The Roots of Editorial 'Independence'

"Anyone who trades liberty for security deserves neither liberty nor security"
Benjamin Franklin




The Roots of Editorial 'Independence'
By JIM PREVOR
http://online.wsj.com/article_email/SB118403552816161785-lMyQjAxMDE3ODE0MDAxMzA1Wj.html
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The controversy over the possible sale of Dow Jones and particularly The Wall Street Journal to Rupert Murdoch's News Corp. may be predictable, and the efforts of the Bancroft family to maintain the editorial integrity of the publication may be laudable. Yet the complicated negotiations to create a board that would secure editorial independence are a mistake. They misinterpret the nature of editorial independence and miss the point that the owner of a publication is the person most likely to defend its editorial integrity.

Editorial independence is always a function of one thing and one thing only: an editor's willingness to be fired. In his autobiographical book "Making It," Norman Podhoretz, the long-time editor of Commentary magazine, reflected on how he could both have independence as an editor, yet work for a magazine owned by the American Jewish Committee, which had decided interests and opinions:

"The editorial independence which the American Jewish Committee had always granted to Commentary consisted simply in this: no person except the editor or anyone he might voluntarily wish to consult could read articles in advance of publication or could dictate what should or should not appear in the magazine . . . The editor of Commentary, like any chief executive of any operation owned by others, only had as much freedom -- which is to say power -- as he was willing to risk exercising. If he did something he thought right and of which the AJC then disapproved, it was not enough merely to defend himself and hold firmly to his ground; he also had to make certain that he would not be deterred in the future by the fear of similar trouble from taking an action which he believed to be in the best interests of the magazine. There was only one way I or anyone else could be faithful to this principle: I had to be ready at any moment to lose my job. The AJC could fire me at its pleasure; that was its protection against me. My protection against it was my willingness to get fired; the minute I lost that willingness, I would lose my freedom and consequently my power to do the best editorial job I was capable of doing."

All of the mechanisms being discussed as possible ways to maintain editorial independence for The Wall Street Journal in a possible post-Bancroft era are designed to evade this fundamental fact: If the editor in chief of a publication is not willing to lose his job, he will always operate in a manner designed to please those who can assure his employment. The only thing that elaborate mechanisms such as independent committees to hire and fire chief editors, etc., will achieve is changing the names of the people to whom the editor will be subservient.

Now, some would say that Rupert Murdoch is some kind of uniquely sinister force in journalism and they would, in fact, be pleased to see a system set up to make sure that anyone other than him makes the important editorial decisions. Yet the incentive system is such that the owner of a publication, in this case presumptively Rupert Murdoch and News Corp., is the one with the greatest incentive to maintain the publication's reputation.

Readers turn to publications for information and insight on various subjects. If a publication is taken over and is losing money, as in the case of News Corp.'s purchase of the New York Post, the owner may look to change editorial approaches because the old one was not a component of a successful business model. But what is the alternative? Allow an independent board to dictate an editorial approach that does not attract readership and leads to bankruptcy?

A large, reputable and profitable company such as Dow Jones offers a very different set of risks and rewards to an owner. Any attempts to utilize the publication for personal benefit by, for example, talking up friends and attacking enemies, would be greeted with resignations by top editors who refuse to prostitute the editorial content in that way.

These resignations would be widely reported, and the word would quickly get out that readers are being fed propaganda, not news and analysis. This loss of reputation leads to a loss of readership and imposes on the owners an enormous loss of value. So ownership, though perhaps tempted to use editorial coverage to its advantage, has powerful incentives not to do so.

On the other hand, independent, self-perpetuating committees have nothing to lose and so they are not restrained in their actions. Typically, this means the publication will become a bore because the members of the independent board will look to appoint people who are admired by their friends and represent the mainstream viewpoint of their social class.

We should expect that a self-perpetuating board would eventually stray very far from what its founders intended. A good example is the board of directors at major foundations. Henry Ford II felt compelled to resign in disgust from the Ford Foundation explaining that: "In effect, the Foundation is a creature of capitalism, a statement that, I'm sure, would be shocking to many professional staff people in the field of philanthropy. It is hard to discern recognition of this fact in anything the Foundation does. It is even more difficult to find an understanding of this in many of the institutions, particularly the universities, that are the beneficiaries of the Foundation's grant programs."

Publications do not edit themselves, so editors must be hired, and they are always answerable to somebody. Even if the editor happens to own the publication, he is only free to act as he chooses to the extent he is indifferent to the effects of those actions on subscriptions, readership and advertising.

Setting up self-perpetuating boards only serves to switch the names of those the editor is answerable to. A board with a lack of interest in the business success of a publication is unlikely to lead to successful and thus greatly important and influential publications.

This whole exercise of trying to ensure editorial independence is somewhat insulting to the editors of Dow Jones publications, now and in the future, as it implies that they are so desperate for employment that they need to be protected against a demanding or opinionated boss.

Great publications always come from editors on fire with ideas and with a vision for their publication. Their independence comes always and simply from their willingness to be fired. No committee can change that truth.

Mr. Prevor is founder and editor in chief of Phoenix Media Network, Inc.

A Private Dow Jones?

"I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years."
Warren Buffett




Mergers & Acquisitions
A Private Dow Jones?
www.Forbes.com

Could Dow Jones & Co. go the way of Tribune?

It would be an ironic fate for the company that shares its name with America's leading stock market barometer, but the union that represents about 2,000 Dow Jones employees may try to take the company private.

The Independent Association of Publishers' Employees has retained Ownership Associates of Cambridge, Mass., to organize a bid that would counter the $5 billion, $60-a-share offer News Corp. Chairman and Chief Executive Rupert Murdoch put on the table for the company (see: "Game Over?").

IAPE and Ownership Associates have reached out to a short list of about 10 potential partners, including supermarket magnate Ron Burkle, who's agreed to join the effort, and billionaire investor Warren Buffett, who hasn't yet responded, according to IAPE President Steve Yount. Buffett said earlier that he wasn't interested in Dow Jones.

One possible option would be to take the company private through an employee stock ownership plan, or ESOP, Yount said. Depending on how the ESOP were structured, it could accomplish three different objectives: remove Murdoch from the picture, keep the Bancroft family invested in the company and shield Dow Jones from the pressures of the public markets. The union has said it fears Murdoch would meddle in the journalism at the company.

But scrounging up enough financial might to counter Murdoch's determination and considerable resources would appear to be an awfully tall order.

"If this was just about money, then I think we're in trouble,'' Yount acknowledged. But he added that "I have not gotten the impression from the Bancroft family that this is just about money. They have a legacy to protect."

Real estate mogul Sam Zell's highly leveraged buyout of Tribune involves increasing Tribune's debt to more than $13 billion, which will necessitate selling off key assets. But at least Tribune has assets to sell, such as the Chicago Cubs, which the company is already shopping around, and TV station holdings.

By contrast, Dow Jones is far closer to a media pure-play than Tribune and doesn't have much to sell that would make attractive, standalone assets separate from the rest of the company. The value of Barron's, Dow Jones Newswires, MarketWatch.com and, of course, The Wall Street Journal Online are buttressed to varying degrees by their ties to the Journal.

Burkle makes for an interesting--and in some ways, uninspiring--partner. He made millions from grocery chain mergers and acquisitions and his Los Angeles holding company Yucaipa has investments in a wide range of other industries.

But Burkle has been decidedly less successful in his recent pursuit of newspapers. He led a failed effort last year to acquire 12 newspapers from McClatchy that the newspaper company had acquired from Knight-Ridder. Burkle worked with Ownership Associates to come up with a buyout proposal that would have involved an ESOP.

Later in the year, Burkle expressed interest in buying the Los Angeles Times from Tribune and subsequently joined forces with developer-philanthropist Eli Broad--surely another billionaire that IAPE has contacted--to submit a bid for the entire company. But the pair lost out in April to Zell. Burkle and representatives for Yucaipa would not comment.

IAPE's Yount said the union's hiring of Ownership Associates on Friday was prompted by a May 31 statement by the Bancroft family, which it was willing to consider strategic alternatives for the company and that it planned to hold talks with Murdoch. The family began meetings with the News Corp. chief began this week.

"I believe and the union believes that the unquestioned integrity of The Wall Street Journal would be called into question because of the track record of News Corp. and how it has handled its other properties,'' he said, adding that the "overwhelming majority" of the union membership "understands and shares the concerns of a News Corp. takeover."




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Newspapers flourish in Internet age
Web posted at: 6/5/2007 8:53:8
Source ::: AFP
CAPE TOWN · Newspapers around the world saw a 2.3 per cent rise in circulation in 2006 and a growth in advertising revenue despite the rise of digital media, a report by a global industry body said yesterday.

Sales have increased 9.5 per cent in the last five years, the World Association of Newspapers (WAN) said in a report, while advertising revenues in paid dailies rose 3.8 per cent last year and 15.8 per cent since 2002.

When adding free dailies into the mix, global circulation grew 4.6 per cent last year and 14.8 per cent since 2002.

"Newspapers are alive and well and exhibiting enormous innovation and energy to maintain their place as the news media of preference for hundreds of millions of people daily," WAN's CEO Timothy Balding said.

"As the digital tide gathers strength, it is remarkable that the press in print continues to be the media of preference for the majority of readers who want to remain informed," Balding added as the report was released at WAN's annual meeting in Cape Town.

The report said North America was the only continent to show a decline in newspaper sales, with the United States registering a 1.9 per cent drop in daily circulation last year and just over five percent in the past five years.

On the other end of the scale, South Africa saw sales grew by 8.2 percent last year and 43 per cent since 2002.

"Newspapers in developing markets continue to increase circulation by leaps and bounds, and in mature markets are showing remarkable resilience against the onslaught of the digital media," said Balding.

The Merger Frenzy Explained

"A budget is just a method of worrying before you spend money, as well as afterward."

Unknown



The Merger Frenzy Explained
By Jon Fine
http://www.businessweek.com/magazine/content/07_21/b4035034.htm


This is how the market views media right now: It loves video assets when they're in the hands of a well-regarded conglomerate like News Corp. or Walt Disney. It likes companies with data that people will pay serious money for, like financial-information providers Thomson and Reuters . It also likes players with a commanding presence in one media space and an Internet strategy that's considered smart, like cable giant Comcast and broadcaster CBS. It doesn't like companies owning content and distribution perceived to be commoditized, like newspapers and radio. And when Wall Street hates a company that is admired in other quarters for its holdings, that company becomes deal bait.


Understanding all of that helps explain May's flurry of big potential hookups. (In brief: News Corp.-Dow Jones, Microsoft merging all or some of its media operations with Yahoo!'s , Thomson-Reuters, the speculation that Gannett might or should pursue help-wanted giant Monster.com And understanding why, beyond simple earnings growth, the Street likes or dislikes a media company offers insights into the next deal or merger targets.

Considering the billions of dollars squandered in past deals that chased a mirage of synergy, it pains me to write the following sentence: The performances of News Corp. (stock up about 40% in the past two years) and Disney (up 34%) show that the markets like big, multi-platform combinations of content and distribution better than almost anything in media, especially when they're paired with a new-media story (hello, MySpace!) the Street prefers. That fact, and News Corp.'s $5 billion-plus in cash reserves, enabled Murdoch to offer a 66% premium for Dow Jones.

SO DID THIS: Dow Jones traffics in premium information-consider the nearly 1 million subscribers claimed by wsj.com, The Wall Street Journal's online arm, plus the Factiva database service. But Dow Jones' stock isn't being valued like that of data players Thomson and Reuters, both of which were up over 25% in the past two years even before merger talks were made public. Dow Jones, whose stock had gone sideways for years before Murdoch's bid, is being treated like a newspaper company. If Dow Jones had had a couple of years of Reuters and Thomson-esque gains-and, um, decent profits-it would have been much harder for Murdoch to offer such a premium. And while Reuters' and Thomson's gains are fine, they don't match those of another key data player. The McGraw-Hill Companies, which owns such data assets as Standard & Poor's and consumer ratings service J.D. Power & Associates (as well as BusinessWeek), has outperformed the stocks of even News Corp. and Disney in the past two years. Don't think this escaped the notice of Thomson's and Reuters' management.

Yahoo, another underperformer, has familiar ills-management missteps, coupled with the misfortune of facing direct comparisons with Google. That is making its stock lag behind where it should be. (As a dominant online player, Yahoo at least qualifies for being liked, if not to the lofty status of being loved, by Wall Street.) Hence the talks with Microsoft, the theory being that a combo or partnership would allow them to compete with Google. Similarly, those suggesting that Gannett hook up with Monster may remember how key Web acquisitions-comparison-shopping sites Shopzilla and uSwitch -helped newspaper-and-cable conglomerate E.W. Scripps outperform its newspaper brethren, at least until those properties came up short.

Based on the current lay of the land, there is one company to watch: Viacom. It owns top-tier content, including Comedy Central and Paramount Pictures, yet its stock has badly trailed market indexes since it was uncoupled from CBS in January, 2006. Taking the day's dynamic to a logical extreme leads you to Viacom and Yahoo linking up. You'd get near-matchless Web distribution paired with content perfect for slicing and dicing online. You'd also get, I would bet, a corporate culture clash that would make your hair curl. But in moments like these, who knows? Of course, deal flurries often end badly. Just ask AOL Time Warner, whose stock took five years to begin its long climb back.

For Jon Fine's blog on media and advertising, go to www.businessweek.com/innovate/FineOnMedia