Opinion

Jack Shafer

Who jumped first from the newspaper sinking ship?

Jack Shafer
Jun 15, 2012 22:21 UTC

When did the ripe, bulbous, and gibbous newspaper bubble pop?

It was probably in the 1990s, when the business better resembled a cruising blimp than it did the dotcoms like Pets.com, Boo.com, and TheGlobe.com, which all went kerblewy around the turn of the century. Unlike the bombing dotcoms, the high valuation of newspapers was based on real, not imaginary profits, and the belief that the profits from these deals would extend for years, if not decades, into the future.

And such deals there were. The New York Times Co bought the Boston Globe for $1.1 billion in 1993. In 1997, McClatchy acquired the corporation that owned the Minneapolis Star Tribune for $1.4 billion and Knight-Ridder purchased the Kansas City Star and Fort Worth Star-Telegram (and two other smaller papers) for $1.65 billion. On the sidelines, newspaper consultant John Morton crunched the numbers and expressed the market consensus about these transactions in the headline for his January/February 1998 American Journalism Review column: “Expensive, Yes, But Well Worth It.”

Morton’s column provides no sense of the impending doom, no inkling that an entire industry is arrowing its way to a hospice, no clue that all these newspaper people have booked passage on a death ship. Even after the Hearst Corp ditched its San Francisco Examiner for a $660 million deal to buy the San Francisco Chronicle in late 1999, more happy talk ensued. If anybody cited Warren Buffett’s 1991 warning that newspapers had lost their special “franchise” value and that he wouldn’t be buying any more of them soon, I missed it.

The newspaper faithful were still such strong believers at the end of the century that the Washington Post, one of the most prudent newspaper operations in the universe, opened a new $130 million press facility in 1999. By 2009, the company had to shutter the place. The Post wasn’t being stupid when it built the plant, it just misread the contraction of newspapers by a decade. Many newspaper owners continued to think that profits would fund expansion forever. Arthur Sulzberger Jr. completed a modern Renzo Piano-designed Manhattan office tower for his New York Times in 2007, and as recently as 2008, Rupert Murdoch was completing construction of a new $290 million printing complex for his London newspapers.

Every seller has good reason for unloading his property, but until bubbles pop the news coverage accentuates the buyer’s brilliance and vision. Thanks to the genius of hindsight, we know that the sellers of the Globe, the Star Tribune, the Chronicle, the Star, and the Star-Telegram were the dealers and the buyers were the marks. But I doubt if any of them were making a shrewd market call when they sold. The Globe, Chronicle, and Star Tribune went on the market primarily because the sprawling families that owned the properties had lost interest in the business and preferred cash to dividends. The Star and Star-Telegram went to the block because their owner, Disney, which had recently acquired them in another deal, wasn’t interested in the press.

What happens to Tribune after bankruptcy?

Jack Shafer
Jun 11, 2012 22:40 UTC

Choking softly on the wad of debt “rescuer” Sam Zell fed it, Tribune Co checked into a Wilmington, Delaware, bankruptcy court at the end of 2008. Now newly slimmed, especially after the payment of $410 million in legal and other professional fees, the much diminished patient is about to be released and turned over to its new owners, a group of banks and hedge funds. How diminished? At the time Zell acquired control in 2007, Tribune Co’s newspapers, television stations, other media properties and Chicago Cubs baseball franchise were valued at $8.2 billion. Reporting from court filings, Chicago Tribune reporter Michael Oneal put Tribune Co’s current value at about $4.5 billion.

That’s not a haircut. That’s a beheading. Some of that loss in value represents the sale (for $845 million) of Tribune’s Chicago Cubs operation in 2009, but still.

What will the likely new owners (JPMorgan Chase; Angelo, Gordon & Co.; and Oaktree Capital Management) do with the reconstituted Tribune Co? According to Oneal, who has been monitoring the ailing company’s vitals since before its bankruptcy, Tribune isn’t so sick that it must sell off all its parts immediately. But hedge funds and banks aren’t the best managers of media properties, and when combined with today’s declining market for media properties, those hedge funds and banks might want to put out a for-sale sign as soon as possible. I’m sure that if you were interested in Tribune’s 23 TV stations, which are valued at $2.9 billion, they’d meet you for coffee.

The great newspaper liquidation

Jack Shafer
Jun 5, 2012 22:53 UTC

In his 2004 book The Vanishing Newspaper: Saving Journalism in the Information Age, Philip Meyer imagined “the final stages” of a “squeeze scenario” by a newspaper owner who wanted to exit the business but didn’t want to actually sell the title: He would start charging more for his newspaper and delivering less, commencing the “slow liquidation” of his property. This slow liquidation would not be immediately apparent to observers, Meyer wrote, because the asset “being converted to cash” would be “goodwill” – the newspaper’s standing in the community and the habit of advertisers and subscribers of giving it money.

One reason an owner would want to extract a newspaper’s goodwill value before selling its physical assets – its real estate, presses, computers, trucks, paper, ink, etc. – is that traditionally, goodwill is where most of a newspaper’s value has resided. When Meyer asked two newspaper appraisers to estimate how much of a newspaper’s value was locked up in goodwill versus physical assets, both gave him the same answer: 80 percent goodwill, 20 percent physical assets.

Selling goodwill is a dangerous strategy because once sold, it’s difficult to reacquire. But a newspaper owner who feels trapped by losses and can’t find a new owner at what he considers a fair price may feel he has no alternative but to cheapen his newspaper bit-by-bit, month-by-month. He may explain the goodwill sell-off as temporary economizing to be reversed once business conditions improve, or even as the exploration of a new business model. Sellers of newspaper goodwill might protest that the financial losses they’re absorbing constitute a serious investment in the newspaper’s future, that they’re harvesting nothing. But don’t be fooled. If you’re winding your company down with no strategy to wind it up, you’re burning goodwill even if you don’t acknowledge it.

Drug panics, bath salts, and face-eating zombies

Jack Shafer
May 31, 2012 23:26 UTC

Last Saturday afternoon, a naked man gnawed off most of the face of a half-naked man on a Miami causeway. He continued chewing even after police shot him and did not stop until they shot him dead.

Things like that don’t happen everyday – not even in Miami – so quite naturally the horror story has been picked up by every flavor of media around the world. The most sensational – and I don’t mean that in a good way – coverage came from local TV station CBS4 (WFOR-TV). On the day Rudy Eugene attacked Ronald Poppo, CBS4 relied on the musings of the president of the Miami Fraternal Order of Police and an emergency room physician – neither of whom attested to having firsthand knowledge of the case – to speculate that the attack was caused by a new kind of LSD, by a mixture of drugs, or by “bath salts,” the street name given to the many quasi-legal, over-the-counter stimulant concoctions that are packaged and sold under such wacky brand names as “Ivory Wave,” “Vanilla Sky,” “White Cloud” and “Zoom.”

Before any criminal lab could determine that Rudy Eugene had drugs in his system, some outlets, including the Guardian, the New York Daily News and CNN were seizing on CBS4′s reporting to vilify a “new” drug and its users, exaggerate the peril it presents and launch a new drug panic. To believe the early press accounts about bath salts – recall last year’s story of a West Virginia man found in bra and panties next to his neighbor’s murdered goat – madness comes in a $20 package of powder, the product gives its users superhuman strength, and they may have turned a 31-year-old man into a flesh-eating zombie.

The cable news audience has peaked

Jack Shafer
May 24, 2012 21:15 UTC

CNN’s rotten ratings have grown only rottener. The Time Warner-owned news network drew fewer prime-time viewers last week than any week since September 1991, the New York Times just reported. But CNN isn’t the only network riding the down escalator when it comes to ratings. Over the same week, Fox News Channel attracted its fewest viewers in the important 25-to-54-year-old category since July 2008, the Times added. * But CNN isn’t the only cable news network in the doldrums, according to year-by-year data. Various observers have blamed the viewership downturn on the lull in the 2012 campaign, on viewers defecting to the season finales on the entertainment channels and on the lack of breaking news. But I interpret the falloffs as fresh evidence that the audience for cable news has peaked.

The first sign of a peak in cable news appeared in March 2011, when the Pew Research Center released a study that proclaimed, “Though many will remember 2010 as a hard year for CNN, in reality, most cable news channels suffered audience losses.” The able chartists at Pew drew a sad graph of cable news. Combined median viewership for CNN, Fox News and MSNBC during prime time had receded 16 percent, to 3.2 million, that year. Mean viewership had also dropped 13 percent, to 3.3 million, making it the largest year-to-year drop for cable news since Pew started analyzing the numbers in 1997. It also marked the first drop in the median audience since 2006.

The bad news continued through 2011, as cable news viewership remained nearly flat. This was fairly astonishing considering all the breaking news from that year – the Arab Spring, Japan’s tsunami, the killing of Osama bin Laden, the Libyan civil war and the European economic crisis – not to mention the bustle of the presidential campaign.

So Warren Buffett likes newspapers again?

Jack Shafer
May 18, 2012 23:05 UTC

Just because Warren Buffett blew $142 million in cash on 63 daily and weekly Media General newspaper titles yesterday doesn’t mean that newspapers are back. All it means is that an old cow that’s still a milker has been moved to a neighboring farm’s pasture, where it will be squeezed until it can give no more and will then be ground into pet food.

Buffett has long loved newspapers, having made about a half a billion dollars on the Washington Post Co. after his company, Berkshire Hathaway Inc, started investing in it in 1973. In 1977, he bought the Buffalo Evening News for $32.5 million, and after it vanquished the city’s other daily, it became one of the country’s most profitable newspapers, as measured by return on assets.

But Buffett isn’t romantic about newspapers. He buys when he sees value that others don’t. For instance, in a lecture he gave at Notre Dame in 1991 (pdf), Buffett explained why he bought Washington Post Co. stock.

Candidate-press relations are, well, about as ‘sour’ as usual

Jack Shafer
May 16, 2012 23:53 UTC

Having secured the nominations of their parties, Barack Obama and Mitt Romney have set their campaign throttles to late-spring idle with a speech here, a speech there, a commencement address over there, and fundraisers and soft TV appearances everywhere. Eventually, the two candidates will stop coasting, but until they do, reporters will continue to lard their work with exercises in meta-journalism, such as today’s 1,800-word Politico piece, “Obama and Romney’s common foe.”

The common foe, don’t you know, is the press! According to Politico’s Maggie Haberman and Glenn Thrush, Barack and Mitt both “disdain” the “political news media” because they believe reporters are “eager to vaporize them for the sheer sport of it.”

Is there anything new about presidents and presidential candidates having bad feelings for the press? Does nobody recall John McCain’s low regard for the New York Times coverage of his 2008 campaign? Or of George W. Bush’s attitude toward the press? Bill Clinton’s scorn? George H.W. Bush’s hatred? Carter’s? Nixon’s? Johnson’s? Sometimes candidates do charm the press, as McCain did in 2000, and the anti-war candidates of 1968 and 1972, but it’s the exception, never the rule.

Aiming for Bradlee but missing

Jack Shafer
May 9, 2012 14:21 UTC

This review originally appeared in the Washington Post on May 6, 2012, and is being reprinted by permission of the Post.

Jeff Himmelman uses his new book, Yours in Truth, to take shots at Bob Woodward, Carl Bernstein and their 1974 book, All the President’s Men. But Himmelman’s fire does not come from the usual redoubt of Watergate revisionism. He is a former researcher for Woodward, one who worked so diligently on Maestro the reporter’s 2001 book about Alan Greenspan, that Woodward gushed about him in his author’s note.

“Jeff Himmelman,” he wrote, “was my full-time collaborator at every step of this book—reporting, writing and editing. … A truly remarkable man of unusual maturity, brainpower and charm, Jeff is an original thinker who retains a deep sense of idealism. … This book would never have been completed without him, and it is his as much as mine. I consider him a friend for life.”

Anatomy of a leak, 1966-67

Jack Shafer
May 8, 2012 15:27 UTC

Every leaker of information has an agenda. The leaker can be an honest whistleblower, a spinner, a junior Machiavelli, a nut job, a misinformed flunky or a combination of several of the above. But with every trickle of privileged information, the leaker invites other interested parties to leak their side of the story, setting institutions against institutions and publications against publications.

An extraordinarily well documented account of battling leaks appears in Marigold: The Lost Chance for Peace in Vietnam, a new book by George Washington University history professor James G. Hershberg. Professor Hershberg’s exhaustive book – and by exhaustive I mean 936 pages long – draws on declassified diplomatic cables, foreign archives, countless interviews, and reporters’ private notes to recount the breakdown of secret Polish-Italian efforts in 1966 – code-named “Marigold” – that hoped to coax the United States and North Vietnam into direct peace negotiations.

Like all history lessons, Marigold charges a high price for admission. If you’re not already a student of the Vietnam War or weren’t reading newspapers in the 1960s, the players will sound sketchy and the dispute ephemeral. But I promise a payoff: Marigold etches a template that can provide relief for today’s news consumers who find themselves perplexed by dueling accounts in competing publications. It teaches that sometimes the real news is often who is leaking, and that’s news that can’t often be found in newspapers.

Rupert Murdoch’s escape act

Jack Shafer
May 1, 2012 21:49 UTC

The publication today of Parliament’s 121-page report (pdf) on phone hacking has the British press all but publishing obituaries for Rupert Murdoch. The report damns him for turning “a blind eye” to the scandal of phone hacking at his companies, News Corporation and News International.

Murdoch is not “a fit person to exercise the stewardship of a major international company,” the report concludes, leveling a hammer to the media baron’s head. As the Telegraph interprets this finding, BSkyB, the UK satellite broadcaster that Murdoch owns 39.1 percent of, is “vulnerable” to a challenge from the regulators at Ofcom. If the regulators applied their “fit and proper” test to BSkyB, they could cancel its broadcasting license, order News Corp. to reduce its holdings in the broadcaster and oust Rupert’s son James Murdoch from its board of directors. The BBC seconded the Telegraph‘s take, and the Telegraph and the Guardian speculate that the report will echo in the United States, triggering criminal prosecutions and unending damage to Murdoch’s corporate reputation here.

Murdoch’s corporate counterattack today states that News Corp. has “already confronted and … acted on the failings documented in the Report,” insisting that the company has righted all the wrongs. In a memo to his 50,000 employees, Murdoch remained defiant, minimizing corporate wrongdoing and maximizing the corrective measures his company has taken.

  •