Analyze this
You know how JR and I have been talking so much about better journalism here at the N&R? Turns out we've been wasting our time:
Analyst Ed Atorino of Benchmark Capital called high-quality journalism "almost irrelevant" to a newspaper's overall financial health. He said a paper should provide timely, interesting information without errors. "But does it have to be Pulitzer Prize-winning?" he asked. "No."Atorino cited his former hometown's weekly newspaper, the Chatham (N.J.) Courier (circulation 3,000), which "covers local stuff: the Kiwanis, the football game, pictures of the 80-year-old lady that retired. You don't need 'quality' journalism. It's information. It's value.
"I think the whole idea of quality journalism is overrated," he said. "Pulitzer prizes haven't saved Knight Ridder, case in point. I'm sure from some perspective quality journalism is better than lousy journalism, but perfectly average journalism is fine."
Note to self: Move investments from Benchmark Capital BEFORE LUNCH.
Beyond that, where to start?
Well, let's start by scattering this implicit straw man to the four winds. As I've pointed out previously way too many times to bother linking to an example, news content very seldom drives circulation -- at least, it doesn't drive it very far or for very long on a day-to-day basis. (Note to the so-called newspaper-bidness analyst: That's why even small newspapers have circulation departments.) I don't know if I ever heard what our single-copy numbers were on 9/11/01 or the next day, but prior to that, our highest-ever sales of extra single copies was on the first day of the 1991 Gulf War, when we sold about 1,000 papers more than we normally would have expected to sell. At the time, the paper retailed for a quarter, so that's a whopping $2,500 in windfall revenue, less than we were getting even then for a full-page ad running for a single day.
(If you've ever accused the N&R of publishing a story "just to sell papers," go back and read that paragraph again.)
No, quality journalism doesn't sell papers on a day-to-day basis. What it does do is build up the paper's standing in the community as an independent, trustworthy source of news and information and as, by extension, a good place to advertise. That standing isn't just a warm feeling in my tummy. Accountants call it "good will," and although it certainly is intangible, it constitutes a large majority of the market value of a newspaper in most cases. (Which is another fact of which this "analyst" shouldn't have to be reminded.)
So just remember that if somebody in the financial industry tells you that average journalism is just fine, he probably has a stock he's trying to sell you.
Comments (4)
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There's some truth in what he's saying. The law of diminishing returns kicks in at some point. He's probably making the point about prima donnas with big salaries and low outputs.
Posted on April 19, 2006 12:30 PM
Well, there's nothing in the piece that suggests that, David. In fact, although the reporter certainly could have gotten this wrong, the context -- the awarding of Pulitzer Prizes, along with the recent purchase of Knight Ridder by McClatchey -- suggests he's talking about industry finances, not individual cases.
If he is in fact talking about the big picture, then he's betraying a startling lack of understanding about the business side of the business, which is something he makes (presumably) big bucks to know something about.
And why is that bad? Because people are going to make nine- or 10-digit financial decisions based in significant part on what analysts like this guy tell them, with ramifications for the thousands of employees whose livelihoods and lives are affected by those decisions, as well as for investors. I don't expect such analysts to be perfect, but I don't think it's unreasonable to expect them to understand at least the basic components of a company's financial operations and net worth.
Posted on April 19, 2006 1:02 PM
Don't get me wrong, I'm all for high quality journalism. Actually I'm for high quality anything. I think people should do their jobs well.
However, he's looking at this from a cost standpoint. Presumably it costs more to have a Pulitzer Prize quality reporter on a newspaper staff than it costs to have an average reporter. If nothing else it takes the Pulitzer Prize guy longer to craft his articles and thus he produces less. So how much does the high quality guy increase circulation? Do people buy the local paper because of high quality writing and reporting about local stories or are they satisfied with the basics? You've got people on your staff who are better writers than others I'm sure. And I bet you know exactly who they are. But I don't. I haven't a clue. When I read the N&R, I rarely check to see who the author of a story is unless there's some glaring bias or error. Most of the time I move from article to article oblivious to a change in style. I suspect most folks are like me. (I will say though that the overall quality of your paper is better than the Burlington paper. However, your paper isn't as good as the WSJ. And that's all fine. You're serving different markets and I'm a customer of each of you and I'm only really influenced by high quality when it comes to the WSJ.)
Think about it like this from a financial standpoint. Let's say I own a ditch digging company. You hire me to dig a ditch. Your specs are that it be twelve inches deep, six inches wide and ten feet long. If I send an employee out to dig the ditch and he exceeds your expectations wildly by digging a perfect ditch that has perfectly square corners and all specs of dirt removed, what has my company gained? Maybe there's good will, maybe there's not. Maybe you appreciate a perfectly square ditch. Maybe you don't. Maybe you think the guy wasted his time. More likely you don't notice at all. However, what have I lost? I may have lost a chance at another job since my employee spent all day at your house. Or maybe I had to hire another guy, so I've got twice the expense.
The point is that by concentrating on an aspect of the process that may be peripheral to what drives sales, costs get out of control and get out of control in a non-productive way.
Posted on April 19, 2006 1:42 PM
I agree with your point, David; I just don't think that that is the same point the analyst was making, the explicit Pulitzer reference notwithstanding.
I think he's saying that in general, quality journalism is an unnecessary expense. And I say that because I'm giving him the benefit of the doubt on the question of whether he realizes that it's not just Pulitzer-winning work that is difficult and time-consuming (and, therefore, expensive).
And I'm also saying that to debate whether or not quality journalism increases routine operating costs is to misunderstand the role that quality journalism plays in the financial value of the paper.
Quality journalism does not, necessarily, increase circulation and, therefore, revenue (although it might, a little, in isolated cases). Nor, conversely, does it necessarily increase expenses and therefore, all other things being equal, decreases profit (although it certainly would, carried to extremes).
In other words, quality journalism fits into the financial picture, but generally not in the routine operations, the day-to-day and year-to-year statements of profit and loss.
Quality journalism's role in the financial side of the paper is that it enhances the newspaper's net worth by increasing the largest single part of that net worth -- good will.
Posted on April 19, 2006 2:10 PM