Profits Without Honor   

Sky-high margins during a downturn come at a steep price.

IF YOU BELIEVE what you read, the news in the news biz is bleak. Midnight has tolled for the once-sexy media dotcoms, and the vanishing of their lavish advertising campaigns is putting the hurt on their erstwhile competitors in print and broadcast. Employment lineage recedes, stock prices wilt. Just three months into the new year, media executives are frantically rebudgeting and announcing layoffs.
The timing was auspicious, then, for the Scripps Howard Foundation's National Roundtable, which recently assembled nine savvy professionals to discuss this question: Does the news media's growing emphasis on profits adversely affect the quality of their journalism?
In opening remarks, the first panelist, a veteran network television producer, talked about the "self-censorship"--a reluctance to pursue certain stories--she's already witnessed due to advertiser influence. The second, a general manager of a major TV affiliate, said such behavior is ultimately bad for business because it undermines news credibility. The third, a newspaper editor, asserted that the media have never asked their customers to shoulder the true expense of newsgathering, and that the "freeware" mentality of the Internet will only make matters worse.
Good observations all. Nevertheless, it was here that I leaned over to a colleague and whispered, "If somebody doesn't raise the subject of profit margins pretty soon, we'll be missing the point of the whole discussion."
As if on cue, the moderator then turned to Al Tompkins, an accomplished journalist who now runs online and broadcast training for the Poynter Institute. Tompkins told the story of how a good friend of his, news director of a major-market TV station, had been instructed to increase its profits by 2 percent. The previous year the station had made 69 percent. He paused a moment so that we might pick up our jaws.
Then Tompkins said he called another friend, this one a drug agent in Tennessee. "I asked him, 'What percentage profit do crack dealers make?' And he said about 25 percent," Tompkins said. If you degrade the crack any further trying to secure a higher profit, the agent explained, you're apt to get yourself killed.
"I think that's an important point to make," Tompkins continued, "that journalism--good journalism--costs money, and that companies that own television stations, companies that own newspapers, companies that own online journalism sites have a different kind of obligation than companies that sell soap. It's a long-term public trust, and it's an implied contract with the people that we're in it for the long term."
I couldn't help but smile at the crack analogy, not only because of the nifty point it offered but for its suggestion of addiction. After all, no junkie in the world is as hooked as media companies are on their profit margins. And like all addictions, I fear this one will make for a bad end.
News is an extraordinarily pricey proposition, because it takes real live human beings, and lots of them, to find it. When news companies demand too much in the way of profits quarter after quarter--despite economic sluggishness, despite the most competitive media environment in history--they cannot help but diminish their product. And when that happens, as it so often does at the first whiff of trouble, who loses? We do, the consuming public.
Yes, this will be a disappointing year financially, maybe even a dismal one. But disappointing compared to what? Compared to the best boom years in industry history, ones that saw media companies scoring record revenues and margins typically running between 20 and 30 percent, and not infrequently much more. A friend of mine who edits a small daily said his owner this year budgeted a margin in excess of 40 percent.
Everyone knew that rocket ride had to end. But just as prudent cost-cutting is appropriate under the circumstances, it's equally important that some of those record proceeds now be used to protect the integrity of news reports. That means temporarily lower margins. Instead, we're seeing corporate suits responding to a full-bore recession that simply doesn't exist.
They say they are looking out for shareholders, of course, but their true minders are those towheaded Wall Street analysts who are bored with media companies even when times are robust. As such, it was kind of refreshing to see Donald Graham, chairman of the Washington Post Co., tweak them at a New York presentation a few months ago. Amid his forecast for the company's newspaper, television, online and magazine operations, Graham said, "Our journalism, which I know is not the focus of your interests but is the focus of mine, is better than ever."
Can good business and good journalism coexist? Perhaps we should turn the question around: Can our industry survive producing inferior journalism? The answer to that seems clearer.