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Nov. 15, 2012, 10 a.m.

The newsonomics of thin ice, from the BBC and FT to The New York Times and The Washington Post

Some of the world’s biggest news organizations, once rocks of stability, are showing signs of unstable foundations.

The cracks got a little louder this week.

For most of a decade, news companies have been operating on thinning ice. This week, events on both seaboards of the Atlantic displayed anew just how thin the foundations on which many major news operations operate are. With each crack comes a new sense of mortality and, thankfully, motivation.

Here’s a quick chart to demonstrate what’s at stake, just with the companies most lately in the news.

  BBC New York Times Washington Post Financial Times
Number of journalists 2,000 1,150 ~550 600
Last profit reported n/a $8.5M (3Q, 2012) $21.8 million loss (3Q, 2012) $34.8M (or £22M), (1H, 2012)

I’ve highlighted just two data points: the number of journalists and the profit performance of four major news organizations in the spotlight. We see about 4,200 journalists employed among these four companies. One, the BBC, is an intentional nonprofit. Another, The Washington Post, is unprofitable in its publishing division. The New York Times is barely in the black. And the FT, though in better financial shape, may be the odd man out as its parent company re-strategizes its future. We can see how tenuous their business models are, given the profit numbers. They’re each in transition, each in a somewhat different place. Those transitions, though, are subject to many impacts, such planned and some not. Bottom line: There’s not a lot of room for error at even the world’s biggest news producers.

Let’s look at the cracks we heard over the last week:


The first truly global news organization has been the gold standard for both trustworthy reporting and bloated bureaucracy. Now its multiple scandals (well displayed on this Guardian page), from child abuse committed by one of its long-time icons to shoddy “investigative” journalism, have ripped it wide open. “Appalling,” “wretched,” and “ghastly” are just a few of the printable terms applied so far to the scandals, and those came from people close to the BBC. Its head, George Entwistle, resigned last weekend, while the head of news and her deputy have both been essentially suspended.

Certainly, any long view of the BBC’s quality and value says that these incidents are aberrations, and aberrations can be repaired. Let’s consider the context, though. The BBC has been playing defense at home, even as it tries to take the offensive outside the U.K. Its former head, new New York Times Co. CEO Mark Thompson, spent much of his time fending off and mitigating budget cutbacks. Long subject to political pressures, the BBC is now increasingly vulnerable to new partisan attacks, along with the (some valid, some overblown) complaints of its commercial competitors that it is unfairly transitioning its longtime broadcast dominance into the digital world.

In fact, the BBC’s position as a “free” provider of news has complicated the U.K.’s quality press to move forward with all-access/digital circulation models. For a network that gets about £3.6 billion ($5.7 billion) in tax money, its subsidy in the digital age may now become a central issue. In Britain, TV “licenses” cost £145.50 ($230) a year, so it’s understandable the public already believes it’s paying for “news.”

Bottom line: The strength of the BBC’s 2,000-strong corps of journalists will be further tested as hearings take their toll on a leadership both too numerous (“more senior leaders in the BBC than in the Chinese Communist party,” said Lord Patten, head of the BBC Trust) and too timid. BBC News has already absorbed plenty of cuts, with some being blamed for the latest NewsNight scandal, its false accusation of child abuse against a former Tory leader.

The New York Times

Overall, it’s been an improving year for the Times. It innovated on digital circulation, earning more than an extra $100 million in circulation revenue — and using it to offset fast-declining ad revenues. It sold off its regional newspaper group and, which had become more of a distraction than anything else. It launched a site in China and announced one in Brasil (“The newsonomics of the New York Times’ expanding global strategy”). And it was greatly looking forward to arrival of its new CEO Mark Thompson, who began work Monday. The clear timing of his arrival: to build on those 2012 positives and make the Times even more of a multimedia, global news player.

That may well happen. As I’ve detailed elsewhere (“The New York Times and The Thompson Effect: Blowover or Blowback”), the Thompson impact is uncertain. By hiring the now-to-be-further-questioned former BBC head, the Times has at least borrowed, just by association, a problem that will cascade through the news well into next year and will be covered aggressively (as it has been over the past two weeks) in its own pages. Maybe it will simply blow over as Thompson’s involvement in the scandals is adjudged indirect.

As Times columnist Joe Nocera, though, told WNYC’s The Takeaway Monday: “If he is not telling the truth, it will come out, and it will hurt The New York Times, for having invested so much in him…I think people are trepidatious in the sense that they really want a CEO who can move the ball forward, who can help us figure out our business model issues, and who can help, you know, make this transition from paper to digital. The question of ‘Is this the guy?’ I think looms large in everybody’s mind.”

NYT Co.’s meager third-quarter numbers demonstrates why that trepidation is well-placed: only $8.5 million in operating profit.

The Washington Post

Things have been going from bad to worse at The Washington Post Company. Its cash cow, Kaplan, is in maddening decline, as federal government crackdowns on for-profit education continue to take a toll. So the major prop to the Post’s flagging publishing financials has been removed. Further, the Post continues to lag most of its peers, its downward fortunes generally a little worse. More cuts, including newsroom ones, are underway.

Into this aging castle, now walks in a doughty prince of the trade, Marty Baron. The editor of The Boston Globe since just before 9/11 (good Baron farewell email to his staff here), Baron was announced as Marcus Brauchli’s replacement this week. Brauchli, who’d left The Wall Street Journal, as News Corp. was installing its own leadership, was caught betwixt and between. Early issues of trust (the “salon” debacle forward) muddied the relationship with the new Post publisher Katharine Weymouth who hired him. Inevitable disagreements about where and how to cut staff deepened problems.

Beyond that, though, is the fact that the Post overall has lacked a forward-reaching business model strategy. It’s still a great newsroom, with national reputation and national ambitions, but a company that has focused on harvesting revenue on the regional D.C. area. It’s a great, affluent market, but the regional strategy, as now in place, can’t pay the bills of a national operation. (Good rundown on the Post’s woes by Erik Wemple.)

The deeper problems of the Post are business, not editorial ones. It must figure out what many of its peers have, that a digital circulation strategy is an essential part of the way forward. It must develop a way to make the mobile audience — as much as a third of newspaper audiences now — a key part of its monetization. It must learn to cross borders within its own building, including such things as applying its national Social Code social marketing business to its local market.

The Post’s publishing division showed an operating loss of $21.8 million in the third quarter, more than double its operating loss of $10.8 million a year ago. Broadcasting and cable profits helped buoy the overall company to an overall $75 million profit for the quarter, but those aren’t sufficient to subsidize the newsroom going into 2013. The paper has cut more than 200 newsroom staff since 2009.

Financial Times

It may be soon be up for sale, as reported by Bloomberg. With “the FT-will-be-sold-over-my dead-body” CEO Marjorie Scardino retiring at year’s end, the noises of “not ruling out” a sale are being heard more loudly. That’s the FT’s crack in the ice.

Arguably, the newspaper trade’s leader in digital innovation — digital circulation, data analytics, direct licensing, and more — the 600-strong FT newsroom is a vital news force, one of few truly global news providers. Among the potential buyers are Bloomberg itself, Thomson Reuters, and of course News Corp., as well detailed by Murdoch antagonist Michael Wolff. Any of those could be a good home for the FT, but inevitably, its independent news reporting would suffer in any absorption. There are the inevitable 3 R’s: rollup, redundancies, and rightsizing.

With an almost 5 percent increase in operating profit, Pearson’s FT Group looks more stable than its peers, though it contributes but 12 percent of the company’s overall profit. Yet Pearson is looking like a company that wants to focus more and more on its digital education businesses, and $1 to 1.5 billion in cash (the high end of the FT Group’s potential market value) would help in that pursuit.

These aren’t the only cracks — just the loudest. If you were work for the Manassas News & Messenger, the ice just gave way. Berkshire Hathaway Media, which bought the D.C. suburban daily along with other Media General properties, announced its demise yesterday, putting 33 employees in the deep freeze and removing one news source from Prince William County readers. Then there’s the crack-by-crack continuing layoffs around the U.S., captured well on this Poynter page. In addition, we’re all still waiting for Act 48 of the Tribune saga — 48 months of bankruptcy so far — and to see, soon, into which hands its papers may fall.

To be clear, the events of the last week aren’t life-or-death ones. They’re just more cracks, some more insistent than others — reminding us again of the mortality of news organizations.

Photo by Paul Downey used under a Creative Commons license.

POSTED     Nov. 15, 2012, 10 a.m.
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