, you know, I’m just a businessman, but I’ve never seen any kind of a sales force that was effective if, in fact, they had no incentives. Now, part of the reason is that historically, because it was a monopoly, newspapers heavily depended, and still do, on national advertising, where the salesman is an order taker. When the guy from Macy’s calls and says, “We want six pages,” you don’t say to him, “Well, how about nine.” You just say, “Yes, sir. Send me the check and we’re on.

On the fact that Tribune advertising has declined more steeply than at USA Today or NYT:   “Well, I think that’s comparing leprosy to cancer.”

We did not have a single salesperson on commission. In other words, every single newspaper had a cadre of salaried salesman. Now, you know, I’m just a businessman, but I’ve never seen any kind of a sales force that was effective if, in fact, they had no incentives. Now, part of the reason is that historically, because it was a monopoly, newspapers heavily depended, and still do, on national advertising, where the salesman is an order taker. When the guy from Macy’s calls and says, “We want six pages,” you don’t say to him, “Well, how about nine.” You just say, “Yes, sir. Send me the check and we’re on.

Me? I like monopolies. I’m just sorry I waited 60 years to get into the newspaper industry because the 40 I missed were great.


Bailout Nation

November 28, 2008

In doing research for the forthcoming book, Barry Ritholtz has compiled the following comparison to relate the cost of the financial bailouts to other painful moments of government intervention in U.S. history:

If we add in the Citi bailout, the total cost now exceeds $4.6165 trillion dollars. People have a hard time conceptualizing very large numbers, so let’s give this some context. The current Credit Crisis bailout is now the largest outlay In American history.

Jim Bianco of Bianco Research crunched the inflation adjusted numbers. The bailout has cost more than all of these big budget government expenditures – combined:

Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

TOTAL: $3.92 trillion


data courtesy of Bianco Research

That is $686 billion less than the cost of the credit crisis thus far.

The only single American event in history that even comes close to matching the cost of the credit crisis is World War II: Original Cost: $288 billion, Inflation Adjusted Cost: $3.6 trillion

The $4.6165 trillion dollars committed so far is about a trillion dollars ($979 billion dollars) greater than the entire cost of World War II borne by the United States: $3.6 trillion, adjusted for inflation (original cost was $288 billion).

Go figure: WWII was a relative bargain.

I estimate that by the time we get through 2010, the final bill may scale up to as much as $10 trillion dollars…

Insert my standard spiel about our leaders’ unwillingness/inability to ask for sacrifice–and the war on future generations we are willfully conducting–here.

Michael Lewis on “The End”

November 27, 2008

If Michael Lewis’s stature as the best working business writer needed any burnishing, his Portfolio piece on housing-induced collapse of Wall Street certainly does the trick.  Referring to his 1989 classic Liar’s Poker, he sets the stage:

 thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”

Paul Kiel on Bailout Bingo

November 26, 2008

Paul Kiel’s brief article, “How Much Could the Government Lose in the Citi Deal,” is interesting both for what it is and what it is not. 

First, the Is.  This piece is the first I’ve seen that is a partnership between two non-profit entities, ProPublica and MinnPost, the former as a producer and the latter as a distributor of proprietary content.   Kiel also demonstrates the power of link journalism, incorporating the perspectives of the WSJ, NYT, and Washington Post, as well as linking to the original government term sheet.  And although this approach is traditionally more the stuff of a column or a blog post, he presents it as an “article” which was worthy of top story billing on the MinnPost site

As for the isn’t, Kiel breaks no new news.  Rather, he seeks to provide the connective tissue between bits of already broken news which are difficult to understand individually and out of context.    As such, it would seem that he isn’t doing much in service of ProPublica’s stated mission of investigative journalism that will break stories with “moral force.”

And I say, good for him.  Moral force is nice when you can find it; but so is “journalism in the public interest,” which is ProPublica’s official tag line.  Kiel serves the public interest by sacrificing his journalistic ego by organizing news rather than breaking it; by understanding that the basic unit of news can be “topic” or “fact set” rather than “story” or “article.”

Now, wouldn’t it be great if ProPublica could go one step forward, and create a dynamically updated “super page” for the rolling financial bailout, such that I could look for a story about Citi, but I also could go to a page that places the Citi situation amidst the other cases of federal largesse?  It seems that if “public interest” is roughly synonomous with “informed citizenry,” this task of contextualization is at least as important as the imperative to break new news.

Karen Olsson in Texas Monthly

November 24, 2008

Please, please read Ms. Olsson’s piece about the impact of the April immigration raid on the Pilgrim’s Pride chicken plant in the East Texas town of Mt. Pleasant.  This is just absolutely terrific reporting and writing.  Bravo.

Prospect 1: New Yorker Review of New Orleans Biennial

November 21, 2008

Peter Schjeldahl’s piece in the New Yorker is the review I would have written after attending the opening of Prospect 1 in New Orleans.  That is, if I could write remotely like Peter Schjeldahl:

Be it ever so small and poor, and despite catastrophic displacements, New Orleans can’t help but remain New Orleans, which is to other cities what a poem is to prose. The phantasmagoria of high and vernacular architecture, polyglot flavors, omnipresent music, exuberant cemeteries, and geographical unlikelihood, of a seaport largely below sea level, stokes continual wonderment. Desire isn’t only a street name there. A municipal tradition of giddy impulsiveness, shadowed by recent tragedy and chronic woes—including a high incidence of crime—has got to many of the invited artists in Prospect 1….You may disdain the frequent sentimentality in the show if you can suppress your own uprushes of sentiment. I could not.

The en masse arrival of the art world at  the scene of Katrina’s crime  produced a series of tableau that  not even curator Dan Cameron could have imagined.   Our small group beat the crowds to the Lower Ninth Ward on a crackling, breezy fall day,  the quiet surrounding Mark Bradford’s signature Ark both heartbreaking and preternatural.  A dozen stoop-sitting neighbors eyed us with more curiosity than suspicion; to be sure, ours was the only gleaming black Escalade they’d seen in quite some time.  Maybe ever, unless Brad Pitt has an Escalade.

Debbie, our thoroughly native driver, an attractive, forty-something blonde  with a swoon-inducing Cajun drawl, apologized for needing the festival-supplied  map.  It seems Debbie had never visited these parts, even though her own home is not more than 15 minutes away.  “Twenty,” she hedged through an embarrassed laugh, “with traffic. ” Parked as we were beside a weed-strewn lot, our vehicle’s air conditioner worthy of a sun-belt Wal Mart, traffic anywhere nearby seemed an unlikely abstraction.  The wind made the only sound that our party didn’t.

Then,  just up the road, the only evidence that anything like commerce once was conducted here:  the vestigial remains of a Long John Silver’s and a KFC, long since abandoned by their YUM Brands ovelords.  Was there a grocery store in this neighborhood’s past?  A laundromat?  No such evidence presented itself, and if the Captain and the Colonel knew, they weren’t talking.    A tight-lipped stoicism seemed to attend their recent demotion from quick-serve icons to street-corner relics.   Or to the contrary, maybe they had settled nicely into their sinecure, standing  silent watch over a neighborhood with few neighbors.  In either case, they didn’t seem to want for much, least of all company.

A companion muttered something about Cormac McCarthy’s The Road.

Then, farther over still, the tour buses, their drivers loathe to silence the loud and noxious engines.   Not with diesel at three buckas a gallon.  Shouted explanations of the installations, halted for translation into a handful of languages.  Cell phone cameras raised high.  Much Prada and air kissing, as if the scene were the Arsenale or the Shore Club; Pier 92 or the Schaulager rather than Ground Zero of America’s Greatest Natural Disaster.  Then, with the tacit and sudden purpose singularity of a fire-ant brigade, back on the bus.  Other wards to visit before cocktails back at the Windsor Court.

On each of the abandoned houses, a large, spray-painted X.   Each v comprising the X contains a coded fragment of devastation, inconsistently placed:  the date the house was searched;  number of living found; identity of the search team;  and other annotations addressed to no one in particular, e.g. “2 dogs ded undr porch.”

I asked Debbie about the difference in elevation between the French Quarter and the Lower Ninth; between moldy, fetid inconvenience and the death of a way of life.   “Ten feet,” came her quick, terse reply, fashionable sunglasses pointed resolutely forward.  Debbie’s answer was the stuff of received wisdom, not approximation.  She had pondered the deeper meaning of those ten feet many times.  “Look,” she said simply, directing my gaze to the high-water mark near the top of a very tall stop sign.

Said curator Cameron to critic Schjeldahl, and probably to dozens of others:  “I’m a tourism promoter.”  Perhaps that’s what I was while in New Orleans–a tourist.  Nonetheless, I felt like something else entirely:  a voyeur?   Maybe.  But this profoundly odd day was both more and less than voyeurism, both more pleasurable and more shame-inducing.  I’m left with a feeling, six weeks later, which I can no more describe than I can chase away.

NYT: “Wall Street Tries to Climb Back”

November 21, 2008

That’s the headline after the markets opened this morning.  What it really meant, of course, was that

The Dow Jones industrial average rose 149 points, or 1.9 percent, and the broader Standard & Poor’s 500-index rose 1.8 percent, a day after the major exchange dropped 5 percent or more for a second day.

Don’t junior high journalists learn not to anthroporphise the inanimate, especially what already starts out as a metaphor?   Who owns the headline style guide at the Paper of Record, anyway?

The more nagging question, of course, is why such things drive me crazy.