Reporting on Business: Enron and Beyond
Enron’s extraordinary collapse leapt into public view with banner headlines befitting the precipitous fall of a once mighty power. This was a company that not too long before its demise had been the business media’s poster child, praised for its “innovative” practices and consistently listed among the top American corporations. During these heady times, only a few reporters followed leads that eventually took readers past the media’s mostly laudatory words and into the reality of a company whose foundation was crumbling. – Melissa Ludtke, Editor
No topic received as much attention as the newspaper business. Observations were interspersed throughout the various sessions. Some of those comments are now brought together in a series of edited excerpts that attempt to capture the range of ideas and experiences that participants shared during the conference.
Photo from the Library of Congress, Prints and Photographs Division.
.jpg)
Photo from the Library of Congress, Prints and Photographs Division.
Photo from the Library of Congress, Prints and Photographs Division.
Rosabeth Moss Kanter: The point is that when one starts thinking about innovation, it means going beyond the model we have—it’s about what’s the bundle? What’s the package? What’s the product? Newspapers are, by definition, a bundle and could be unbundled. Lots of different things could be done with the quality to provide first of all an entry point for a future customer and also funding for more R&D and better news coverage. The solutions come in rethinking the bundle, the package, the model, and starting to be creative about alternatives. It’s not jumping into the Internet with huge expenditures and losses. It’s being creative. There’s a certain model. It’s a culture, a mindset, and it’s been around a long time. And any time an industry has been around hundreds of years and hasn’t fundamentally changed its form, there are opportunities for innovation.
Geneva Overholser: Before we decide on what the innovations are, we need to decide that we want to be an innovative industry, because we haven’t been at all. Being a cash cow is a strategy, and that’s been our strategy. Even the good companies have been dragged into that strategy by the prevailing winds of profit pressures. And maybe it isn’t that simplistic. Giving money to education—well, one of the first things to go in tough times is newspapers in education. It’s a no-brainer: You’re breeding readers. But it costs them money. We have to really decide we want to be alive in 40 years and thriving instead of just sort of barely hanging on by our fingernails with the best newspapers. This is not an innovative climate to be in newspaper journalism.
Phil Meyer: Our culture works against it because we have been monopoly enterprises for so long, and it’s been so easy to make money. That environment develops a corporate culture that is risk averse and against innovation. I once heard a publisher say the amount we spend on research and development is indistinguishable from rounding error.
Right now, there’s too much cheerfulness in this room. Let me add some gloom. When the solutions are found, they will be found by entrepreneurs blind-siding us with new technology. Startup costs for news operations are much less than they used to be. And 80 percent of the value of a newspaper company is what the accountants call good will. Which means you can start a newspaper for 20 percent of the price of buying one. So in my scenario the newspaper business and possibly the network broadcasting business will simply degrade itself until it’s easy for an entrepreneur to come along and steal its lunch. And that’s not necessarily a bad thing for society, but it’s bad for those of us who are used to the existing organizations.
Ande Zellman: Everyone says you can’t do business the way we have in the past. But there’s a culture of risk aversion. It’s change aversion. It’s like we’ve been doing this this way for a long time. I mean Monster.com is a perfect example of someone who showed us what we should be doing. It wasn’t that people within newspapers weren’t saying, “That’s where the future is.” Our voices were drowned out.
Jeff Flanders: The Chicago Tribune has rethought the way it approaches news and rethought being a stand-alone newspaper. It has extended itself into the Web, into television, in a way that I think holds a lot of promise for the future. But I think the institutional issues in moving from a traditional organization to something like that is not easy.
Margaret Holt: There’s huge resistance. We can talk about how industry analysts don’t get it, but neither do we. It’s hard just getting people in the newsroom to be receptive to the change. But it’s ultimately about the public and the readers who are, whether you like it or not, customers. And that’s a big gulp for people.
When you talk about diverse audiences, they want a brand that they can trust and that has credibility for them. These are people who are very talented, very bright, and very well employed. And they have much to contribute to our communities. And we’re aware of where they are and what their interests are. If we’re going to serve that audience, we have to be talking to them not when there is a problem with a story, not because we messed something up, but because we want to hear in the quiet times what their world is like and how we can be a part of it. And that’s a very different thing. So often we are so crisis-driven that it’s hard to take that step back and to say, “Tell me about your life. What are you interested in? What do you need from us?” Not to say, “What do you like?” We’re not talking about pandering, because there’s a very big difference. But to ask, “What do you find of value? And how do you use the paper?”
Our part is to be attuned to what are good stories and to understand there is a maturity of coverage that comes about when you start to think about it in a different way. And it’s that you’re not writing about that community so your traditional community understands it; it’s that you’re writing for them as part of your community. That’s a big shift. It’s so easy when you work for a big institution to stay in the tower—and very tempting.
We had some people from the Muslim community talk with us in January, and they were terrific resources for us since September 11. We had a group of people from the Mexican community and different communities talk about what stories are of interest to them. And for us it’s not a question of marketing. It’s really about giving us a chance to think about things in a different way during the quiet times, and they’ll make it into our Rolodexes, and we can use that information later.
Flanders: This discussion really comes down to the recent layoffs. Is it pruning for profitability or is it the beginning of triage? And the way you look at the future is very important in how you’re going to run your business. I could make the argument that over the next five years, newspapers will face the problem of having one foot on the lily pad of the physical paper—they have this big press that has to turn over and a lot of people that have to feed it. The other foot is on the emerging ways to deliver the paper, and there’s a lot of work that’s being done that is actually profitable. There’s a company, Newsstand.com, and the Harvard Business Review is offered through it, and The New York Times is going to be offered through it. It is an encrypted PDF that’s delivered to people’s desktops. I’ve heard from folks at two major high-tech companies that the flat screen technology is getting better and better and that there’ll be commercial introduction of that in the short term. Newspapers may face higher costs in the short term because they have to support the infrastructure for their physical business as they have people moving over to a more virtual way of receiving information. And that’s going to cause major problems with Wall Street.
Tom Wolzien: I’ve been puzzled about why the news industry in general has said that its content is absolutely worthless by giving it away on the Web. And that’s what we’re seeing here, right? If you can get the news on the Web for nothing, and you don’t even have to pay a buck or 75 or 50 cents for it in print, then that’s saying that all the value you’re getting just happens to be a piece of paper.
Flanders: That’s an assumption that needs to be challenged, and there are a couple of models. With your subscription to The Economist, you get access to their site. No subscription, no access. And I think that’s a model that a lot of newspapers are going to have to look at, where you don’t give it away.
Wolzien: That’s what I would suggest as an experiment over the next two years. However, there is a short-term issue to that because, with classifieds, the rate base expands, right? So as a newspaper company has expanded its rate base for classifieds by making them available for free, at the same time it’s debased the value of the journalism. Now, it may be that you can do both. It may be that classifieds are out there for free and the news part comes with your subscription. If you are saying, “Let’s look at the model going forward,” that would be one proposal.
Flanders: I suspect market forces are going to push newspapers in the direction of a tailored newspaper. The Austin paper has tried this. You should be able to identify people who want the Sunday business section with the full stock market report and those who don’t. You kill an awful lot of trees to deliver something to people who may have no interest or who might be accessing stock tables on their Blackberry. So I think some of the fundamental questions are about what are the sacred cows. What is the core of the business? Where are areas for growth? And do you make some tradeoffs? Do you staff every game out of town? Is that commodity news or do you bring something uniquely to the table? These are hard questions.
Wolzien: The single, most important thing within newspapers is the acquisition of credit card information. That is what’s made AOL so successful; they’ve got a credit card number on 25 million households or more. As newspapers shift to credit cards, it means they have the ability, if they wish, to become the intermediary in the process of tying the advertiser to actually shifting from advertising to a marketing vehicle, to engage in the process of moving people toward a sale. What newspapers have done traditionally is advertising, providing some information but not finding a way to help move across to the marketing.
Clark Gilbert: What you might get is the user willing to pay with personal demographic information. This allows a newspaper to enhance the value of what it can provide from an advertising perspective. But the newspaper industry’s been abysmal in this area. There are three or four maybe who have done well with this. Advertising revenues that you can target based on e-mail and demographic data could raise, potentially, your advertising premiums 50 to 70 percent. Yet no newspapers have adopted it. Similarly, the types and sources of revenue are likely to expand away from traditional revenue. We should be thinking about not just how to preserve the existing types and kinds of revenue, but how to grow and advance new revenue sources that are possible today that weren’t possible 15 years ago. That’s the bigger question.
Kanter: There’s the assumption—only really a newspaper assumption, not necessarily a television or broadcast assumption—that the content is perishable. I was thinking about content aggregation. Amazon is doing something totally amazing. I really can’t believe people are buying this, but they swear they are. They have an e-documents section in which you pay four dollars to eight dollars to download an article previously published somewhere else. I’m amazed, but they say it works because it’s valuable to people at the moment they want it. Much of what’s been in newspapers and Web sites is not perishable. It is a commodity, but it isn’t a perishable. What parts of it are not perishable and how can we think about delivering the value Clark is talking about that people will pay for at the moment they need it rather than when it is published? There are a lot of golden assets in news and in that content.
Holt: It seems to me the ultimate competitor remains time—the time people have and are willing to spend with us. September 11 has really brought people back to us, and that’s a golden opportunity because they’ve invested time in us that they hadn’t been doing at that level in a long time. So I think it’s a clarion call for us to do what we do well and do it better. I think news sells; that’s very clear when you look at the numbers. But with that responsibility comes a need to be more connected and more in touch with information that leaders want and need. Not just what they’re telling us they want, but what they need. And it’s going to cost. It’s very expensive. So I hope a year from now we’re talking about news that sells.
Photo from the Library of Congress, Prints and Photographs Division.
Photo from the Library of Congress, Prints and Photographs Division.
Photo from the Library of Congress, Prints and Photographs Division.
Rosabeth Moss Kanter: The point is that when one starts thinking about innovation, it means going beyond the model we have—it’s about what’s the bundle? What’s the package? What’s the product? Newspapers are, by definition, a bundle and could be unbundled. Lots of different things could be done with the quality to provide first of all an entry point for a future customer and also funding for more R&D and better news coverage. The solutions come in rethinking the bundle, the package, the model, and starting to be creative about alternatives. It’s not jumping into the Internet with huge expenditures and losses. It’s being creative. There’s a certain model. It’s a culture, a mindset, and it’s been around a long time. And any time an industry has been around hundreds of years and hasn’t fundamentally changed its form, there are opportunities for innovation.
Geneva Overholser: Before we decide on what the innovations are, we need to decide that we want to be an innovative industry, because we haven’t been at all. Being a cash cow is a strategy, and that’s been our strategy. Even the good companies have been dragged into that strategy by the prevailing winds of profit pressures. And maybe it isn’t that simplistic. Giving money to education—well, one of the first things to go in tough times is newspapers in education. It’s a no-brainer: You’re breeding readers. But it costs them money. We have to really decide we want to be alive in 40 years and thriving instead of just sort of barely hanging on by our fingernails with the best newspapers. This is not an innovative climate to be in newspaper journalism.
Phil Meyer: Our culture works against it because we have been monopoly enterprises for so long, and it’s been so easy to make money. That environment develops a corporate culture that is risk averse and against innovation. I once heard a publisher say the amount we spend on research and development is indistinguishable from rounding error.
Right now, there’s too much cheerfulness in this room. Let me add some gloom. When the solutions are found, they will be found by entrepreneurs blind-siding us with new technology. Startup costs for news operations are much less than they used to be. And 80 percent of the value of a newspaper company is what the accountants call good will. Which means you can start a newspaper for 20 percent of the price of buying one. So in my scenario the newspaper business and possibly the network broadcasting business will simply degrade itself until it’s easy for an entrepreneur to come along and steal its lunch. And that’s not necessarily a bad thing for society, but it’s bad for those of us who are used to the existing organizations.
Ande Zellman: Everyone says you can’t do business the way we have in the past. But there’s a culture of risk aversion. It’s change aversion. It’s like we’ve been doing this this way for a long time. I mean Monster.com is a perfect example of someone who showed us what we should be doing. It wasn’t that people within newspapers weren’t saying, “That’s where the future is.” Our voices were drowned out.
Jeff Flanders: The Chicago Tribune has rethought the way it approaches news and rethought being a stand-alone newspaper. It has extended itself into the Web, into television, in a way that I think holds a lot of promise for the future. But I think the institutional issues in moving from a traditional organization to something like that is not easy.
Margaret Holt: There’s huge resistance. We can talk about how industry analysts don’t get it, but neither do we. It’s hard just getting people in the newsroom to be receptive to the change. But it’s ultimately about the public and the readers who are, whether you like it or not, customers. And that’s a big gulp for people.
When you talk about diverse audiences, they want a brand that they can trust and that has credibility for them. These are people who are very talented, very bright, and very well employed. And they have much to contribute to our communities. And we’re aware of where they are and what their interests are. If we’re going to serve that audience, we have to be talking to them not when there is a problem with a story, not because we messed something up, but because we want to hear in the quiet times what their world is like and how we can be a part of it. And that’s a very different thing. So often we are so crisis-driven that it’s hard to take that step back and to say, “Tell me about your life. What are you interested in? What do you need from us?” Not to say, “What do you like?” We’re not talking about pandering, because there’s a very big difference. But to ask, “What do you find of value? And how do you use the paper?”
Our part is to be attuned to what are good stories and to understand there is a maturity of coverage that comes about when you start to think about it in a different way. And it’s that you’re not writing about that community so your traditional community understands it; it’s that you’re writing for them as part of your community. That’s a big shift. It’s so easy when you work for a big institution to stay in the tower—and very tempting.
We had some people from the Muslim community talk with us in January, and they were terrific resources for us since September 11. We had a group of people from the Mexican community and different communities talk about what stories are of interest to them. And for us it’s not a question of marketing. It’s really about giving us a chance to think about things in a different way during the quiet times, and they’ll make it into our Rolodexes, and we can use that information later.
Flanders: This discussion really comes down to the recent layoffs. Is it pruning for profitability or is it the beginning of triage? And the way you look at the future is very important in how you’re going to run your business. I could make the argument that over the next five years, newspapers will face the problem of having one foot on the lily pad of the physical paper—they have this big press that has to turn over and a lot of people that have to feed it. The other foot is on the emerging ways to deliver the paper, and there’s a lot of work that’s being done that is actually profitable. There’s a company, Newsstand.com, and the Harvard Business Review is offered through it, and The New York Times is going to be offered through it. It is an encrypted PDF that’s delivered to people’s desktops. I’ve heard from folks at two major high-tech companies that the flat screen technology is getting better and better and that there’ll be commercial introduction of that in the short term. Newspapers may face higher costs in the short term because they have to support the infrastructure for their physical business as they have people moving over to a more virtual way of receiving information. And that’s going to cause major problems with Wall Street.
Tom Wolzien: I’ve been puzzled about why the news industry in general has said that its content is absolutely worthless by giving it away on the Web. And that’s what we’re seeing here, right? If you can get the news on the Web for nothing, and you don’t even have to pay a buck or 75 or 50 cents for it in print, then that’s saying that all the value you’re getting just happens to be a piece of paper.
Flanders: That’s an assumption that needs to be challenged, and there are a couple of models. With your subscription to The Economist, you get access to their site. No subscription, no access. And I think that’s a model that a lot of newspapers are going to have to look at, where you don’t give it away.
Wolzien: That’s what I would suggest as an experiment over the next two years. However, there is a short-term issue to that because, with classifieds, the rate base expands, right? So as a newspaper company has expanded its rate base for classifieds by making them available for free, at the same time it’s debased the value of the journalism. Now, it may be that you can do both. It may be that classifieds are out there for free and the news part comes with your subscription. If you are saying, “Let’s look at the model going forward,” that would be one proposal.
Flanders: I suspect market forces are going to push newspapers in the direction of a tailored newspaper. The Austin paper has tried this. You should be able to identify people who want the Sunday business section with the full stock market report and those who don’t. You kill an awful lot of trees to deliver something to people who may have no interest or who might be accessing stock tables on their Blackberry. So I think some of the fundamental questions are about what are the sacred cows. What is the core of the business? Where are areas for growth? And do you make some tradeoffs? Do you staff every game out of town? Is that commodity news or do you bring something uniquely to the table? These are hard questions.
Wolzien: The single, most important thing within newspapers is the acquisition of credit card information. That is what’s made AOL so successful; they’ve got a credit card number on 25 million households or more. As newspapers shift to credit cards, it means they have the ability, if they wish, to become the intermediary in the process of tying the advertiser to actually shifting from advertising to a marketing vehicle, to engage in the process of moving people toward a sale. What newspapers have done traditionally is advertising, providing some information but not finding a way to help move across to the marketing.
Clark Gilbert: What you might get is the user willing to pay with personal demographic information. This allows a newspaper to enhance the value of what it can provide from an advertising perspective. But the newspaper industry’s been abysmal in this area. There are three or four maybe who have done well with this. Advertising revenues that you can target based on e-mail and demographic data could raise, potentially, your advertising premiums 50 to 70 percent. Yet no newspapers have adopted it. Similarly, the types and sources of revenue are likely to expand away from traditional revenue. We should be thinking about not just how to preserve the existing types and kinds of revenue, but how to grow and advance new revenue sources that are possible today that weren’t possible 15 years ago. That’s the bigger question.
Kanter: There’s the assumption—only really a newspaper assumption, not necessarily a television or broadcast assumption—that the content is perishable. I was thinking about content aggregation. Amazon is doing something totally amazing. I really can’t believe people are buying this, but they swear they are. They have an e-documents section in which you pay four dollars to eight dollars to download an article previously published somewhere else. I’m amazed, but they say it works because it’s valuable to people at the moment they want it. Much of what’s been in newspapers and Web sites is not perishable. It is a commodity, but it isn’t a perishable. What parts of it are not perishable and how can we think about delivering the value Clark is talking about that people will pay for at the moment they need it rather than when it is published? There are a lot of golden assets in news and in that content.
Holt: It seems to me the ultimate competitor remains time—the time people have and are willing to spend with us. September 11 has really brought people back to us, and that’s a golden opportunity because they’ve invested time in us that they hadn’t been doing at that level in a long time. So I think it’s a clarion call for us to do what we do well and do it better. I think news sells; that’s very clear when you look at the numbers. But with that responsibility comes a need to be more connected and more in touch with information that leaders want and need. Not just what they’re telling us they want, but what they need. And it’s going to cost. It’s very expensive. So I hope a year from now we’re talking about news that sells.
- Jefferson Flanders is vice president of consumer marketing at Harvard Business School Publishing, which publishes the Harvard Business Review.
- Clark Gilbert is assistant professor in the Entrepreneurial Management unit at the Harvard Business School, where he researches corporate innovation and the challenges of entrepreneurship in large, established firms.
- Margaret Holt is customer service editor for the Chicago Tribune, where she manages the paper’s accuracy initiative.
- Rosabeth Moss Kanter is the Ernest L. Arbuckle Professor of Business Administration at the Harvard Business School.
- Philip Meyer, a 1967 Nieman Fellow, is a professor of and Knight Chair in Journalism at the University of North Carolina at Chapel Hill.
- Geneva Overholser, a 1986 Nieman Fellow, holds the Curtis B. Hurley Chair in Public Affairs Reporting at the Washington bureau of the University of Missouri School of Journalism.
- Tom Wolzien is senior media analyst at Sanford C. Bernstein & Co., a Wall Street research and investment management firm.
- Ande Zellman is a media consultant, former assistant managing editor for Newsweek, and was a member of the team that led The Boston Globe into its multimedia ventures.
