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July 2, 2018, 12:01 p.m.

Newsonomics: What’s next for the L.A. Times, and a few other questions of the moment for the news business

Warren Buffett may not have sold his newspapers, but he sure looks to be throwing in the towel.

How do we respond to tragedy? That question is never far from the work of journalists, and Friday’s Annapolis Capital Gazette assault only made it more intimate, with journalists becoming one with the story they’ve covered time and again.

Numerous journalists responded to the murder of five of their own by restating the truths of local journalism. The humorist Dave Barry (“Sorry, I’m not feeling funny today — my heart aches for slain journalists“) captured it as well as anyone:

There are over 1,000 daily newspapers in the United States, most of them covering smaller markets, like Annapolis or West Chester. The people working for these newspapers aren’t seeking fame, and they aren’t pushing political agendas. They’re covering the communities they live in — the city councils, the police and fire departments, the courts, the school boards, the high-school sports teams, the snake that some homeowner found in a toilet. These newspaper people work hard, in relative obscurity, for (it bears repeating) lousy pay. Sometimes, because of the stories they write, they face hostility; sometimes — this happens to many reporters; it happened to me — they are threatened.

The Annapolis shootings would of course have been tragic in any year. But in 2018, it’s impossible to understand them without considering the cleaved national context of journalism itself. Certainly, the craft has never been under greater pressure, financially or in terms of public trust. We still don’t know how the madness of fake news fury will redefine the very nature of the journalist/reader relationship in the digital age.

Today we, like apparently many Americans, choose our realism. Millions of Americans have never valued journalists more, seeing us as providing an essential service. (From Edelman’s annual trust survey: “The biggest gain in credibility in the latest survey was for — ahem — journalists.“) At the same time, fake news purveyors, foreign and domestic, have cynically divided democratic populaces, content to make journalists collateral roadkill. The contradictions take real, daily form. As newsrooms, like airports and schools, must put in place physical security measures, engaging with the communities they serve grows more difficult.

As we have read this weekend in the sense-making out of Annapolis, such engagement — in reporting, in community events, in governmental meetings, and in just being seen around town — separates what the local press has always done differently, and by its nature better, than the national press. It’s what the American local press in the best of times has done in cities and towns across our 3,000-mile landscape, and it’s a task uniquely required at this time in American history.

Here are a few of the other big questions we’re watching in today’s news industry.

What does Norm Pearlstine have planned in L.A.?

There’s a lot of chatter around Patrick Soon-Shiong’s pick of news veteran Norm Pearlstine as his new editor-in-chief. “He pulled a Cheney,” several sources observed of the appointment. Like the man who famously headed up George W. Bush’s vice-presidential search, only to end up with the job himself, Pearlstine’s role, in part, was to help the L.A. Times’ new owner pick his first editor-in-chief. As I pointed out in May, though, his job always encompassed more than just that selection process.

Given unlimited financial capacity, sole ownership, and a clean slate, Soon-Shiong and Pearlstine have been able to take a cartographer’s tour the past couple of months.

Do they map out the next Los Angeles Times — the Times of the 2020s — as a global creature? Or as one focused on the fastest, closest, maybe most intriguing part of the globe — Asia? Should it (as Michael Ferro was only the latest to fantasize) turn its Hollywood (er, El Segundo) base into a worldwide entertainment franchise? Or does it try to launch itself into the national space, taking a page from Jeff Bezos’ Washington Post playbook, adding a couple of hundred journalists and entering our frayed political conversation more fully?

Of course, Bezos saw in his investment — $250 million, or half of what Soon-Shiong paid Tronc for the Times and San Diego Union-Tribune — the power of the Post’s home city. With Washington the country’s center of politics and policy, reclaiming that national position didn’t require a big leap of imagination — just resources, smart leadership, and the proper application of the technologies of the day.

The L.A. Times’ case is trickier. Once roughly on par with the Post (and even The New York Times) in stature and resources, its home turf is Southern California. Does that mean embracing, defining, and explaining a new California ethos, one that’s also emerging fitfully nationwide? How would the West Coast’s deep blueness color that sort of a role in our bizarre political landscape?

What does Patrick Soon-Shiong want his L.A. Times to be? And, importantly, what kind of business does he want it to be?

Hyper-successful businesspeople don’t like to lose money at anything they do, even if they can easily afford it. So how do Soon-Shiong and Pearlstine meld an audience and product vision with a new business model? Among the multitude of questions: How will they harness technology to forge that new strategy? While many have focused on the extra journalistic headcount Bezos has provided Post editor Marty Baron, his funding of a similar number of new technologists has made its business transformation — most notably, passing 1 million digital subscribers — possible. The L.A. Times became the first Tronc paper to implement the Post’s Arc platform earlier this year. So what will it now do with it? And how compatible with Arc will Soon-Shiong’s AI-aided notions for revolutionizing journalism be?

Pearlstine, a now fashionably youthful 75, quickly acknowledged that finding a successor became part of his role the day his position was announced. Certainly, if Soon-Shiong had been able to lure either the Times’ Dean Baquet or the Post’s Baron — each a former L.A. Times editor — the publishing world’s skepticism about his plans would have melted away. With Pearlstine in charge, though, many will wait and see.

It’s easy to look at the hiring of a New Yorker septuagenarian as less than au courant, and yes, the hiring of a younger, even female, editor-in-chief would have sent a far different message. But in hiring someone of Pearlstine’s long industry stature — The Wall Street Journal, Time Inc., and Bloomberg — the newbie publisher has hired someone who should be able to set up the new lines of church and state at the new Times properly. That’s no insignificant task. Soon-Shiong’s innovative medtech career has been all about crossing lines, and with Pearlstine, the Times’ staff and readers should be assured that the Times’ coverage won’t be bent to fit the owner’s own interests or beliefs.

Pearlstine’s big and immediate test will be in hiring. In the past couple years of Tronc chaos, the Times has lost lots of talent, most notably to the Post and New York Times. Can Pearlstine reverse the flow and lure top people with a golden promise of building the next Times? That’s not just a question of finding a successor-in-waiting; it’s about repopulating and adding new newsroom talent, both those with gumshoe journalistic skills and those with a deep digital sense of reader connection. Watch who gets hired — that will tell us a lot about the reality of the new Los Angeles Times.

Will AT&T follow through on its promises for an independent CNN?

As a federal judge okayed AT&T’s deal to buy Time Warner, few people focused on the questions of its ownership of CNN. Certainly, they’d come up during the lengthy merger battle, but only here and there. John Stankey, AT&T’s newly appointed head of Time Warner, immediately said all the right things about CNN, its independence, and its value to our struggling democracy. We have no reason to doubt him.

And yet as we look around the world, at the rampage of press-strangling authoritarianism from Russia, Turkey, Poland, and Hungary to China and the Philippines, let’s recall how concentrations of media power have often been coupled with the erosion of democratic freedoms. One usual course: Major telecommunications companies come to own major news operations and then bend them to the political needs of their owners, when push comes to expedient shove.

We would seem far away from that point today — but then again, so many of our democratic norms have been blown away in such a short time. I still recall AT&T CEO Randall Stephenson paying his courtesy call to Trump Tower — one that seemingly didn’t do much to soothe the presidential-elect beast, given his feral hatred of CNN itself. That photo still bothers me, though.

We will, and should, watch CNN for any signs of business and political interference, though I don’t expect any in the short term. But the politics and pressures of our time are as likely to get worse as better, and we shouldn’t lose sight of this concern, which is exacerbated by longer-term trends and the ongoing quest for bigness, which accelerates year by year.

Perhaps the marriage of pipes and content in the U.S. can proceed differently; Comcast’s stewardship of NBC/MSNBC hasn’t appeared to be problematic. But certainly, Rupert Murdoch’s Fox News shows the clear and present peril of a politicized, regime-echoing “news” company. If CNN, one if its two main counterweights, were neutralized — or turned — imagine how our national debate would morph overnight. We now know, on so many fronts: It can happen here.

Consider — and savor, for the moment — the unaffiliated and feisty we’re-news-companies position of The Washington Post and The New York Times, today and back to Watergate times. What’s been the value of that independence over the past two years? Priceless.

What’s the sound of a towel being tossed in?

It would be something like the multiple thwacks we heard last week, as new milestones in the ongoing consolidation of news media continued just about daily.

Warren Buffett tossed in one of those towels Tuesday. He announced that he was doing the ultimate outsourcing — paying Lee Enterprises $5 million or so a year, plus partnership incentives that could double the Lee take — to run his newspapers in 30 markets.

Recall that just six years ago, the Oracle of Omaha — and a leading supporter of civil society and of the role of the press — seemed to be giving beleaguered newspapers a vote of confidence, buying 63 newspapers from Media General. It was a year before Jeff Bezos bought the Post. Both deals seemed to signal that smart, caring money saw a future in transforming print franchises into digital.

But while one of them has done that gloriously, one never got far from the starting gate. As Berkshire Hathaway Media CEO Terry Kroeger departs, perhaps for a political future, the disappointment here is in BH Media’s lack of transformation. While Buffett himself has run hot and cold publicly on the prospects of the newspaper industry, for some reason, he squandered the chance to use his reputation and capital to actually innovate. The BH Media playbook, such as it was, always seem to trail even its struggling chain peers, leading to the same results and same layoffs. Maybe more was going on inside the company — but whatever it was plainly didn’t work.

Perhaps the Media General deal was widely misunderstood from the beginning. I found Roy Greenslade’s Guardian piece on the 2012 sale, and the seemingly jaundiced view expressed by both the FT’s Andrew Edgecliffe-Johnson and me may have been too close to the eventual truth:

[Media columnist Jack Shafer] cites media analyst Ken Doctor, who regards the Media General deal as “more a feat of financial engineering than a newspaper deal” because it includes a $400m loan and a $45m line of credit at 10.5% interest in exchange for warrants that would give Berkshire Hathaway almost 20% of Media General.

And Andrew Edgecliffe-Johnson of the Financial Times points out that the warrants obtained by the “well-meaning billionaire” are worth $19.5m.

So, once Media General dumps the Tampa Tribune, the company will essentially be a profitable TV station owner, a business that Buffett knows and likes. Then there is the valuable newspaper real estate too.

And then Greenslade concludes with this observation from Shafer:

Buffett’s recent newspaper acquisitions don’t indicate the industry has returned to health. But if he starts selling, you’ll know that it’s dead.

Buffett hasn’t sold, but he has thrown in a towel.

Lee, which owns papers in 47 largely smaller markets, gets good marks from its peers for its operating prowess. That’s meant the management of decline, which all those peers have contended with, and a brick-by-brick building of a more digital business. But still, in 2017 only about 28 percent of Lee’s ad revenues were digital, and it saw an overall revenue decline of 7 percent — about the industry average.

For Lee, the deal buys one precious commodity: time. If it can earn out that $10 million a year, that’s a shot of much-needed revenue.

How much will the two companies combine? Not that much, apparently, which is a bit of a headscratcher in an era where cost efficiencies drive strategy.

“Regarding regional management, BH Media will remain a separate company with its own management, personnel, and systems. Lee’s role will be to guide BH Media management,” a Lee spokesman told me. “As [Lee CEO] Kevin Mowbray mentioned, we do expect that both Lee and BH will benefit from our combined larger operating scale, primarily in digital sales, shared services and vendor contracts.”

So BH Media’s national costs go away, replaced by Lee fees. Berkshire Hathaway had previously been a significant shareholder in Lee, but it isn’t any longer. Still, Buffett’s long familiarity with the company and its chair (and retired CEO) Mary Junck provides the logic for the dealmaking.

One day before the BH Media semi-exit, another big newspaper chain headed for the showers. Gray TV — now the country’s No. 4 local broadcast player; another rapidly consolidating industry, as the FCC has undone decades of restraint on bigness — bought Raycom’s 65 stations (some of which it will have to divest) for $3.65 billion.

That leaves Raycom’s more than 100 CNHI newspapers — some smaller dailies and many weeklies, largely across the Southeast — as refugees from the deal. They’re now up for sale, less than a year after CNHI formally combined with broadcaster Raycom. Who will buy them?

Newspaper brokers are busy this week.

Would traffic signals help people separate real from fake?

Yes, they might, says a new Knight Foundation-funded Gallup Poll. The survey found that both “signals” and neutrally written descriptions of websites did help survey respondents separate news wheat from abundant chaff.

For the survey, Gallup used NewsGuard’s system of tagging. The new Steve Brill/Gordon Crovitz startup applies green (“aims for accuracy”) and red (“doesn’t meet minimum standards” signals to websites (not stories) and provides “nutritional labels” for those descriptions. (Samples here.)

This is what Gallup found:

The news source rating tool worked as intended. Perceived accuracy increased for news headlines with a green source cue and decreased for headlines with a redsource cue. Participants also indicated they were less likely to read, like or share news headlines with a red source cue. The source rating tool was particularly effective for participants who correctly recalled that experienced journalists devised the ratings, compared with those who did not recall that information.

The source rating tool was effective across the political spectrum. The perceived accuracy of news articles with a red source cue decreased similarly among Republicans and Democrats, with the sharpest decline occurring when the headlines had a clear political orientation that matched the users’ political beliefs.

The source rating tool did not produce known, unintended consequences associated with previous efforts to combat online misinformation. Our experiment did not produce evidence of an “implied truth effect,” an increase in perceived accuracy for false stories without a source rating when other false stories have a source rating, or a “backfire effect,” a strengthening of one’s false beliefs following a factual correction.

Knight, one of NewsGuard’s funders, sees the survey (conducted independently of the principals) as support for the NewsGuard notion.

For its part, the startup is on track. In July, it will begin providing its browser plugin free to libraries to get its product to market. By fall, it plans to make its full product publicly available.

Meanwhile, its staff of “several dozen full-time and part-time” journalists continue their review of the news web, affixing signals and writing labels. The goal: have 98 percent of U.S. news consumption covered by site tagging by fall.

The big question looms: However good this attempt to defang fake news might be, how will the public see it? That will take some major platform — Google, Apple, Facebook, Microsoft — to take it public. And — so far — no movement on that front.

POSTED     July 2, 2018, 12:01 p.m.
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