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Steve Newhouse

steve-newhouse

Steve Newhouse, 56, is a graduate of Yale University. After college, he worked as a newspaper reporter and editor at the Portland Oregonian, and the Springfield Republican.In 1983, he became Editor of The Jersey Journal in Jersey City, NJ, where he worked for 10 years.

Subsequently, he became involved in digital media for the parent company of his family business, Advance Publications, Inc. He is currently chairman of Advance.Net, the digital division of Advance Publications.

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INTERVIEW TRANSCRIPT

Martin: …Steve Newhouse. New York. March 14th, 2013. Let’s just start with when did you first realized that electronic media, digital media was going to have a meaningful impact on publishing of any kind. Magazine publishing, newspaper publishing. What was your first time?

Steve: I first became aware in the early ’90s when there wasn’t an Internet yet. It was called “New Media.” No one quite knew what that was but everyone was afraid of what it could be and wanted to become more familiar with it. And so, I was editor of the “Jersey Journal” in Jersey City, New Jersey and in the third generation of a family business. Because no one else in the business really cared or wanted to pursue new media, I elected myself. That’s how I started learning and experiencing what was then new media.

Martin: What was that? Was it AOL? Do you remember?

Steve: There was the first of the online networks. It was Compuserve and Prodigy and AOL.

Paul: So closed wall garden model.

Steve: Walled gardens and…I joined a consortium at MIT, News in the Future, which was a really pioneering effort by Nick Negroponte, who ran the Media Lab, to investigate the changing landscape and remarkably accurate in its focus and prediction.

Paul: Do you remember any of them? Can you recall any of that?

Steve: I remember sitting with the grad students in the Media Lab and hearing a view of news that was digital, that was interactive, and it was community based. That was very different from the kind of news that I was dealing with in Jersey City. I actually saw the Internet for the first time in the Media Lab. It was before Netscape. It was text based. It looked like the early computer programs where you typed in equations and got an answer. They were actually playing something called NetTrek on what was the Internet, but no one really knew what it would become.

Paul: Did you have any inkling at that moment that it could become something else, or did you just look at it as curiosity?

Steve: Over time, at the Media Lab, I became convinced that the Internet was the way of the future. We then decided to embrace the Internet as our publishing platform. We never did a deal with CompuServe, or Prodigy, or AOL. At the same time, as I was learning about the digital future at the Media Lab, we had become interested in an unknown magazine called “Wired,” which had been founded in Amsterdam by Louis Rossetto and Jane Metcalfe. We made an investment in Wired.

Martin: What year was that? Do you remember?

Steve: It was early ’90s. I’m really bad on dates.

Paul: ’93 maybe? 92?

Steve: I can check it out but…

Martin: Negroponte had a relationship in that, too.

Steve: Yes, Nick steered us to Wired, and it was a fantastic relationship. On the one hand, I was becoming more educated through the Media Lab, and on the other side, I became the advanced representative to Wired. I would go out there every couple of months and sit with Louis and Jane, and they were really pioneering people. Then we were starting to do our own digital development. We had hired Jim Willse, who was then the President of the “New York Daily News,” to become our first new media executive. That was the early ’90s. Jim had an office at the Jersey Journal where I worked, and we were basically it, the two of us.

Martin: How did that evolve into CondeNet?

Steve: In the early ’90s, we decided to start Internet sites. It was really based on the first Internet site that ever existed, which was at Wired magazine. It was called “Hotwired.” I saw how Wired was starting to develop on the Internet. They were the first publisher to…

Paul: Did you say your first application being in the newspaper business or in the magazine business, or did you not say it that way?

Steve: Concurrently. I was interested in taking what I was seeing at Wired into both the local and the CondeNet spaces. Jim Willse hired Jeff Jarvis, who was a friend of his, to run our digital operation for that local group. Jeff started planning a site which would become NJ.com. As a sense of how early we were, we were able to sign up URLs like NJ.com, Cleveland.com, Syracuse.com, because no one was doing websites with those names. Now, if I had really been smart, I would have bought a thousand of the best URLs and made hundreds of millions of dollars. But, so be it. We just bought city names.

On the national side, we tried to think of how we could apply what we were seeing at Hotwire to magazines, and we decided to start a food site and build a Hotwire like site for food, because we thought looking for recipes would be a good application, which it turned out to be. That’s when we started “Epicurious.”

Paul: I remember that. The editor, what was her name…

Steve: It was Joan [Feeney] was the editor.

Martin: I was always curious to me because you had these incredibly big food brands, like “Gourmet” and “Bon Appetit,” and yet you decided to do a new brand, that was unique at that point, because everybody was just simply taking their old brands and, yeah…

Steve: I think we felt that we needed to give the new medium new brands, and experiment with new things. Epicurious was both a site that combined content from the two food magazines, at the time, Gourmet and Bon Appetit, with a searchable recipe database, and all sorts of other enhancements. With the Epicurious brand, we were able to include both Gourmet and Bon Appetit, and also all sorts of other features that made it to the Internet. Most importantly, we believed early on in interactivity, and we allowed our users in Epicurious to comment on recipes, so the recipes became annotated with the comments of people who actually used them, and that became very popular.

Paul: Did you see a lesson somewhere else that led you to go a different direction, because it was trying to create a new format and a new medium, not just a blueprint to this online world, which so many did?”

Steve: I think that the lesson of “Wired” was instructive, that they really felt Hotwire should be something special and different and not just a digital version of “Wired” magazine. I think that gave us the courage to try something different.

John: It was so separate, as I recall, that they actually sold it separately from the magazine. Didn’t they sell the website and then sell the magazine?

Steve: They had a dedicated staff, yes, which was good at the time, because there were so little dollars in digital that magazine sales staff, which was selling hugely expensive packages. They weren’t going to bother with tiny digital buys.

Martin: At about that time, a bunch of websites came into being. All of these different media collided. The cable folks, the broadcast folks, newspapers, et cetera. A culture of free evolved. Those of us from the print world were always used to charging for content. There’s a subscription price for magazines, as well as for newspapers. Was it a big deal that these sites were being offered for free? Or did you not think very much about that?

Steve: At the beginning, no one was building an audience like crazy. Even on a free platform. It was still relatively new. The Internet use hadn’t grown to the point where it did. Just getting a critical mass of users was a challenge. If we had charged, at that moment, we might never have built up anything.

John: We had an interesting interview this morning, with Gordon Crovitz, who talked about the reason that Dow Jones never gave it away. It was the fact that they had 100 year history of selling an electronic news service, real time news, and they’d always charged for it. It wasn’t in their DNA to give anything away. They got a lot of credit for being visionary. But he says, mainly they already were doing that. And changing from the DOW Jones news service to the Internet was not as profound a shift as it was for somebody like The New York Times, who had no wire service 24/7. They just produced a daily newspaper. It was a different culture.

Steve: I think The Wall Street Journal’s lack of a critical mass in the early days, allowed a site like Market Watch to grow like crazy. Didn’t Dow Jones eventually buy MarketWatch for like…

Martin: 580.

Steve: $580 million, making Larry Kramer rich.

John: Culturally, was there a big difference between the newspaper side of your business and the magazine side of your business, vis a vis the Internet?

Steve: Culturally, there’s a complete difference between the magazine and newspaper worlds. There is, naturally, a different sensibility. The early pioneers of the Internet were willing to try things, and embracing an approach that was different than the print sensibility, especially the interactive elements. That helped make it grow.

Martin: Going back to Epicurious. You launch Epicurious and it gets a lot of notice. What did you learn in those early years? What were the key things that you took away from Epicurious, that you then took to some of the…

Steve: The most important lesson was that, unlike print, which was very much an us to them paradigm, where really great editors selecting content and presenting it brilliantly could attract a great audience and make a great magazine or newspaper, the web was a very interactive experience. It was important for the readers, the users, to participate in the process. Epicurious didn’t just have amazing recipes. It had readers discussing the recipes, improving the recipes, offering solutions. On the local side, the users of our local sites like NJ.com started jumping in and talking about things that were interesting to them. The Giants or the local political races, in different counties in New Jersey. That became really great content and made the site grow.

John: Can you remember your evolution of your thinking, from being excited about the Internet as an opportunity, to becoming concerned about any threats it might have to traditional models? The whole innovator’s dilemma situation, where you go, “This is a great thing, but we have this other great thing here.” How did that evolve in your world?

Steve: One of the many areas that we fell down on was, we didn’t realize how, in the newspaper side, the pure played classified category killers would have such a profound negative impact on newspapers.

Martin: You were part of Career Path, weren’t you?

Steve: We were not part of that. We were part of some group classified plays. But we didn’t sense, early on, how destructive to the newspaper revenue model both free and vertical classified sites would be. As they started taking share away from us, that’s when we realized that the Internet was going to be a real challenge, as well as an opportunity.

Martin: Craigslist first and then the paid verticals second?

Steve: Probably in that order.

Martin: Monster.

Steve: Yeah. People started searching on the Internet, rather than searching in our newspapers.

Martin: There was a paradox, certainly at the Times. I think this was true at The Globe, as well. 2000, which was the height of the dot com boom, was the height of our classified businesses, too. People think it happened in the nineties, but it didn’t happen until after that bust and the recession. Because everybody was taking a big sigh of relief. They thought, “The Internet’s over.” I’m not speaking for you. But a lot of people said, “Hey, the Internet’s over. We can go back to printing newspapers and magazines now.” The classified business never recovered from that recession. It just went right down after that. Fascinating how the dot com boom fueled the classified business during those years.

Paul: And ended a subsidy to the newsroom, or a partial one.

Martin: That’s where I was going to go next. Speaking of the newsrooms, what do you see as the principle benefit of…How do you think that local journalism will play out on the news side? In other words, is it about the interactivity? Do you view local bloggers as being important? How do you view the emerging kind of relationship of newspapers to local communities coming about?

Steve: I think on the news side, much more so than on the revenue side, the Internet has offered some tremendous opportunities. First of all, as the Internet cycle because a 24 hour cycle, it allowed our local news operations to play in the game in a way that we hadn’t been able to at a time when television and radio were the only mediums that allowed continual access to the news. When cable introduced 24 hour news channels that really heightened the challenge to newspapers who are only really able to reach customers once a day. But the cycle on the Internet allowed newspapers to play in the up to the minute news game, and we played really well, and our local sites outstripped televisions as the leading sources of local news on the Internet.

It also gave our newsroom the chance to participate in different types of mediums, such as video, and that’s been a huge opportunity. The multimedia newsroom is a consequence of the Internet and gives us a stronger position locally, a position which we hope over time will result in a very re invigorated local franchise.

Martin: I’m going to skip to another topic just because I think it’s something that few people even know about, and that’s [your investment in] Reddit.

[edited]

Steve: We’ve always been interested in community plays and interactive plays, and so when we first met the founders of Reddit, who I think were barely out of the University of Virginia and they were living in Boston. I think all three of them were in a one bedroom apartment. We saw what they were doing, which was allowing a community to decide what news was interesting them and ranking news based on the communities voting and then allowing the community to comment on the stories that were presented. That was right up our alley, and we really saw great value in what they were doing. I think it was in 2007, although my dates are hazy. It could have been a year earlier or later we hit it off with the founders and really within six months did a trial of the Reddit technology in the entertainment area, and it was through CondeNet at the time.

We built a site called, “lipstick.com,” which used the Reddit voting to rank entertainment, and it was not a huge success, but it was a proof of concept that you could use the Reddit concept in different ways. Within a couple of months after that, we acquired Reddit and really became committed to helping these founders succeed.

They had a three year contract, and in the next three years, they helped grow Reddit on the trajectory that today really has put it at the forefront of news on the Web with 40 or 50 million users a month, and just last month in February we had our biggest page view month. We had the first month over four billion page views.

Martin: Is there a business model for Reddit? What are your thoughts about how it can be a…?

Steve: Certainly Reddit’s scope gives it the opportunity to do many different things. I think that it’s important at looking at a company like Reddit, which in an incredibly high growth company, not to impose a business model until it evolves organically and until it really also supports the community itself. Facebook had a 20 billion dollar valuation before it saw any revenue at all. It’s not foreign to the growth of great companies to grow without a clear business model for a long time. Reddit, we feel will be a tremendous company as well as a great website. It’s still finding its way.

One thing that we’ve done over the last year or two is try to set it up more as an independent company that mirrors the great companies like Facebook and Twitter that really have the opportunity to grow organically. We recapitalized the company so that equity could go to the management team.

We went out and found a CEO from the technology world, Yishan Wong. Yishan was an early director of engineering at Facebook and had previously been at PayPal, and really knew how to drive a technology team. We think with Yishan’s leadership we have a tremendous opportunity with Reddit and it continues to grow dramatically.

John: One thing we haven’t talked much about is the advent of paid search and the enormous impact of Google on all your industries and they’re now approaching 50 percent market share of all advertising dollars spent. How do you see that playing out as we go forward, and looking back on it, could it have been any different, or not?

Steve: There have been companies that have dominated various eras of the Internet. First it was AOL, which really was the gateway to the digital world for a long time and became a gigantic company. And then, when the walled garden kind of fell apart, search…Yahoo became a dominant company as a portal to the digital world. And then search…

[inaudible] It went from ramp to guide.

Steve: Search became almost the gating factor in digital content. I don’t know if that was inevitable or if the brilliance of the Google algorithm furthered that, but who knows if it will stay that way, because certainly social media and Facebook has now put a dent in the Google world.

John: That’s what led me to the question. You’re talking about Reddit as wanting it to be like one of the great companies like Facebook or Twitter, and you didn’t mention Google as the great company. Is it your Google killer, or your Google defender, or…?

Steve: No, I guess I mentioned relatively young companies, whereas Google now has been around long enough to be really more of an established tremendous success. I think aspiring to be like Google or startups that emerged in the Valley and became great companies is certainly what we hope for with Reddit.

[edited]

Martin: I wanted to go back again to the Epicurious conversation and one of the themes that has been woven throughout these conversations is this idea of separate versus integrated organizations. One of the things that you guys did first was create CondeNet as more or less a separate organization. We created “New York Times Digital.” Do you think in retrospect that was a good idea, to break something out and manage it separately, or do you think it would have been better if you had kept everything inside of the core business and managed it from the inside?

Steve: I think at the time early in the growth of the digital world, it needed dedicated people who didn’t have tremendous responsibility for other mediums, and to have started Epicurious within the Gourmet organization or the Bon Appetit organization. It would have had a hard time getting the attention it deserved, and also the sensibility for building a website or a digital operation was very different from a print organization. It really needed its own team to jumpstart where it needed to go. But later as the leadership of the company as a whole became more attuned to the digital world and as digital became more mainstream and more important, that started to change, and now we have a Wired operation, for example, that is completely integrated and functioning at a very high level.

Martin: Is that true across the organization, Steve? Is very every part of the organization integrated at this point?

Steve: It is. Everything is integrated.

Martin: Is that going well?

Steve: I think it took a while to get to a really effective integrated operation, and there were some speed bumps along the way, but it was a learning curve that could be expected and turned out be very positive that, right now, we’re really hitting on all cylinders and Wired is just going from strength to strength both as a print magazine and as a website.

Martin: So you guys joined with some of the other magazine publishers in this consortium. I think it’s called “Next Issue.” Can you talk about that a little bit and what you think that will do?

Steve: Next Issue media is a digital newsstand for digital editions of magazines, and the digital replica editions have been very popular and are really attractive compelling products. The iPad and the Kindle and other digital devices are tremendous platforms for digital content. They’re almost like super high grade paper, because they show photography so beautifully. If you read Vanity Fair on a tablet, it’s really remarkable how well it looks. Magazines like the New Yorker have proven to be popular not only on pads but also on smart phones. The smart phone audience reading the New Yorker was a pleasant surprise. A lot of people said, could you really read a long New Yorker article on the subway on a phone? The answer is yes.

Martin: Do you think that’s really a big part of the future, the idea of electronic distribution on these?

Steve: I think it will be an exciting part of the future. Next Issue Media has come up with a really clever offering, which is a kind of cable subscription to whatever magazines you’d like to read for a flat fee. That cuts across all the major magazine publishers. I can choose some of my favorite magazines, Sports Illustrated and Vanity Fair and the New Yorker and each month, or each week, I get an email that the new issue has arrived. I can read my favorite magazine on my iPad.

Martin: How much is that? Flat fee, do you remember?

Steve: I don’t remember the pricing.

Martin: The money flows based on usage? Is that how it works?

Steve: I don’t know the exact details but it’s shared among the publishers whose magazines are selected.

Paul: You actually jumped to the conclusion, but the march of technology. So if we had barely get online with AOL and it was dial up, which you couldn’t do much compelling on the screen. The more interesting the site, the slower and the less appetizing it was. Then we got broadband, which helped, but it was still locked to a desktop. Mobile and tablets and high resolution and broadband have changed it, but it’s still not television, but you can see where it will be full motion video and it’ll be like TV and another iteration or two. Do you think that creates a whole new business modem environment for publishers?

Steve: The one thing that you can guarantee in the digital space is nothing stays the same for very long. There will certainly be new iterations of models and products. No one would’ve guessed that you would suddenly, in the space of a couple years, be connected to your friends all over the world through a digital site like Facebook.

You would be able to see what they were reading and discover interesting news stories because they had posted them on their feed. It was almost incomprehensible until it actually happened. I think there’s going to be more opportunity like that and more challenges.

Martin: Do you have a view? I noticed two days ago, LinkedIn acquired Pulse. Do you have a view of how copyrights should be or have been managed online? In other words, there’s this tug and maybe Reddit’s a little bit part of that, but there’s this tug between this notion of free links and open web and the idea that much of the values seems to be accruing to the guys that aggregate, not create. Do you have a view of that?

Steve: I’m not really a lawyer…

Martin: No, I know that.

Steve: It’s hard to really…I think that in the end, whoever delivers the best product to the audience is the winner. I think the compelling nature of Facebook, for example, has more to do with how it’s evolved over time and continues to change and find new value. That’s what keeps people engaged.

Martin: Let me ask the question in a different way. Rupert Murdoch, he’s not been on this lately, but for a very long time, was threatening to pull his links off of Google News because he felt that Google was in essence, exploiting the content, the creative material that he was paying all this money to have created.

It doesn’t sound to me like you view that as a viable strategy at all. I don’t want to put words in your mouth, but that…

Steve: For example, Reddit simply gets much of its traffic from linking to stories that appear elsewhere, but the stories that it gets linked to get tremendous audience. Certainly, a lot of the sites that I work with aspire to be linked to and have that traffic driven, so I don’t think that would be something that is an unfair exchange of value.

Martin: That’s the answer. OK, thanks.

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