James K. Batten Distinguished Lecture
Delivered by Steven Isenberg, James K. Batten Visiting Professor of Public Policy
May 3, 2001
May 3, 2001
I want to begin by thanking the Batten family and the family of Davidson for the last few months. Teaching here has been a great pleasure and an instructive one, testimony to the special satisfactions of being part of a small community, distinctive in its character, aspirations and hospitality.
This was Jim Batten's college. That it is now home to the Batten Professorship honors the part his undergraduate education played in forming his outlook and achievements. The professorship also reflects Davidson's dedication to the spirit of community, and the flowering of the individual through learning and service. These hallmarks and ideals of Davidson are at one with the lasting reputation of Jim Batten. The John and James Knight Foundation and Knight Ridder recognized that when they honored him by their generous contributions to the creation and maintenance of the Batten Professorship.
I also want to thank my students who have been part of two courses--one on newspapers and politics, the other on literary journalism. As we read newspapers and the longer works of literary journalism by such great journalists as George Orwell, John Hersey, Rebecca West, Truman Capote and Tom Wolfe, we were at the center of journalism and public consequence, which I feel is at the heart of the Batten professorship.
Jim Batten and I share a good friend. I asked him what Jim's most praiseworthy characteristics were. He replied that Jim was rare in his understanding of both business and journalistic enterprises, their values and their needs. He went on to say that Jim never led by mechanical, even-handed weighing, but knew when he must assert either the priority of editorial resources, quality and mission or financial achievement and business requisites to preserve and enhance the whole newspaper and the company. And he said Jim did so in wise and effective ways.
I had not expected that observation to shape much of what I want to say tonight. But the economic uncertainties of the last few months, the plunges on Wall Street, the realignment of expectations, and the unsettling questions about the performance and worth of so many once high flying companies, have had their effect on newspapers. As a result, the complex relationship within a newspaper of journalism and business has shown some wear and tear.
The reason newspapers are so closely related to the economy and the business cycle is that most of their revenues come from advertising. When consumer confidence saps retail sales, and the sale of homes and cars, and employment levels drop, a paper suffers directly from the loss of ads.
What comes of this? Because newspapers are profit-making enterprises, in tougher times, how well their profits square with the expectations and strategy of their management and ownership, raise hard issues. When those who run newspapers must reckon with how best to deal with a forecasted shortfall in profits, every meeting is alive with tensions about whether and where jobs will be frozen or cuts made, and the potential impact. When decisions are made, questions may arise about a company's long and short-term goals and if they at odds. And if the strains are more severe because of cuts in staff, especially in the newsroom or the paper's content or coverage, the responsibilities and values of ownership may be put at issue. Underlying such a critique often is a conviction, shared strongly and widely among those in newspapers, that newspapers, as a business, deserve special standing, especially in terms of journalistic resources and public mission.
Recently, at Jim Batten's old company, Knight-Ridder, these matters came into sharp relief with the resignation of Jay Harris as the publisher of the San Jose Mercury News over a "fundamental disagreement over business strategy" and "over whether the company's values and priorities have been changing." This came as a shock. Publishers are seldom resigners. And rarely do they do so over a "myopic focus over numbers" and concerns "about damage to the whole of the paperŠand a lessening of ability to fulfill responsibilities to the community."
Harris's remarks to the Association of Newspaper Editors a few weeks ago argued that business priorities and sensibilities, in response to Wall Street and other shareholder surrogates, have assumed too much power. So much so that a newspaper's special status and responsibility as a "public trust" have been put in jeopardy and that shareholders, perhaps even to their detriment, have been accorded greater weight than readers, as well as the long term interests of the franchise.
Tony Ridder, the CEO of Knight-Ridder, wrote a column a few weeks after Harris' resignation telling readers that "Silicon Valley has a volatile, cyclical economy, and the Mercury News is not immune to its changes." He went on to say that a publisher must come to terms with accepting responsibility for "simultaneously managing revenue and expenses while creating excellent newspapers. There is always some tension between these goals. But the first commitment is to the ongoing health of the underlying enterprise." What was at issue, according to Ridder, was a corporate directive that the San Jose Mercury News improve "the range" of its operating profits over a multi-year period to help Knight Ridder achieve its overall goals. In fact, Ridder had set the goal of virtually doubling overall company margins from 15% in 1995 to 29% in 2004. He insisted that the Mercury News was not expected to improve its profit margin this year, but had to be sure that over a multi year period it did not "dip as low as it occasionally has."
The new publisher, speaking one assumes with a clear understanding of the corporate margin rationale and anxiety about being vulnerable to a takeover, said days later: "A publicly held newspaper company-or any other company-that allows its financial performance to fall below similar companies, will see that performance reflected in the price of its stock and become an attractive acquisition target for others."
And just a few days ago, Tony Ridder was reported saying at the company's annual meeting that The Mercury News saw economic worsening coming in December and "they didn't stop hiring in December, January or February, because management didn't get on top of what was going on. The publisher didn't face up to what was going on and didn't react to it."
What happened between January, 2001 when Tony Ridder told analysts that for the fifth year in a row Knight Ridder was reporting record earnings, operating income, cash flow and free net cash, and that despite anticipated newsprint prices, margins would rise again, and the resignation of Harris?
So much is unknown, and many questions come to mind. I'll ask a few.
First, why, in the face of the economy as it stood in early January, especially aware of the vulnerabilities and concentrations of tech companies industries in San Jose, and impending rises in newsprint prices, insist on and warrant maintaining margins and seeking improvements in the next few years? When it was said, "layoffs were not mandated", what did that mean? That they were inevitable and expected, but not ordered from above? What were the alternatives?
Having made substantial investments in the newsroom in San Jose over the last few years, going from a staff of 376 to 415, and $20.6 million to $28.1 million budget between 1995 and 1999, and clearly establishing the paper's franchise as an intimate and authoritative part of their new technology communities, what kind of changes did the corporate officers want management to make? Surely Harris was encouraged to build up his newsroom. Neither corporate nor Harris' strategy for working this through is known.
Newspapers everywhere are grappling about how best to ride through the business cycle, weighing and taking actions to reduce costs. Knight Ridder is not alone in this; in fact, neither are newspapers.
Recently Ted Koppel asked Michael Eisner, the head of Disney, which owns ABC, if the news division could be exempt from any of the thousands of cuts foreseen in the company. Eisner said no one, not even the animators, could be held harmless. Reports of the exchange said Koppel then asked Eisner if he knew a certain name, and then another, which Eisner did not. They were the names of reporters who had been killed in the line of duty. The claim for a unique status for everyone in the news division couldn't have been put with any greater intensity.
As network news loses share of audience and cable grows and fractionates audience, the costs of on the spot coverage rise and the new recipe for winning audiences blends large scoops of entertainment and celebrity with teaspoonfuls of information, the place of television news has become its own field of conflict.
Among our guests tonight are seasoned newspaper professionals who know how these matters are felt intensely within the newspaper and media world, though not much beyond it.
At my old company, Times Mirror, I worked at The Los Angeles Times during the last recession, which hit Southern California in 1990. I saw how, in many ways, a very large and successful newspaper was unprepared for a plummeting economic barometer. People had not been trained and tempered by the experience of paying sustained attention to costs and deliberating ways of recasting the organization and operations to weather bad days and insure a sound footing for the future. You go through that and you'll never be glib about the complexities of advancing journalistic and business achievement at the same time, especially in a lousy economy.
A few years after that, I lived through Times Mirror's loss of self-confidence and a difficult CEO succession, which led eventually to choosing a new CEO from General Mills, who later on was dubbed "The Cereal Killer." Mark Willes knew little of the pathology of newspapers, but enough about Wall Street and his new Board of Directors to kill New York Newsday in his earliest days on the job. That new and bold paper was the most innovative and creative part of Times Mirror. Those were favorite words of his, but unlike the Supreme Court decision on pornography, he didn't know it when he saw it. Pegging a margin he said couldn't be met soon enough, despite it having been previously decided by the Board that the investment phase for a new paper within a paper would take ten years, he shut it down. Reductions, and indeed substantial ones, were ruled out as an option. Wall Street pressures had set the course. He offered a closed New York Newsday as a sacrifice to the Wall Street gods who cared little about the costs incurred in sending home 800 people, -- one time buy out and severance dollars are happily written off. Willes went on to raise the price of Times Mirror stock which made a lot of people happy, including the family shareholders who owned a large part of the stock. He also went on to soil the reputation and workings of the Los Angeles Times by preposterous circulation goals and managerial incoherence which failed in a hugely embarrassing and debilitating incident to keep the separation between advertiser and sponsor participation and the news. Today the Times Mirror Company is no more; its newspapers are part of the Tribune Company. I read and know of with no small degree of bitterness Newsday's reinvigorated presence in New York City. Who knows, New York Newsday may be reborn. Another of life's lousy ironies. In all of that, I don't know what a concerned public might have done. Actually, I believe nothing. I recall Willes the day before the fatal meeting on New York Newsday telling me and the editorial page editor that he had received many calls and letters in strong praise of the papers op-ed pages. All had said how important those pages, as well as the news coverage, were in giving the widest range of views on city politics and government. Willes came not only to praise us, he came to bury us. So much for what readers and the concerned public thought.
The dynamics of public ownership and Wall Street influence have led some to raise the notion of a return to private ownership, which was the way things were decades ago. How many people have the large sums necessary to buy larger newspapers and are committed to accept more restrained profit margins? Interestingly, some old romantic notions of private newspaper ownership have been set aside, such as being equated with stability and generosity and firmness of purpose. That mythology ignored a history of thumbs on the scale of news coverage, favorite playing in seeking out enemies or protecting friends, and the play of an owner's whim and caprice. A paper's destiny was subject to the character and interest of an heir.
Today there is admiration for large public companies such as The New York Times and The Washington Post where public ownership is circumscribed by the heavy holdings and weighted voting power of the Sulzberger and Graham families. And their commitment to papers of intelligence and sophistication, in the best sense of the word, worthy of being located in the nation's capitol and in the capital of capital, media and culture, earns them great respect.
But what of others, without a large portion of family ownership, who must seek and sustain financing from institutions and individuals, investors often without anything other than strict, one dimensional, financial criteria for where they put their money. What stars will those newspapers and the companies which contain them, steer by?
Ultimately, the question is asked to whom and what the highest duty of a paper is owed. Is it to the shareholders, to the readers, to the wider community, to journalistic ideals or to the "public trust" which some argue is at the core of the enterprise and position of a paper. To which I respond: why assume one overriding duty when talking about the entirety of the enterprise, rather than a subtle weave of obligations?
So it is understandable why Jay Harris said he found himself "for the moment, at least, at the symbolic center of a debate that extends in substance and consequence well beyond the specific circumstances."
The heart of the matter is reconciling strong financial achievement with a newspaper of admirable journalism, which serves its communities with distinction. And especially how to do so when the economy constricts.
The specter or actuality of cuts made in the news pages and staff, especially to please the investment community, worries deeply those who feel newspapers are unique in purpose, in their constitutional place and within the media constellation. Some then propose that as a business, newspapers ought to be treated differently in their financial imperatives, at the very least in dealing with the business cycle.
The invocation of a newspaper as a "public trust" has not had enough discussion about what makes a newspaper different than a television network, an airline, a hospital, or a pharmaceutical company. What is it about the independence of a free press and its role in our society that differentiates it from a myriad of institutions, which must find the right balance between high ideals, public responsibility and financial durability? And there ought to be more discussion as to why and how a holder of a public trust, within the terms of for profit business, must take that trust into account when making financial decisions.
Another way to think about all this is to take it the other way round. What if financial strength was taking a back seat? Wouldn't someone rightly argue that financial accomplishment isn't necessarily at war with being a good paper? In fact, doesn't it make investment in talent and coverage possible? Certainly, if advertising and circulation are vibrant it testifies to how essential a paper is to its community of readers. And if that weren't all the case, would we count on the public to insist on the paper improving its performance and insuring its future?
Let me end on the place of newspapers in our society. I am of a generation, an upbringing, a build and an inclination that is shaped by the word. So old am I that radio dramas were in my heart and mind, before movies and newspapers and Life, Look, Collier's and Saturday Evening Post, yet not so old that television wasn't part of my pre-teen years. Reading provides me with wind, compass and charts. It makes me feel part of the world I know and live in, as well as the world beyond my seeing and the world that came before me.
I see newspapers as the spinal column and central nervous system of our media world and our citizenship. I see newspapers illuminating our politics and government, our schools and universities, our highways and airports, our sports, movies and books and television shows, our health and our hospitals, our military and our diplomacy, the dynamics of our working lives and activities, and the worlds of business and trade, in their international and local dimensions. I see newspapers giving context and understanding to international relations, the lore and language and points of view that affect our obligations and opportunities, as well as the unique dangers and dilemmas in a world unyielding in its connections and complexities. I see newspapers mark our celebrations and our mournings and ties to communities of purpose, geography and interest.
The media, especially television. have become bloated with opinion, so often coarse and careless, sanctimonious and at a boil, and surely not in Samuel Johnson's words the kind which seeks to raise opinion to knowledge. When speed is king, and context and depth but hand maidens, and preoccupation with entertainment casts a long shadow, we rely on the best newspapers to help us sort things out by holding the world still for a moment.
And so in the great business of a democracy, the informing of citizens and the exercising of their responsibilities and rights, newspapers do hold a special place.
That public trust is real because when they are at their best newspapers are doing their work for something more than financial achievement, just as when they fail in their journalistic standards or energy, they can do so even if they are making lots of money. It is a calling, not one that should grow sanctimony, nor encourage naivete, or push healthy skepticism to corroded and corroding cynicism. It is a calling to the spirit of inquiry, the championing of truth, the courage of conviction, the fairness of the just, the competitiveness of the striver and the common sense and good humor of those who just want to know why something is the way it is or isn't as it should be. I love newspapers when they expose, not foster or coddle, what George Orwell called "the smelly little orthodoxies of our time."
Newspapers are in fight to hold their place in the way we get information, entertainment, opinion and transact our business. Sometimes the prospects darken, all the moreso when clouds of economic uncertainty gather and reading's hold loosens. Large challenges loom.
And so we return to that appraisal of Jim Batten and the importance of those in high places in newspaper companies as they manage the complex world of a free and independent press, an effective press, an idealistic press, a serving press and a financially sound press, all in the public marketplace.
What we must hope for is that among newspaper publishers and editors and corporate executives, and their governing boards, there will be voices of strength and persuasion, idealism and practicality, who will manage these precious enterprises as trustees with an eye to the unities of a paper, as well as its separate grounds, who promote newspapers' staying power, high purpose, and essential role in our democratic enterprise. And, because it may need saying these days, who never forget that making a buck is just one of the many duties vital to the enduring character and achievement of a newspaper.