Schädenfreude

Move over journalists. Engineers are taking over your newsrooms

Round and round we go. It’s tough watching the end-stage of a once-glorious industry, as newspaper companies are hung, drawn and quartered by private equity. In late May we found out that not even Apollo Capital Management, the well-known distressed asset fund that owns stuff like Coldwell Banker, Caesars Palace and Norwegian Cruise Lines was prepared to take Digital First Media, with 75 properties one of the largest newspaper companies in the country, off the hands of its current majority shareholder, Alden Global Capital, another, yep, distressed asset specialist. Alden is led by Randall Smith, the man who practically invented vulture capital.

What does that tell you? That after Alden has applied its unique take on corporate hospice, there’s nothing much left at all? You might remember, we had an idea this was coming: https://blastofwinter.com/2015/03/11/its-tough-being-the-boss-at-digital-first-and-mcclatchy/

They dressed up DFM pretty nicely too, selling off parking lots and people to get pre-tax earnings up to around $125 million. But Apollo smelled the perfume. Not even chief executive John Paton could convince them to buy.

You would never guess that Paton was Canadian, he makes an awful lot of noise. A former journalist and editor. So brazen he stole the name “Digital First.” Now he’s leaving DFM on June 30 to run something called IVA Ventures, which will give him plenty of time to deliver his unique brand of bullshit to El Pais in Madrid, where he’s on the board. It was either that, or Pravda. It gets him safely out of the way so the piecemeal sell-off, closures and cycle reductions can begin. DFM is now officially in end-stage metastasis.

I won’t bore you with the long saga of how we got here. It’s the same familiar story of self-serving financial chicanery you’ve heard before, though this one is especially crass; three bankruptcies, re-structuring of dubious economic and strategic merit, the layering on of unsustainable levels of debt in a time of great recession, wrecked pension plans, grandly excessive profit-taking, all that kind of thing. All sorts of people came running to the trough too, not just the equity guys. The company put together an advisory board composed of self-styled visionaries like Jeff Jarvis, Jay Rosen of NYU and Emily Bell, the director of the Tow Center for Digital Journalism at Columbia. The academics gave Paton – and Alden Capital – useful cover. It’s all worth googling, if you get the time. The level of self-interest and collective hubris is breath-taking.

But look, if I sound angry, it’s not because of the obvious iniquity, where the working stiffs get screwed and the vultures and sweet talkers make out like bandits. That’s how the system works, I lived in it and did quite nicely, and there’s nothing much I can do about it anyway. No, if I’m pissed at all, I’m pissed because it didn’t have to happen. DFM and newspapers in general didn’t have to lose it all, at all.

Let’s assume that newspaper companies weren’t deliberately eased over the cliff by executives who took one look at the magnitude of the challenge of digital transformation and opted out, electing to manage decline and public opinion until the last dollar was taken. That would be a perfectly good call for many shareholders, though maybe not for you and me. We’d rather have a shot, right? A real shot, too. We’d rather invest in the tricky business of divining a new digital future, for real. So let’s give Paton the benefit of the doubt despite his querulous financial backing and assume that reinvention really was his sincere intent. In that case, good for him. But where did he go wrong?

Step back a moment. I remember when cable television began to penetrate local markets – and many newspapers came to believe that local cable news might threaten their local news monopoly. So they decided to get into the cable news business. They thought it would be easy. A makeshift “studio” in a corner of the newsroom. A stationery camera. Two editors in uniform – you know, beards, blue button-down oxford cloth shirts, red ties and a load of self-importance – talking to each other for 30 minutes three times a day. A script for scintillating television programming lifted right out of the C-Span manual. I asked the guy running our television division what he thought. “Come with me to Charlotte, you idiot” he said. “Charlotte?” Turns out the highest-rated local television news programming in the entire United States was produced by our station in Charlotte, North Carolina, WSOC-TV, an ABC network affiliate. Had a share of over 50%.

So I went. And I came to understand that for a newspaper to imagine it could produce quality television was just arrogant over-reaching. Newspapers knew nothing about television production values. I watched as my guy reviewed video after video of the previous month’s newscasts, critiquing in minute detail the open, the “flip” from one anchor to another, the camera angles, the “in and out” from commercial breaks, the running order and story selection, the close, even the credit roll. And it also became clear that newspapers knew even less about the construction of a successful television news program. It involved much more than summarizing a news story from the front page of the newspaper…

When you enjoyed the economic benefits of monopoly for more than a century, you end up thinking you earned it, like the rich kids I’ve met who think they got to third base by running all the way there. A little humility might have helped. But newspapers never had that. Back in the 1920s, a prominent newspaper editor casually dismissed radio by calling it the work of “parlor books, hopeless pupils of honorless music teachers and quack health doctors.” Just like Buzzfeed, I guess.

To symbolize his intent to put digital first and print second, Paton famously announced when he took over in 2010 that he would provide all reporters with Flip video cameras. “This company will successfully make the transition from a newspaper company to a dynamic, multi-platform news and information company,” he said on his blog back then. “We also shipped some of the Flips to advertising directors as well. Not only have we started to add ever more compelling video to our news sites but we have already made some money using them too.”

It’s inside out, this thinking. It may not be print first. But it sure is still newspapers first. The market didn’t care if print reporters delivered video reports or chocolate cake. The market didn’t want what they had to offer. It wanted something different. Paton wasn’t listening.

He still hasn’t learned a thing. On his latest post announcing that he hadn’t found a buyer, he touted DFM’s “numerous awards for outstanding coverage including the first Pulitzer Prize for the Torrance Daily Breeze in our Los Angeles News Group. Our Denver Post was a finalist for a Pulitzer as well, and our San Jose Mercury News won the prestigious Scripps Howard Foundation Award for Environmental Reporting. And that’s just to name a few.”

That’s all very nice and congratulations all round. It’s also completely irrelevant. Now, just as the digital generation comes of age – or maybe because of it – the next generation of news franchises is rising to serve them, and not one was developed by a newspaper. Each of them has software – and engineers – at the heart of the business. But their success is not based simply on a supra-normal ability to stroke code. Take away the precious terminology and the “frictionless” reach – and the singular difference between digital news companies and their print predecessors is the digital sensibility that informs everything they do. Deep down in their bones they understand how to reach young digital media consumers, how to get their attention and how to engage with them.

They also know how to deliver them to advertisers. Last time I looked, Buzzfeed was having no problem making its number. But digital news as delivered by DFM and newspapers in general is just another undifferentiated commodity news product – and even in an age of audience segmentation and tighter and tighter ad targeting, it’s still sold like that, too. Gross reach into an undifferentiated audience, the dreaded CPM. Makes me shudder. Instead of a Flip camera for every reporter, Paton might have invested in a marketing database that helped him get to know his audience. To this day he knows pretty much the same about his users as he knows about his readers. Nada.

“Vox is not doing anything newspapers couldn’t have done,” Vinod Khosla, the famed Silicon Valley venture capitalist, an early investor in Vox Media and an old friend, told me the other day. But a digital re-invention was beyond newspapers. They might have invented Buzzfeed. Or Vox. Their coupon business may have led them to dream up Groupon, their thousands of local sales relationships may have been leveraged into Yelp. But they couldn’t do anything like that, because their publishers and editors had always known what the market wanted without ever having to ask. They knew that “quality news” done the classic newspaper way was all they needed in the digital age, dressed up a little with videos and a poll and stuff like that. They knew this because they still put themselves at the center of the universe.

But the Millennial generation is at the center of the universe.

Millennials don’t live with the Internet. They live in it. They are busy assembling their own personal bundle of news and information, plucking items out of the digital stream of content that flows by them every day. Only two things matter now. Mobile. And what we still call Social, though it’s just free distribution, that’s all it is. Newspapers don’t have a clue how to program in this world, how to get attention, how to engage. It takes a whole lot more than slapping .com at the end of your name.

Paton assumed that news designed for the print era would fly in the digital era. Once he went down that road, he couldn’t change direction. After all, that was the idea he had used in the first place to persuade Alden Capital that there was more profit to be taken – at not much expense.

It’s elementary, you see. DFM didn’t listen to the market.

It’s always hard to listen when someone’s yelling in your ear.