To Become an Entrepreneur, You Need to Think and Then Act Like an Entrepreneur - Secrets of the Successful
Here Are the Top 10 Business Quotes of 2010 - They're Serious and Funny
Here Are 7 Reasons Why Print Media Will Make a Comeback in 2011
An Inside Look at the Television News Business Reveals a Seamy Side of Payouts and Profits for Sensational Story Lines
Bernstein: The "Golden Age" of Investigative Journalism Never Existed
Among 49% of Respondents Who Use Twitter, Zero (As In No One) Would Pay a Fee for the Privilege of Doing So
Nielsen Advertising Research Claims That Younger Consumers Are Losing Their Dominance in the Marketplace
Try to Imagine the Difference in Consumer Prices From 1990 to 2010 - How far will your $20 get you?
Zach Carter Outlines His Choices for America's 10 Most Corrupt Capitalists - Hint: It's Not David Letterman's Top 10 List
Wall Street's captains of industry, and top policymakers in Washington are
often the same people, according to Zach Carter. A lot of them get rich by
playing for both teams. Find out who they are and how they do it in this guest
article that appeared in alternet.com in May 2010.
So Just How Much Do These Media Moguls Make? The Answer: More Than Your Wildest Dreams - They Make Money Even When Their Businesses Don't
Aaron Elstein writes a blog for Crain's New York Business and covers all aspects of Wall Street.
Why Do People Read Newspapers? And Why Are So Many People Now Reading the Internet? The Answer Will Surprise You
This analysis by Jack Fuller first appeared in the Nieman Reports newsletter, published by the Nieman Foundation for Journalism at Harvard University. Jack Fuller, who won a Pulitzer Prize for Editorial Writing, was editor and publisher of the Chicago Tribune and president of Tribune Publishing Company.
Robert Reich Says "Don't Listen to the Cheerleaders, the Main Street Economy Isn't Improving" - He Should Know
This guest article by Robert Reich originally appeared on his web site at RobertReich.org. Reich is a former Secretary of Labor in President Clinton's Administration, and currently a Professor of Public Policy at Cal-Berkeley.
Federal Reserve Chair Does Not Need to Be a Toady in Defending the Interests of Big Banks - Say It Ain't So, Bennie
This guest article by Dean Baker first appeared in The Huffington Post. Baker is co-director of the Center for Economic and Policy Research in Washington, DC.
Bloomberg News Survey of CEO Pay - Leslie Moonves, Columbia Broadcasting System's Top Exec, Was Apparently Overpaid by $28 Million in 2009
Most successful politicians understand that nothing hits closer to home with
potential voters than money issues. When a politician's vote takes money out of
his constituent's pocket, he is in trouble. This is why politicians want nothing
to do with reforming Social Security or Medicare. You would think that fat-cat
CEOs of mega-companies would be more sensitive to ripping off their customers,
but apparently not so. Some continue to get outrageous compensation for very
little production. Trust me when I say that the rich live a very different life
than we do.
Health Insurance and Life Insurance Companies Have Invested Nearly $2 Billion in Fast-Food Chains - They Sure Are Broke (Wink, Wink)
Well, I guess you can't leave $2 billion in profit in your stinky socks at the office. It's a real hardship finding some place to stash an extra $2 billion in profits, but some insurance companies have really smart bean counters—they figured it out.
For the First Time Ever, Digital Advertising Will Outstrip Print Media Advertising as the Internet Grows in Influence - Grabs a 32.5% Share
Changing Models: A Global Perspective by Nielsen on Paying for Content Online
Nic Covey is the Director of Cross Platform Insights at The Nielsen Company, and the author of this piece on paying for online content.
After Three Months, Only 35 Readers Are Willing to Pay for Newsday's Web Site Content - Yikes! No Wonder Newspapers Are in So Much Trouble
This piece by John Kobilin in The New York Observer shows why newspapers are going to have a tough time charging online fees to read their copy. In this particular experiment, Newsday readers could not raise their middle finger fast enough.
Looks Like the New York Times Will Begin Charging to Read All Content on Its Website
This guest article gives readers a look at the future when reading the New York Times.
Arianna's Huffington Post Doubles in Traffic From the Same Month in 2008
The following article by Amanda Ernst apparently appeared in mediabistro.com. My site had 5.57 million visitors in 2009. Arianna Huffington's Huffington Post site (HuffPo) had 9.8 million unique visitors during the month of December 2009 alone.
Deal or No Deal, Tech or No Tech, It's Really About Phones, Smartphones to Be Exact
Anyone who has a website and wants readers should be aware of this developing trend.
The Print Assault Continues - Irish Professor Claims Newspapers Are in Peril as Trends Change in the Age of New Media
The plight of newspapers that are diminishing in importance reaches across the pond from the United States to Ireland. Here is an insightful piece by Roy Greenslade that appeared in The Irish Times. Greenslade is a Professor of Journalism at City University London. I have changed the British spellings of words to our spellings here in the United States.
Here Are the Top 10 Media Blunders During 2009 for Your Consideration
Staff and Owners of the media try to get it right, but oftentimes cannot resist pushing it just a little to promote their own point-of-view and hopefully influence unaware readers and viewers, most of whom can smell a pile of stink a mile away. Read Michael Calderone's take from politico.com.
An Interesting Take on Why Some Readers Today Prefer the Internet Over Reading Newspapers
One reason seekers of news are abandoning print newspapers for the Internet has nothing directly to do with technology. It's that newspaper articles are too long. On the Internet, news articles get to the point. Find out why by reading this article.
Important News About Newspapers, What We Grew Up With and Still Want to Enjoy Reading
Mark Fitzgerald is the Editor-at-Large for Editor & Publisher magazine, the nation's most famous and well-respected magazine covering the newspaper industry in America. Fitzgerald assesses the state of the industry today, why it will survive, and where it is headed.
Be Cautious About Giving Information to Census Workers
Everywhere there are con artists wanting to take the easy way out—they lie, cheat and steal for a living, rather than working for a living and paying taxes to support our free enterprise system. Corrupt census takers are no exception.
A Big City Newspaper Story That Only a Newspaperman Could Most Appreciate
Michiael Sokolove is a contributing writer for the New York Times Magazine, where this article first appeared (apparently on 9-9-09). After a 20-year career in the newspaper business, I re-publish it here because newspapers are like children for those of us who have spent a good deal of our adult working life in the newspaper industry. For me, the death of a newspaper is almost like the death of a child, always taken too soon and never able to be replaced. For those who understand, read on. For those who do not understand, you have other fish to fry.
Here Is One Reason Why Newspapers Have Become Less Relevant to Readers
There was an 8-year period of my life when I owned and operated a community publishing company that published a weekly newspaper, and I made it my business to separate news facts from the opinion expressed in our editorials and by our columnists. Most major newspapers today make no distinction between news and opinion, and this is one reason why fewer people today care what major newspapers have to say.
Who Should We Really Blame for the Unfair, Excessive Pay of Underperforming Corporate Chief Executive Officers?
With the collapse of our America economy and ongoing recession, hardly a day goes by without reading or hearing about an underperforming chief executive officer of a Fortune 500 company getting bounced out on his ear. Then the incompetent CEO that ruined the company and its stock value is walking away with a sweet going away gift of millions in compensation while the company is losing money and struggling to survive. Why is this happening in America?
Don't Let Me Catch You Today, or I Will Willfully Kick Your Sorry Ass - Targeting Low Life Scum
Most people that know me and see me find me to be a very even-tempered guy in control of himself and the situation. But there are days, and this is one, where me Irish temper gets riled up. Let me make it very clear: Don't let me catch you today, or I will willfully kick your sorry ass. Why? Read my article if you want to know.
America's CEOs Could Do Worse Than Heed Warren Buffett's Advice
Sometimes it seems obvious that too many chief executive officers at America's biggest corporations make really stupid decisions that are driven by greed and avarice rather than sound business practices. Take for example the two mortgage giants Fannie Mae and Freddie Mac, one of about 90 banks that are in financial trouble—Wachovia—and a former automotive giant that is in serious financial trouble—General Motors. Find out why.
Too Many Overpaid CEOs Are Really Smooth Operators Who Produce Little
When you understand that the average CEO in America makes 400 times what the average worker makes, you could get upset. When you have an environment where chief executive officers of companies can rack up a pitiful financial performance and still continue to rake in millions of compensation for being essentially incompetent, it is even more upsetting. What are we to do?
USPS: It Reminds You of the Army, and its Call to "Hurry Up and Wait"
Why aren't those postal lines moving faster? If you thought it was because the front counter people at your post office are slow and inefficient, think again. Usually in the battle between men and machines, it is the man that slows down the machine; in the case of the USPS front counter processing software, it is the machine that is slowing down the man, not to mention annoying customers and aggravating postal employees.
The Lure of Greed Allowed Bankers to Ignore the Signs of Trouble on Foreclosures
Is Your Stockbroker a Trusted Adviser or a Stock Pusher? Should Stockbroker Activity Come Under Legislative Control?
Recently I posted an article on my web site titled "If There Is Currently a Lower Life Form on Earth Than Greedy Bankers, Please Let Me Know". No one has yet contacted me to indicate a lower life form than bankers, but I have stumbled upon another species that rivals bankers—brokers, as in stockbrokers, whose job is to relieve you of your hard-earned money by buying and selling stocks, bonds and associated financial instruments. In other words, they have to use your money to become successful because they can't cut it on their own. Check out this New York Times article by Tara Siegel Bernard.
If There Is Currently a Lower Life Form on Earth Than Greedy Bankers, Please Let Me Know
Banks apparently will not stop paying their top executives more bonus money, many times regardless of the bank's bottom line performance. Here is one example of all but hidden compensation revealed by Aaron Elstein in Crain's New York Business publication.
ISP Providers Decide to Do the Right Thing Rather Than Stuff Their Pockets with Money
They took their merry time about it, but finally some Internet Service Providers have decided to do the right thing and get about the business of eliminating child porn on the Internet service they provide. That is the good news. The bad news is that it took a threat by a government official to file a legal suit with charges of fraud and deceptive business practices to eventually get the ISPs to agree. Is it not amazing that pigs do not know that pigs stink!
"So Why Should I Subsidize Any Banks Because of Their Greed and Incompetence?"
It seems that in its unbridled greed and with the avarice of its associate mortgage brokers, bankers have taken on a bunch of residential paper that amounts to bad loans. Apparently delinquencies are even rising among borrowers with good credit and conventional mortgages. My, my, my, sounds like someone has a real big problem. Excuse me while I go to sleep with a clear conscience. Let me explain why.
February 11, 2011
Business Secrets of the Successful
To Become an Entrepreneur, You Need to Think and Then Act Like an Entrepreneur
(Ed's Note: Take this trip inside the restless, curious, eager minds of highly accomplished entrepreneurs who are company buildings. Leigh Buchanan is an editor-at-large for Inc.)
By Leigh Buchanan
What distinguishes great entrepreneurs? Discussions of entrepreneurial psychology typically focus on creativity, tolerance for risk, and the desire for achievement—enviable traits that, unfortunately, are not very teachable.
So Saras Sarasvathy, a professor at the University of Virginia's Darden School of Business, set out to determine how expert entrepreneurs think, with the goal of transferring that knowledge to aspiring founders.
While still a graduate student at Carnegie Mellon, Sarasvathy—with the guidance of her thesis supervisor, the Nobel laureate Herbert Simon—embarked on an audacious project: to eavesdrop on the thinking of the country's most successful entrepreneurs as they grappled with business problems.
She required that her subjects have at least 15 years of entrepreneurial
experience, have started multiple companies—both successes and failures—and have
taken at least one company public.
Sarasvathy identified 245 U.S. entrepreneurs who met her criteria, and 45 of them agreed to participate. (Responses from 27 appeared in her conclusions; the rest were reserved for subsequent studies. Thirty more helped shape the questionnaire.)
Revenue at the subjects' companies—all run by the founders at that time—ranged from $200 million to $6.5 billion, in industries as diverse as toys and railroads. Sarasvathy met personally with all of her subjects, including such luminaries as Dennis Bakke, founder of energy giant AES; Earl Bakken of Medtronic; and T.J. Rodgers of Cypress Semiconductor.
She presented each with a case study about a hypothetical start-up and 10 decisions that the founder of such a company would have to make in building the venture. Then she switched on a tape recorder and let the entrepreneur talk through the problems for two hours.
Sarasvathy later collaborated with Stuart Read, of the IMD business school in Switzerland, to conduct the same experiment with professional managers at large corporations—the likes of Nestlé, Philip Morris, and Shell.
Sarasvathy and her colleagues are now extending their research to novice
entrepreneurs and both novice and experienced professional investors.
Sarasvathy concluded that master entrepreneurs rely on what she calls effectual reasoning <http://effectuation.org> . Brilliant improvisers, the entrepreneurs don't start out with concrete goals. Instead, they constantly assess how to use their personal strengths and whatever resources they have at hand to develop goals on the fly, while creatively reacting to contingencies.
By contrast, corporate executives—those in the study group were also enormously successful in their chosen field—use causal reasoning. They set a goal and diligently seek the best ways to achieve it.
Early indications suggest the rookie company founders are spread all across
the effectual-to-causal scale. But those who grew up around family businesses
will more likely swing effectual, while those with M.B.A.'s display a causal
bent. Not surprisingly, angels and seasoned VCs think much more like expert
entrepreneurs than do novice investors.
The following is a summary of some of the study's conclusions, illustrated with excerpts from the interviews. Understanding the entrepreneurs' comments requires familiarity with what they were evaluating.
The case study and questions are too long to reproduce here. But briefly: Subjects were asked to imagine themselves as the founder of a start-up that had developed a computer game simulating the experience of launching a company. The game and ancillary materials were described as tools for teaching entrepreneurship.
Subjects responded to questions about potential customers, competitors,
pricing, marketing strategies, growth opportunities, and related issues. (The
full case study and questions can be found here <http://www.inc.com/leadership>
Quotes have been edited for length, though we wish we had room to run them in their entirety. Sarasvathy remained almost silent throughout, forcing the founders to answer their own questions and externalize their thinking in the process.
The transcripts, riddled with "ums" and "ers," doublings-back on assumptions,
and references to personal rules of thumb, read like verbal MRIs of the
entrepreneurial brain in action.
Do the Doable, Then Push It
Sarasvathy likes to compare expert entrepreneurs to Iron Chefs: at their best when presented with an assortment of motley ingredients and challenged to whip up whatever dish expediency and imagination suggest.
Corporate leaders, by contrast, decide they are going to make Swedish
meatballs. They then proceed to shop, measure, mix, and cook Swedish meatballs
in the most efficient, cost-effective manner possible.
That is not to say entrepreneurs don't have goals, only that those goals are broad and—like luggage—may shift during flight. Rather than meticulously segment customers according to potential return, they itch to get to market as quickly and cheaply as possible, a principle Sarasvathy calls affordable loss.
Repeatedly, the entrepreneurs in her study expressed impatience with anything that smacked of extensive planning, particularly traditional market research. (Inc.'s own research backs this up.
One survey of Inc. 500 CEOs found that 60 percent had not written business
plans before launching their companies. Just 12 percent had done market
When asked what kind of market research they would conduct for their hypothetical start-up, most of Sarasvathy's subjects responded with variations on the following:
"OK, I need to know which of their various groups of students, trainees, and individuals would be most interested so I can target the audience a little bit more. What other information...I've never done consumer marketing, so I don't really know. I think probably...I think mostly I'd just try to...I would...I wouldn't do all this, actually. I'd just go sell it. I don't believe in market research.
"Somebody once told me the only thing you need is a customer. Instead of
asking all the questions, I'd try and make some sales. I'd learn a lot, you
know: which people, what were the obstacles, what were the questions, which
prices work better. Even before I started production. So my market research
would actually be hands-on actual
"Ultimately, the best test of any product is to go to your target market and pretend like it's a real business. You'll find out soon enough if it is or not. You have to take some risks. You can sit and analyze these different markets forever and ever and ever, and you'd get all these wonderful answers, and they still may be wrong.
"The problem with the businessman type is they spend a lot of time with all
their great wisdom and all their spreadsheets and all their Harvard Business
Review people, and they'd either become convinced that there's no market at all
or that they have the market nailed. And they'd go out there big time, with a
lot of expensive advertising and upfront costs, because they're gonna overwhelm
the market, and the business would go under."
The corporate executives were much more likely to want a quantitative analysis of market size:
"If I had a budget, I could ask a specialist in the field of education to go through data and give me ideas of how many universities, how many media, how many large companies I will have to contact to have an idea of the work that has to be done."
Sarasvathy explains that entrepreneurs' aversion to market research is symptomatic of a larger lesson they have learned: They do not believe in prediction of any kind.
"If you give them data that has to do with the future, they just dismiss it," she says. "They don't believe the future is predictable...or they don't want to be in a space that is very predictable."
That attitude is a bit like Voltaire's assertion that the perfect is the
enemy of the good. In this case, the careful forecast is the enemy of the
"I always live by the motto of 'Ready, fire, aim.' I think if you spend too much time doing 'Ready, aim, aim, aim,' you're never going to see all the good things that would happen if you actually started doing it. I think business plans are interesting, but they have no real meaning, because you can't put in all the positive things that will occur...If you know intrinsically that this is possible, you just have to find out how to make it possible, which you can't do ahead of time."
That said, Sarasvathy points out that her entrepreneurs did adopt more formal research and planning practices over time. Their ability to do so—to become causal as well as effectual thinkers—helped this enduring group grow with their companies.
Woo Partners First
Entrepreneurs' preference for doing the doable and taking it from there is manifest in their approach to partnerships. While corporate executives know exactly where they are going and follow a prescribed path to get there, entrepreneurs allow whomever they encounter on the journey—suppliers, advisers, customers—to shape their businesses.
"I would literally target...key companies who I would call flagship: do a frontal lobotomy on them. There are probably a dozen of those I would pick. Some entrepreneurial operations that would probably be smaller but have a global presence where I'm dealing with the challenges of international sales...Building rapport with partners, with joint-venture colleagues as well as with ultimate users....The challenge then is really to pick your partners and package yourself early on before you have to put a lot of capital out."
Chief among those influential partners are first customers. The entrepreneurs anticipated customer help on product design, sales, and identifying suppliers. Some even saw their first customer as their best investor.
"People chase investors, but your best investor is your first real customer. And your customers are also your best salesmen."
Sarasvathy says expert entrepreneurs have learned the hard way that "having even one real customer on board with you is better than knowing in a hands-off way 10 things about a thousand customers."
Merely gathering information from a large number of potential customers, she
says, "increases all the different things you could do but doesn't tell you what
you should do." Toward that end, many of her subjects described their preference
for an almost anthropological approach to customer interaction: observing a few
customers as they work or actually working alongside them.
"You can't go out and survey customers and say, 'OK, what kinda car do you really want?' I believe very much in living it. If you're gonna write a book about stevedores, go work as a stevedore for a period of time. My company was going to design and sell products for physical therapy, so I worked in rehab medicine for two years."
Corporate executives, by contrast, generally envisioned more traditional vendor-customer interactions, such as focus groups.
"I would like to get from them...by meeting with them or getting their input on what they think of the limitation of existing programs....just kind of sit and listen to them telling me...what new features they'd like. And I'd just listen to them talk, talk, talk and then be thinking and develop something between what they want and what's possible technically."
Sarasvathy says executives rely less on firsthand insights, because they can afford to place bets on multiple segments and product versions. "Entrepreneurs don't have that luxury," she says.
Sweat Competitors Later
The study's corporate subjects focused intently on potential competitors, as eager for information about other vendors as about customers. "The corporate guys are like hunter-gatherers," says Sarasvathy. "They are hired to win market share, so they concentrate fiercely on who is in the marketplace. The first thing they do is map out the lay of the land."
"What information do I want about my competition? I want to see what kinds of resources they have. Do they have computer programmers? Do they have educational experts? Do they have teachers and trainers who can roll out this product? Do they have a support structure in place? Geographically, where are they situated? Have they got one center or lots of centers? Are they doing this just in English, or do they have different languages?
"I'd be wanting to look at the
finances of these companies....I'd probably be looking at their track record to
see what kind of approach they take to marketing and advertising so I know what
to expect. I might look and see what people they hire, see if I can hire away
someone who might have experience."
By the time entrepreneurs start seeking investment, of course, they should be as far inside competitors' heads as they can get. But the study subjects generally expressed little concern about the competition at launch.
"Your competition is a secondary factor. I think you are putting the cart before the horse...Analyze whether you think you can be successful or not before you worry about the competitors."
"At one time in our company, I ordered our people not to think about competitors. Just do your job. Think only of your work. Now that isn't entirely possible. Now, in fact, competitive information is very valuable. But I wanted to be sure that we didn't worry about competitors. And to that end, I gave the annual plan to every employee.
And they said, 'Well, aren't you afraid your competitors are gonna get this
information and get an advantage?' I said, 'It's much riskier to not have your
employees know what you need to do than it is to run the risk of competitors
finding out. Cause they'll find out somehow anyway. But if one of your employees
doesn't know why they're doing their job, then you're really losing out.'"
Entrepreneurs fret less about competitors, Sarasvathy explains, because they see themselves not in the thick of a market but on the fringe of one, or as creating a new market entirely. "They are like farmers, planting a seed and nurturing it," she says. "What they care about is their own little patch of ground."
Don't Limit Yourself
Corporate managers believe that to the extent they can predict the future, they can control it. Entrepreneurs believe that to the extent they can control the future, they don't need to predict it. That may sound like monumental hubris, but Sarasvathy sees it differently, as an expression of entrepreneurs' confidence in their ability to recognize, respond to, and reshape opportunities as they develop.
Entrepreneurs thrive on contingency. The best ones improvise their way to an
outcome that in retrospect feels ordained.
So although many corporate managers in Sarasvathy's study wanted more information about the product and market landscape, some entrepreneurs pushed back on the small amount of information provided as being too limiting. For example, the description of the product as a computer game for entrepreneurship:
"I would cast it not as a product but as a family of products, which might perform a broader function like helping people make career decisions. I always look for broad market opportunities."
"I wanna use this product as a platform to attract other products literally to build a market-share play. I see this as a missionary product, an entrée into some of the best users and buyers."
The most fascinating part of the study relates to the product's potential. Asked about growth opportunities, the corporate managers mostly restricted their comments to the game as described:
"It depends on how it's marketed. I'm a little bit skeptical....I'm not certain entrepreneurs would go for that. Maybe they think they already know everything. But in terms of simulations for business schools or in further education, they seem to be very popular. And entrepreneurship degrees seem to be very popular as well. So, yeah, it could well be a lot of growth."
Here is where the entrepreneurs really let loose. Starting with the same information as one another and as the executives, they collectively spun out opportunities in 18 markets—not just academic institutions but also venture capital firms, consultancies, government agencies, and the military.
As much as the ability to concoct new products, it is this tendency to riff
off whatever ideas or materials are handy that defines entrepreneurs as a
creative breed. Reading the transcripts, you can almost hear the enthusiasm
mounting in their voices as the possibilities unfold:
"This company could make a few people rich, but I don't think it could ever be huge...You might have a successful second product about how to succeed and get promoted within a large company....That would give you a market of everybody with aspirations at IBM, AT&T, Exxon, etc....You could make another product for students.
"How do I graduate in the top 10 percent of my class at Stanford or Harvard or Yale?...A lot about how to be a good student is teachable. Now you've got a product you can sell to every student in the country.
"Next there is negotiation. You could practice being a good negotiator. There's not a salesman in the United States who wouldn't buy one of those. Then you could genericize the thing to any situation which requires some sort of technical knowledge. Or learning situations within companies where you are trying to get people to understand that company's methods or objectives.
"So maybe I'm gonna change my opinion
about the growth potential. It's easy to see how within an hour you could name
10 products that would each address huge markets, like all employees in Fortune
500 companies, who are rich enough to pay $100 for it. It could be a hit on the
scale of the Lotus spreadsheet. You can see a several-hundred-million-dollar
company coming from it."
You might also glean from the preceding that entrepreneurs are eternal optimists. But you don't need an academic study to tell you that.
December 31, 2010
Here Are the Top 10 Business Quotes of 2010
By Brian Anthony Hernandez of busiknessnewsdaily.com
We all know business people love to talk. And in 2010, we at BusinessNewsDaily kept our ears and notebooks open to capture every sound bite.
Since August — when our publication officially launched — we’ve heard an earful in interviews with well-known people in the business and political worlds as well as social-media aficionados, experts in other industries, seasoned business owners and young entrepreneurs still going through puberty.
Here are the 10 funniest or most insightful things we overheard (in the news) this year:
1. "(Marijuana) is a medicine. And the industry needs to act more like the pharmaceutical industry in the way it presents itself. This is not a Cheech and Chong movie."
— Elizabeth Robinson, owner of medical marijuana-marketing firm Grow Room Communications.
2. "In this country, it has traditionally been unacceptable to have a segment of the population that perpetually lives in poverty. That is because we haven’t tolerated it. This recession is not an ordinary dip in the economy that is occurring. The road we come back on is going to be very different. Right now there is a lot of appropriate concern that high unemployment is not acceptable. However the longer it lasts, the more people become resigned to fact that a certain segment of the population will stay unemployed. That is the way much of the rest of the world thinks, but that’s not the way Americans traditionally think."
— George Muñoz, former chief financial officer and assistant secretary of the U.S. Treasury Department under President Bill Clinton.
3. "If there's anything I've learned from my years in the tech world, it's that companies don't get killed by competition. They usually find creative ways to commit suicide."
—Sridhar Vembu, CEO of Zoho.
4. "We asked small businesses what they wanted, and they all said, ‘More customers. Small business owners are survivors. We can help them."
— Kenneth Chenault, chairman of American Express.
5. "You own your gadgets. They don’t own you. They’re like newborn babies always clamoring for your attention."
— Joanne Cantor, professor at the University of Wisconsin-Madison.
6. "I think successful entrepreneurs were always rock stars. The founders of the industrial revolution giants lived lavish lives, hosted the best parties and rubbed shoulders with leaders and royalty. The only difference between now and then is that the Internet era creates wealth much faster and now these entrepreneurs are often very young when they make their fortune and instead of gradually building their celebrity status like the entrepreneurs from previous generations, they become stars overnight. … Every industry that can turn a 20-something into a millionaire will create rock stars."
— Gadi Shamia, president of Bizzy.com.
7. "Bottom line: If you don’t make money, you’re not a real entrepreneur—so put up or shut up."
— Scott Gerber, serial entrepreneur and syndicated small-business columnist.
8."The unifying force driving businesses to Twitter today is a simple concept: Consumers don’t like being ignored and businesses know they need to listen."
— Ben Grossman, communication strategist, of the marketing agency Oxford Communications.
9. "We’re ramen profitable."
— Jessica Mah, CEO of InDinero.
10. "If you're the CEO of a company, you have to work your bloody ass off. And if you're the CEO of two companies, you have to work two bloody asses off, and you don’t have two asses. And then if you combine that with a terrible economy, that just makes the job even harder, it's been a really grueling several years."
— Elon Musk, co-founder of PayPal and CEO of SpaceX and Tesla Motors.
September 1, 2010 - 2nd Article
Here Are 7 Reasons Why Print Media Will Make a Comeback in 2011
(Ed's Note: Joe Pulizzi is an author, speaker and evangelist for content marketing. He is the founder of the Content Marketing Institute.)
By Joe Pulizzi
Okay...there, I said it.
You'll find no greater supporter of online content marketing than me, but marketers and agencies are talking up print for 2011. Yes, in the era of iPads and Apps, there is still a role for print.
Jeff Jarvis recently wrote about how media companies need to ignore print.
"The physical costs of production and distribution are killing. The marketing cost of subscriber acquisition and churn are hellish."
He's right. And if you are a media company that relies on most of your revenue for print, you need to post Jeff's article on your forehead.
But if you are a corporate marketer, there is an opportunity here. Here's why:
1) Getting Attention: Have you noticed how many fewer magazines and print newsletters you are getting in the mail these days? I don't know about you, but I definitely pay more attention to my print mail.
There is just less mail, so more attention is paid to each piece.
Opportunity? Less traditional publishers are printing magazines today, which
leaves opportunities for content marketers.
2) The Focus on Customer Retention: In a soon-to-be-released research study conducted by Junta42 and MarketingProfs, customer retention was the most important goal for marketers when it came to content marketing outside of basic brand awareness.
Historically, the reason why custom print magazines and newsletters were
developed by brands was for customer retention purposes. We have a winner!
3) No Audience Development Costs: Publishers expend huge amounts of time and money qualifying subscribers to send out their magazines.
Many times, publishers need to invest multiple dollars per subscriber per
year for auditing purposes (They send direct mail, they call, they call again so
that the magazine can say they that their subscribers have requested the
magazine. This is true for controlled (free) trade magazines).
So, let's say, a publisher's cost per subscriber per year is $2 and their distribution is 100,000. That's $200,000 per year for audience development.
That is a cost that marketers do not have to worry about. If marketers want to distribute a magazine to their customers, they just use their customer mailing list. That is a big advantage.
4) What Is Old Is New Again: Social media, online content and iPad applications are all part of the marketing mix today. Still, what excites marketers and media buyers is what IS NOT being done.
They want to do something different...something new. It is hard to believe,
but I have heard many marketers talk about leveraging print as something new in
their marketing mix. Unbelievable.
5) Customers Still Need to Ask Questions: We love the Internet because buyers can find answers to almost anything. But where do we go to think about what questions we should be asking? I talked to a publisher last week who said this:
"The web is where we go to get answers but print is where we go to ask questions."
The print vehicle is still the best medium on the planet for thinking outside the box and asking yourself tough questions based on what you read. It is lean back versus lean forward. If you want to challenge your customers (like Harvard Business Review does), print is a viable option.
6) Print Still Excites People: I talked to a journalist recently who said it is harder and harder to get people to agree to an interview for an online story. But mention that it will be a printed feature and executives rearrange their schedule.
The printed word is still perceived as more credible to many people than
anything on the web. It goes to the old adage, "If someone invested enough to
print and mail it, it must be important."
Whether that is true or not, that is still a widely-held perception.
7) Unplug: More and more people are actively choosing the unplug, or disconnect themselves from digital media. I am doing this more myself. I am finding myself turning off my phone and email more to engage with printed material. A year ago I didn't see this coming. Today, I relish the opportunities when I cannot be reached for comment.
If I am right, many of your customers (especially busy executives) are feeling the same. Your print communication may be just what they need.
Online content marketing is definitely here to stay. Yes to social media, apps and the rest of it. But don't forget that print can still play an important role in your overall content marketing mix.
August 30, 2010
The News Merchant
An Inside Look at the Television News Business Reveals a Seamy Side of Payouts and Profits for Sensational Story Lines
(Ed's Note: As one who spent 20 years in the news business, I find this article on news pandering very upsetting at best, and very damaging to our culture and morals at worst. I have been an investigative reporter, sports editor and managing editor for daily newspapers, and publisher and owner of a community publishing company – all experiences in the print -- not broadcast -- media. This article, on the seamy side of the television news business today, originally appeared in The Atlantic magazine. I have committed a lot of sins in my lifetime, but news pandering was not one of them. The article is Atlantic's; the headlines are mine.)
(Another Ed's Note: Interested in booking Joran van der Sloot's ex-girlfriend for the morning news? Want an exclusive? Got a little cash to spend? Larry Garrison's the person to call, though most news networks won't admit they call him. Here is the inside story of how tabloid TV news is made, bought, and paid for -- and its implications for the news industry and our society.)
By Sheelah Kolhatkar
"I don't think you should go with CNN," Larry Garrison says into his cell phone as he paces across a hotel lobby near his home in Westlake Village, California. "I'd like to team up with you."
He's talking to John Muldowney, a 78-year-old retired propane inspector from Manheim, Pennsylvania, who thinks that he and his wife might have found Natalee Holloway's remains while snorkeling off the coast of Aruba.
The story involves blood and tragedy, but also the opportunity to go on television, and Garrison, who has one of the most unusual --and controversial -- jobs in the TV business, exists to make that happen.
"I want to make sure you don't have your day of glory and then everyone
forgets about you," Garrison continues, his eyes gleaming. "I'll be there for
There is no single term that fully captures what Garrison does for a living, although it involves a lot of time spent cajoling people over the phone. He's sometimes called a fixer, a story broker, or -- his preference -- an independent television producer and consultant, but all the titles mean the same thing: Garrison gets paid to bring tabloid stories to TV news programs.
Missing toddlers, murdered coeds, septuplets, serial killers -- an endless parade of freaks and victims is marched through the studio sets of Dateline NBC, 20/20, Good Morning America, Inside Edition, and countless other shows, all to satisfy viewers' seemingly insatiable appetite for real-life tears and melodrama.
Sometimes network bookers go out hunting for subjects themselves, armed with bouquets of flowers and boxes of tissues and the names of their star anchors (Diane Sawyer, Matt Lauer) as chits.
In many cases, though, Garrison gets
there first, locks up the rights to the person's story, and becomes an
unavoidable middleman in whatever transactions follow.
In addition to feeding what Garrison likes to call "Oh my God" stories to news networks, people like him serve another purpose: they make it easy for mainstream media outlets to pay for interviews while obscuring the fact that they do.
The agent delivers the interview, and in return the network makes him a paid producer or consultant for that particular program; what he then does with the money -- keep it or share it -- is his own business.
(For his part, Garrison tends to keep the whole fee, while sometimes
promising to try to secure a book or movie deal for the grieving mother or
ex-girlfriend he is representing.) If the person has a diary or photo album to sell for on-air use, Garrison can help with that, too.
Garrison has been in the business in one form or another for decades, handling media, book, and movie deals for a host of people on the margins of dark celebrity: jurors in the Michael Jackson child-molestation case; a friend of Robert Blake's dead wife; John Mark Karr, who falsely confessed to killing JonBenet Ramsey.
But he made his name working on the story of Holloway -- the 18-year-old Birmingham, Alabama, blonde who went missing during a high-school class trip to Aruba in 2005, and became the apotheosis of a golden age of dead-white-girl television.
Garrison teamed up with Natalee's father, Dave Holloway, negotiating his TV
appearances, speaking on his behalf, and co-authoring a best-selling book called
Aruba: The Tragic Untold Story of Natalee Holloway and Corruption in
Five years later, the Holloway story continues to be a source of fascination, and Garrison is eager to persuade John Muldowney to work with him. Like sharks on the scent of anchovies, Nancy Grace and Fox News have also come calling, looking for airtime with the elderly couple who might have inadvertently discovered Holloway's final resting place during their Royal Caribbean cruise vacation.
"I did the news on this for 5 years, I wrote the book," Garrison tells Muldowney. "I have people in Aruba who can look for the body. You didn't give out the location, did you?" Pause. "I can put in a call to Dave Holloway." A man passing by turns to stare.
Garrison has electric-white teeth, a deep tan, and carefully styled brown hair. With his Prada sunglasses and silver neck chain, he looks like some former Hollywood player you should possibly recognize but don't.
The matching car, a white Mercedes convertible with leather seats and vanity
plates (MOVIE TV), sits out front.
Garrison has not yet secured Muldowney as a client; the conversation is aimed first at assessing his credibility -- all sorts of attention-seeking cranks, faux psychics, and nut jobs have claimed to have solved Natalee's murder -- and then at convincing Muldowney that he should trust him.
Garrison's trying to get answers to a few questions that might illuminate the couple's motives: why did they wait 6 months before coming forward with their discovery? Have they notified the FBI about the underwater picture they took, so that it can investigate? Is their story marred by inconsistencies?
While Garrison tries to figure out the truth, he continues with a gentle, but
He tells Muldowney that he will look out for his interests and protect him from the rapacious tendencies of the press. His advice is geared toward maximizing the potential value of the story, including news, future book deals, movies, and television specials.
Muldowney has already agreed to an interview with CNN the following day, which Garrison thinks is a mistake, and to an appearance on Nancy Grace, a show whose host Garrison says he finds too "sensationalist" to deal with. ("Until the day I die, I will never do Nancy Grace," he repeatedly tells me.)
After he hangs up the phone, Garrison puts in a call to a producer at ABC's
Good Morning America to see if he can goose any interest; he thinks that a
sit-down interview on a network talk show would be more valuable --"classier" --
than a three-minute sound bite on a cable program. He leaves the producer a
message. The alleged skeleton is probably a piece of coral, or even a hoax, but
the small possibility that the Muldowneys have actually found Holloway's remains
could translate into big dollars, and Garrison wants to be a part of the deal.
"In my gut intuition, I feel this may be it," he tells me as we hop into the Mercedes and start speeding toward his house. "God works in funny ways."
Tabloid television has been big business, of course, for well over a decade. Its rise was fueled by a number of factors, not least of which was the launch in 1980 of CNN, the first 24-hour news channel.
The commodifying effect that cable had on TV, putting dozens or even hundreds of programs on equal footing, combined with sophisticated new methods of tracking viewers -- allowing news producers to see, in real time, when people were tuning in, staying tuned, or clicking the remote to something else -- led to a gradual reframing of the purpose that television news divisions could serve for their corporate owners.
Earnest cost centers where scrappy reporters purported to do the Lord's work gave way to slick operations, seen as sources of profit, whose anchors commanded massive salaries.
Fox News Channel
was launched in 1996, underscoring the fact that cable news -- and even network
news -- was there to make money. It hardly mattered that everything broadcast on
TV jumbled into one big spectacle, whether it was a celebrity murder trial or a
Minute-by-minute competition among network newscasts and among news-magazine shows such as 60 Minutes and A Current Affair led to a sort of programming arms race, and an inexorable slide into the softer, more salacious -- and more popular -- "infotainment" that now fills prime-time hours.
The murder trial of O. J. Simpson in 1995, the death of 6-year-old JonBenet Ramsey in 1996, and the story of a mother and two teenage girls murdered in Yosemite National Park in 1999 were all beamed into millions of American homes, and each set cable ratings on fire.
By the end of the 1990s, sensational
tabloid fodder had grown from obscure filler into a dominant, driving force in
television news -- and the networks found that there simply weren't enough
young, pretty, white crime victims to go around. Bidding for stories, once
anathema, became commonplace.
All of the networks now dabble with payment in one form or another, according to Garrison and others who work in the industry, although some shows and networks have a reputation for being more aggressive than others.
One former network-news booker told me how disheartening it became to work in
such an environment. "There was an utter desperation to get first crack at a
top-flight story, and this was the only way to do it," he said. "Every time a
big story broke, it would become a circus. Someone always came out of the
woodwork with a deal."
Not infrequently, Garrison has been that someone, though many TV news producers won't acknowledge that they do business with him. I couldn't find any who would comment on the record.
"It's a very defined underworld of behavior that people really don't talk about," said the former booker. "All the networks have policies not to pay."
Indeed, most network news divisions are officially prohibited from paying sources for interviews, but they can get around that problem in any number of ways.
In addition to paying a fee to a middleman, rather than to a subject, the network might conduct the interview in a lavish location, with all expenses paid and tickets to Broadway shows or Disney World thrown in.
Or the network might pay for the use of a photo or video, with the interview coming along "for free." Sometimes, a trashier evening tabloid show will license photos and get a coveted interview, and then both are recycled onto a more respectable morning or evening news program on the same network, which can broadcast them freely while leaving its own checkbook unsullied.
In each instance, everyone knows
what's happening except the viewers.
"We don't pay for interviews," says ABC News spokesman Jeffrey Schneider. "If someone has photographs or video that we want to license, we will license it, and we will disclose on the air that we have licensed pictures or videotape."
ABC's disclosure policy is a recent development, put in place after one of the most stomach-turning examples of network payments came to light: ABC News paid $200,000 to the family of Casey Anthony, who is on trial in Florida for murdering her 2-year-old daughter, to license videos and pictures in 2008.
(Garrison was working with the Anthonys early in the case, but he did not
broker that payment.) This March, it was revealed that the family used the money
to help pay for Anthony's defense.
Other recent examples of the creeping influence of money in television news are plentiful. Last year on Christmas Day, Umar Farouk Abdulmutallab attempted to detonate explosives hidden in his underwear on a Northwest Airlines flight en route to Detroit from Amsterdam, and was tackled by a group of passengers who managed to thwart the attack.
Upon arriving in Miami, a Dutch passenger named Jasper Schuringa clumsily tried to auction off to media outlets a fuzzy cell-phone photo he had taken of the hijacker.
It worked: in the end, he reportedly received some $18,000 for the image from
CNN, ABC, and the New York Post. Coincidentally, Schuringa sat for an interview
with both television networks.
Around the same time, a New Jersey resident named David Goldman was fighting to bring his 9-year-old son, Sean, back from Brazil, where the boy had been living with relatives of his recently deceased mother, who were fighting Goldman for custody.
Every network was salivating for an interview with Goldman; NBC won out by
chartering a plane to carry him, young Sean, and an NBC correspondent named Jeff
Rossen back to the United States, where the father and son promptly appeared on
NBC's Today show and a two-hour Dateline special.
Sometimes Garrison is involved in these kinds of negotiations, and sometimes he isn't. But no matter what the networks might argue, he says, "they all pay."
"At night I only watch Diane Sawyer. She's the best," Garrison says. He has strong opinions about TV people-the origins of which are sometimes highly personal.
His antipathy toward Nancy Grace, for instance, seems to stem mostly from an incident in 2006 when he says Grace accused him, on air, of working toward a book and movie deal for John Mark Karr, the man who had confessed -- falsely, it turned out-to the murder of JonBenet Ramsey.
(Garrison was trying to arrange interviews for Karr at the time, but denies
he was trying to sell a book.) Garrison was so angry that he pledged never to
deal with Grace again.
He is hunkered down in the master bedroom of his one-story house, in a gated community full of mansions belonging to CEOs and Hollywood actors, about an hour west of Los Angeles.
The place is overflowing with animals -- a pair of Chihuahuas, parrots and mynah birds in elaborate cages, a battalion of desert tortoises in pens on the back terrace.
In the corner where Garrison works are framed photographs of him with
different celebrities -- Sawyer, Larry King -- as well as a picture of Ben
Affleck holding the book Breaking Into Acting for Dummies, which
Garrison wrote, drawing on his previous career as a Hollywood bit player.
Garrison has been working on the edges of the entertainment business since the late 1970s, when he left his job as a stockbroker. He studied acting with Lee Strasberg in New York and then moved to California, where he landed a series of small roles, including a part on the soap opera Santa Barbara and another in the movie Mulholland Falls.
One day, he says, he went to meet a producer who was "eating a pastrami sandwich with Thousand Island dressing dripping down his face," and who talked on the phone throughout Garrison's audition.
This humiliation prompted him to move into producing. He acquired the rights to the inspirational life story of Tracy Taylor, a poster girl for the March of Dimes, which led to an article in People magazine and the development of his first movie project. (The movie was never made.)
He tells me he did some work with Scott Brazil, a television producer known for shows such as Hill Street Blues, and with the Dick Clark Film Group. Over the course of the 1980s and 1990s, Garrison came to specialize more and more in true stories, a relatively open field at the time, standing apart from the more glamorous scripted entertainment that had attracted him to the industry in the first place.
After a divorce and a tumultuous
period dating model types, he remarried in 2007. He is close with his three
grown kids from his first marriage -- one daughter is a makeup artist, another
is a housewife, and his son is a photographer.
He fires up his computer and AOL bleats out, "You've got mail!" Garrison says that dozens of tipsters, some of whom he has on retainer, constantly bring him story ideas. But he also does a lot of scouring himself.
In his 2006 autobiography, The Newsbreaker, he lists some keywords that signify a captivating subject: arson, fraud, murder, millionaires, slavery.
The competition for anything truly dramatic is immediate and fierce; mainly, it comes from the news shows themselves, although a few other independent operators might be in the mix as well.
Garrison moves in quickly on people who may still be reeling from a traumatic
event. "I love the chase," he writes: "finding the people, contacting them, and
convincing them that I am the one they should entrust their information and
His daily routine consists of scanning the wires, monitoring his Google alerts -- on Natalee Holloway, other stories he's working on, his own name – and watching a giant TV.
At the moment, a group of talking heads on Fox News is analyzing the story of a 19-year-old boy named Colton Harris-Moore who went on a crime spree in Washington state and then disappeared into the woods.
Garrison says that he isn't going
to pursue the story -- "it would influence kids" -- but if he did, he might call
the kid's mother: "I'd like to do a movie and a book entitled In the Middle of
Nowhere," he would tell her. "Or something glamorous. I'd lock up his rights,
and when he's caught, I'd own his rights and have his exclusive interview."
Right now, Garrison is fretting about the Muldowneys, who haven't called him back in the past couple of hours. When I ask him what he has to offer them, he says: "I could make sure that they're not humiliated."
He goes on, "I feel this [might] keep awareness on this case, and also help promote the boycott of Aruba, because in my opinion, Aruba is corrupt. We gotta get to the truth, so that way justice will be served."
He pauses. "Now, if they don't call me back and they decide to do their own
thing, God bless them."
He doesn't stop trying, though. He dials up the Good Morning America producer again: "I wanted to know if you were interested in the couple that has the picture of Natalee Holloway," he coos into her voice mail. "They're supposed to do CNN tomorrow, but I can turn them for you if you're interested."
If Good Morning America calls him back, Garrison is confident he can persuade the Muldowneys to postpone their CNN and Nancy Grace commitments. If things worked out, he says, he could demand a fee -- perhaps $2,500 or $5,000. Or, in this case, he might waive the fee.
"I could say, 'I want you to put them on and treat them right, and that's
it,' because this might be the final chapter of my book and it may be worth it
[for book-writing and -- marketing purposes] just to lock them up and have the
ability to say that I'm working with them."
Garrison is coy about just how much money he makes each year, though he says he isn't wealthy. He moved out of a more extravagant house a few years ago, when he says he decided to simplify his life. He also sold off his antique-car collection (car catalogues are still piled up on his desk).
"In the old days," he told me,
networks "paid a lot more money for stories -- they'd pay $100,000. Now they
don't [pay the really big bucks] unless it's an 'Oh my God' story -- like if I
had Tiger Woods's first interview."
The Internet has commoditized some of what Garrison does, and competition has become more intense. Gossip sites such as TMZ and Radar Online provide a nonstop fix of tabloid titillation, while anyone with a valuable photograph or video can sell it easily and directly to a photo agency like Splash News.
Then there's the generally beleaguered state of the television-news business,
where budgets have been slashed over the past couple of years. For those
reasons, Garrison has turned increasingly toward longer-term book projects that
he can develop out of his stories.
In any case, he tells me, the money isn't so important. "I'm not a flashy person," he says. "I'm proud of what I do. I'd like to believe that I make a difference."
Is it really so bad that people get paid to be on news shows, or that people like Garrison broker the deals?
The networks, after all, are making
money off the stories through advertising revenue. Shouldn't some of the people
they're profiting from -- bewildered actors in real-life soap operas -- expect
to share in the spoils?
As to Garrison's role, he does, arguably, provide a valuable service. Many of the people he deals with are unsophisticated; a middleman might help them negotiate a better deal for their story, and possibly manage their image and their prospects for a book or movie contract, in addition to reducing the media swarm.
"I always say to people, next Christmas, you're going to be sending me a
Christmas card, where tomorrow that network show is gonna be gone. They'll get
their ratings. But I'll always be there."
One of Garrison's clients, Sue Doman, expressed relief that she had Garrison standing between her and the reporters who were banging down her door.
Doman's sister was married to an Illinois police sergeant named Drew Peterson, who was charged with murdering her after he was named as a suspect in the disappearance of his fourth wife.
Garrison has locked up Doman's film, television, literary, and "life story" rights. If he successfully sells a book based on her story, he will take the entire advance, according to Doman. After the advance is paid back through book sales, she will receive one-third of the royalties, which she plans to donate to a domestic-violence shelter.
"I trusted him to be able to control the media for me, so that's why I did
it," she says. "I couldn't ask for a better person."
Still, the same lack of sophistication among news targets that makes brokers valuable to them also leaves them open to bad faith. And the whole practice of payment raises troubling questions.
A long-standing tenet in journalistic circles holds that paying sources will corrupt them, that people should not be driven by money to talk, because cash undermines their credibility and might push them to say things that aren't true.
"It is entirely possible that if someone is being paid for a story, they will cater what they provide to make [the person paying them] happy," says Andy Schotz, the Ethics Committee chairman of the Society of Professional Journalists.
"It's no longer about the pursuit of
truth, it's the pursuit of a financial arrangement." Paying subjects also means
that an individual might stage a stunt -- the infamous "Balloon Boy" incident
comes to mind -- just to get attention or earn some money. And there's always
the potential that a murderer will be rewarded for his crime.
Garrison is still digging himself out of a reputational hole caused by one of the worst professional situations he has ever been involved in, which has made him especially sensitive about working with the wrong people.
The Casey Anthony murder trial has turned into one of the most sensational media circuses of all time in a state – Florida -- that is famous for them.
The story has attracted all manner of bizarre parasites and hangers-on:
agents, lawyers, representatives, and middlemen, who have attached themselves to
the Anthony family in some form or another, hoping to gain notoriety or make a
Garrison signed on as a "spokesperson" for Casey, 24, and her parents, George and Cindy Anthony, in late summer 2008, supposedly at no charge, during their search for 2-year-old Caylee Anthony.
The entire family was under a cloud of suspicion -- the press seemed convinced that Casey had murdered her daughter, and that her parents were helping to cover up the crime by launching a fake missing-person campaign.
Protesters stationed themselves outside the Anthony house, and George and Cindy appeared on their front lawn, erratically gushing and ranting to reporters about the case, the police, the media.
Garrison sensed the potential for a blockbuster book deal, and says that he
believed the grandparents when they told him that they thought their
granddaughter had been kidnapped. He did several television interviews on their
behalf in which he urged people to search for the missing girl; he went on On
the Record With Greta Van Susteren wearing a Help find Caylee Anthony T-shirt.
By October, Casey Anthony had been charged with murder, and Garrison's relationship with her parents had degenerated. Garrison says he began to suspect that they weren't being straightforward with him about the alleged crime, and he issued a press release in November 2008 saying he had quit working with them.
On March 20, 2010, he issued another press release, titled "Setting the Record Straight on Caylee Anthony." In it, he described a conversation he'd had with Cindy over the phone shortly before he stopped working with the couple.
According to Garrison, Cindy
confessed to having switched out Caylee's hairbrush to confound police as they
gathered evidence. Garrison says that he immediately reported this confession to
the prosecuting attorney's office.
"Cindy Anthony came to me with George and said, 'My granddaughter was kidnapped, and I want people to keep looking for her, so if you help me to get the word out, I will do a book with you later on.' And I said okay," Garrison says. He adds: "That was the first time in my 25 years that anyone duped me."
Some press accounts tell a different story. In October 2008, George and Cindy were flown to New York for an interview with NBC's Today show. They taped an interview for Dateline that day as well.
According to a report in the Orlando Sentinel, Garrison charged the network
$6,500 for the Anthonys' Dateline appearance, without telling the Anthonys about
the payment. Their lawyer at the time, Mark NeJame, released a faxed bill from
Garrison to a producer at NBC for the use of pictures, as evidence of the
payment, and said that Garrison didn't have any of the family's pictures to
The Anthonys were outraged when they found out that Garrison had been paid for their television appearance without their knowledge, and immediately fired him, according to people close to them.
Garrison denies being fired, and says that he was not paid by any networks
for interviews with the Anthonys, and that the Sentinel reporters who wrote
about his fee from NBC were making the whole thing up; he also says the faxed
bill was "fabricated."
"I have seen some of the most wonderful acts of human kindness on this case, and some of the most despicable and sleaziest signs of human behavior as well," says NeJame, who represented George and Cindy until he quit the case himself, in November 2008, because they were not following his advice.
"I have rarely experienced anything like this, in my 30-year career, as far
as the various people who attempted to exploit and prey upon this missing
child," said NeJame.
While the relationship between Garrison and the Anthonys was hurtling toward its bitter denouement, Casey Anthony's defense lawyer, Jose Baez, was reportedly making his own deal with ABC, which is owned by the Walt Disney Company.
20/20 wanted to devote an episode to Casey, who was under investigation at the time but hadn't yet been formally charged with murdering her little girl. Casey gathered some home videos of Caylee, and Baez flew to New York in August 2008 to meet with network representatives and offer the videos for licensing, according to someone involved in a similar negotiation at a competing network.
The videos were aired during a 20/20 special that was broadcast on September 5, 2008, and on Good Morning America that morning, though Casey was not interviewed (she had been arrested for writing fraudulent checks on August 29, after Baez's New York trip, and was still in custody).
In March 2010, during a court hearing to determine whether Casey was indigent and incapable of paying for her own defense, Baez told the court that ABC News had paid Casey's family $200,000, which had been used to pay his legal fees up to that point.
It was revealed in separate court documents that ABC had also paid for George
and Cindy to stay at the Ritz-Carlton Grande Lakes Orlando Hotel for three
nights that December.
Other people have also cashed in on the death of Caylee Anthony. A CBS affiliate in Orlando, WKMG, reported that a meter reader named Roy Kronk, who discovered Caylee's decomposed body in the woods, was paid $20,000 by Good Morning America, supposedly for a picture of a snake he had snapped in the area; he also sat for an interview on the show.
Another local TV channel, WFTV, reported that CBS News had paid the Anthony
family $20,000 for photographs of Caylee and Casey.
Garrison insists that he's never seen money, or its prospect, taint anyone he's worked with. When I ask him why the television networks are so squeamish about admitting that money changes hands, he says, "If that [$200,000] is what's paying for Casey Anthony's defense right now, then shame on the person who paid it."
He says he draws his own line to determine whom he will represent and help
enrich. Then he pauses and says, "You know, if I was to have made any money off
of the Caylee Anthony case, it would have never gone to the grandparents or to
Casey. It would have gone to me."
"I believe, spiritually, what you put out comes back to you," Garrison tells me one morning. Something similar might be said about what appears on television: what viewers watch, they will see more of. Everything that follows is entirely predictable.
Judging from the ratings, as long as what is shown onscreen is entertaining,
the people watching aren't bothered by what may have gone into getting it there.
Garrison and I are sitting down to breakfast when his cell phone rings. He starts gesturing after he answers it. "It's Dave Holloway," he mouths to me. Holloway is apparently calling to ask about the skeleton photograph. "Something doesn't seem right with these people. They're doing Nancy Grace tonight," Garrison says into the phone.
"In my heart, Dave, I'm pulling away from these people. It doesn't seem right
to me." He pauses. "I just don't want to see you get hurt . You know me, I don't
like Nancy Grace."
The undersea-skeleton story never goes anywhere. John and Patti Muldowney make an appearance on Grace's show, where they slump embarrassingly in a pair of chairs, sharing screen time with a series of plump-lipped forensic analysts and other made-for-TV experts who yap loudly about the case. It seems that Garrison was right in advising them not to do the show, on the basis of pure tackiness if nothing else.
One day in June, though, there is a major break in the case: Natalee Holloway's suspected killer -- a 22-year-old Dutch kid named Joran van der Sloot -- is arrested in Chile for killing a young woman in Peru.
It's an explosive story, and van der Sloot's scowling, frat-boy face appears
on magazine covers and in the full-time television rotation. The tabloids report
that van der Sloot has told Peruvian authorities that he knows where Holloway's
body is, but will only reveal the location to the Aruban police.
Shortly after, Garrison signs up one of van der Sloot's ex-girlfriends, an Aruban named Melody Granadillo, who started dating him in 2003, when she was 16. Their arrangement leads to an interview on 20/20, and Garrison pitches a book on van der Sloot to several publishers, imagining that it might be the crowning achievement of his career. "This one is big," he tells me, "and it's being done with integrity."
ABC broadcast the 20/20 interview with Granadillo on June 18, and as of this writing, it is still available for viewing on ABC's Web site. There, the following disclosure appears:
The teen saved everything from her dashing Dutch suitor, including a diary they shared, filled with pages upon pages of pictures, cards, emails and love poems. Granadillo licensed a selection of these materials to ABC News.
August 28, 2010
Commentary on the Media
Legendary Watergate journalist Carl Bernstein says that he's not as concerned about the state of investigative journalism as some of his contemporaries are -- in fact, he thinks that newspapers like the New York Times, The Washington Post, and the Wall Street Journal are doing excellent work uncovering secrets in the halls of power.
Rather, he's more concerned about today's readers, because he thinks there is
much less reading of serious journalism going on today.
In his Big Think interview (bigthink.com), Bernstein says the secret to becoming a great journalist is being a good listener -- something that he says journalists today usually aren't.
As television superseded newspapers as the major news medium in the '70s, '80s, and '90s, Bernstein says:
"A lot of reporters ran in with microphones and stuck them in people's faces with the object of sound bytes really for the purpose of manufacturing controversy.
"The real purpose of reporting, of journalism is to illuminate what is real,
you know, real existential truth. What's going on around us? That's not
sensationalism, that's not manufactured controversy, that's not -- it's about
context and listening."
Bernstein also talks about the Watergate era and the legacy of his and Bob Woodward's investigation of the Nixon White House.
Asked if such an investigation could happen with today's media, Bernstein says that such a question is not really about the press. "Do I think that there are news organizations that if they had the same kind of information that Bob Woodward and I had in Watergate would go ahead and print the stories? Absolutely, I do," he says.
"I think what is really a bigger question is, how would readers respond? How
would the political system respond? The great thing about Watergate is, is that
the system worked. The American system worked."
Today, Bernstein is not so sure that the system would be as accountable. He
also talks about what it was like to score such a major story so early in his
career -- and what it's been like trying to follow up that success.
Finally, Bernstein suggests that the United States needs to reinstate the draft. "If there was a draft, I don't think for a minute we would have had this horrible war in Iraq," says Bernstein.
"I don't think members of Congress would have voted to send their own children into that theater, or into Afghanistan, not a chance.
"That the end of the draft has permitted a cowardly politics, a huge
consequence to who we are as a people I think there's a need in this country for
national service for all young people, for a year or two, whether it be in the
military, whether it be building roads, whether it be in public health, whether
it be in helping to teach children. But the idea that there is no unifying
activity for young people such as could be provided for national service is a
terrible shortcoming in our culture."
August 13, 2010
The Problem With Paid Content on the Internet
Among 49% of Respondents Who Use Twitter, Zero (As In No One) Would Pay a Fee for the Privilege of Doing So
(Ed's Note: This is from >insidemusicmedia.blogspot.com<.)
By Jerry Del Colliano
A new USC Annenberg Center for Digital Future study found that 49% of respondents in their most recent survey used Twitter, but no one -- 0% of those polled -- said they would pay to continue using the micro-blog site.
Director Jeffrey Cole said, "Such an extreme finding that produced a zero response underscores the difficulty of getting Internet users to pay for anything that they already receive for free".
Of course, if someone asked me when the first pay road was built if I would pay to travel it, I would have said no.
My mother refused to pay for cable television because she believed TV should be free -- you know, over the airwaves. It didn't mean that she didn't value television but just didn't want to pay for it.
Twitter will remain a free service because the beauty of Twitter is to form a social network with a group of people of your choosing and beyond.
Taken literally, paid social network services will not work on the Internet. I wonder how Facebook would have done if the same question were posed. Somewhat higher than 0% I imagine, but I don't think the numbers would have been impressive as 500 million people now use Facebook.
I keep hearing Peter Drucker in my head when he told radio executives that the Internet was going to be a major deal -- in 30 more years. Without a pay model or an effective ad revenue model, Drucker will turn out to be right as he usually is.
The USC survey of 1,981 Internet users also found that half "never" click on Internet advertising with 70% saying they find it "annoying." Although 55% said they would rather see web advertising than pay for content.
And on and on.
You can see why media companies are reluctant to bet the ranch on the Internet and digital beyond when an obvious revenue model has not emerged. One could argue that no one listens to radio commercials in 6-minute stop sets and that would be a fair comeback.
But the issue going forward is how do you monetize the space that consumers clearly claim as their favorite way to get entertainment, information and stay connected.
When Rupert Murdoch ordered his News Corporation publications to put up a paywall, The Times of London lost at least 65% of its online readership. I am surprised that it wasn't more because a lot of the information in daily newspapers is available for free elsewhere.
As long as this is the case, it will be hard for newspaper publishers to
charge for that which is readily available at no cost.
Publications such as Newsday construct paywalls to keep their print readers from defecting to online where they don't have to pay for the content. So the theory is that some publishers -- perhaps even Murdoch - feel the paywall will be a success if for no other reason it will hopefully stem the loss of paying print readers from becoming online freeloaders.
Then you have Wired and other niche publications that are finding their subscribers with apps that allow readers to access their favorite publications where they like to read -- on iPads, Kindles and mobile devices. This area shows real promise.
The New York Times thinks a metering system that will start charging you after a certain number of stories in a given month will work. But a meter will punish readers like me (and perhaps you) who read The Times extensively.
There are a few significant points to consider:
1. Online advertising is not that effective -- click through rates are awful and that low standard allows media buyers to prostitute any digital publication's rate card.
2. Search is a good business for the few, the proud and the monopolies such as Google and Microsoft.
3. If all that is available to businesses is the "freemium" model postulated by Chris Anderson, then even the 30 years Peter Drucker predicted for the Internet to come of age as a business is too optimistic a date. Ad revenue from banner sales and the like will not be enough.
What is more likely is that there will always be free but there will also be paid. There has to be paid for the Internet to become a growth conduit.
To be free, advertisers will seek eyeballs and that business has been clearly established. Perhaps, as the USC survey seems to indicate, readers will continue to prefer free even if they have to put up with videos starting in the corner, ads creeping across the screen and other distractions. But don't confuse these tactics for effective.
The idea of joining advertising with content may have run its course.
TV shows with commercials.
Radio formats with stop sets.
Maybe in the future it behooves Coke, Nike and maybe even Main Street local businesses to use YouTube videos, social networking and a lot of creativity and skip the non-paid content. They are doing it already. In effect, the ad becomes the content.
Paid content -- the kind radio talent can produce -- could be a strong attraction. Think about it -- most listeners get 10 (at most) different formats in the average radio market and some of them are really not all that different. What would it be worth to you to have exactly what you wanted to hear? There may be a price you would be willing to pay for something unique, compelling and addictive.
Unique, compelling and addictive.
My standard for paywalls.
Twitter and Facebook for free -- they can channel those eyeballs into revenue and better them than us. It's a tough business selling on the cheap.
But my very favorite magazine on my iPad -- well, that's worth something.
My favorite music media blogger on my digital device of choice -- we'll soon see.
August 7, 2010
The Baby Boomers Have Arrived
Nielsen Advertising Research Claims That Younger Consumers Are Losing Their Dominance in the Marketplace
(Ed's Note: This article originally appeared in adage.com.)
By Brian Steinberg
Get ready: Nielsen is once again trying to challenge one of the industry's oldest chestnuts -- that consumers over 50 aren't worth the expense to target.
The measurement-and-data giant is out to prove that it is advertisers'
continued focus on younger customers that's out of date, thanks to a massive and
aging population of baby boomers as well as changes in consumers' lifestyle
sparked by new technology.
Nielsen is in for a tough battle. Any number of parties have complained over the decades about marketers' obsession with youth. Consumers over AARP age often have more money saved and can spend more on items other than food and groceries, but marketers maintain that reaching younger consumers, particularly those between the ages of 18 and 49, is more important.
The logic? That group usually hasn't committed to a favorite toothpaste or
window cleaner, while older folks have -- and won't have their minds changed by
a TV-ad blitz.
Nielsen wants to change those perceptions and it's got numbers on its side. Its researchers believe consumers over the next decade will have fewer children, leading to smaller households and fewer young consumers to lure.
A rough economy will lead to those smaller young families spending less, and smaller salaries for younger generations known today as "Generation Y" and "Millenials."
Indeed, as the baby-boom generation
retires and grows old, America is likely to have a larger older population and a
much slower-growing young one, suggested Doug Anderson, Nielsen's senior
VP-research and thought leadership.
"There will be a huge number of people over the age of 65, 75, and 85 over the coming decade. We've never had a population this big this old before," he said. "This is not something that demographers and anthropologists have tons of models sitting around that they can talk about. We as a species have never had this many older people before. It's new ground."
There is some interest. In May, NBC Universal and Procter & Gamble launched a group of websites under the rubric "life goes strong" and aimed at catching boomers' fancy.
Topics include technology and health.
"With this property in particular, we're enabling advertisers and brands to
reach a powerful demographic with an annual spending power of $1 trillion," Rich
DelCore, director-branded entertainment at P&G, said in a prepared statement at
Most times senior citizens are still seen in ads selling life insurance or denture cream, yet the older person in the U.S. in the next decade is likely to be anything but helpless and in the market for more than just financial help and medications.
According to Nielsen, baby boomers in 2010 account for approximately 38.5% of all dollars spent on consumer package-goods such as diapers, toothpaste and laundry detergent.
They account for 40% of customers paying for wireless services and 41% of
customers paying for Apple personal computers. And while brand alliances are
often thought to be established when a consumer is in his or her 20s, changing
technology has unleashed a steady spate of new devices and gadgets that are new
to all consumers.
With older folks having salted money away and younger consumers expected to find income shrinking over the next decade, "targeting older consumers makes sense because you might be reaching more of your consumers" with the pitch, said Pat McDonough, Nielsen's senior VP-planning and policy analysis.
These aging boomers could also establish new behaviors, said Nielsen's Mr. Anderson. Boomers are accustomed to advertisers meeting their demands, and have always been so, he suggested.
As such, they may be less brand loyal than the elderly of the past. This
generation also drinks more heavily than previous post-retirement consumers.
"Alcohol is a bigger part of their lives,"he said. "They aren't going to just
To be sure, there are business dynamics in place that make the pursuit of a generation of consumers previously thought useless to marketers more crucial than in eras past.
TV advertising was founded on
reaching the demographic of consumers between the ages of 18 and 49, yet the
median age of viewers of prime-time broadcast TV is nearing 51 -- two years
above that age range. To maintain relevance to advertisers, the big networks
need to find a way to establish the relevance of older consumers if they want to
continue to draw the marketers that support TV so heavily.
"There isn't a single media-content company that won't face this, and the same is true for mass marketers," said Alan Wurtzel, president-research and media development at NBC Universal.
The hope is that advertisers will grant new consideration to the older demographic as baby boomers, the generation that has set consumer attitudes by dint of its sheer mass, moves off the radar screen currently established in the advertising industry.
While baby boomers are leaving the demographics that have been favored by
advertisers for decades, said Mr. Wurtzel, "their value is actually increasing
in many ways and no one has noticed it. For many years, we all got along with
it. Now what everyone is seeing is that a very significant portion of the
audience is leaving the group, the Nielsen group that is counted."
Thanks to their wealth and the rise of new product categories, he added, the generation could maintain its importance. "These guys are changing. They are not behaving the way people would normally think" they should, he said.
Old dogs learning new tricks? If older consumers do act in this fashion -- and continue to do so for the next decade -- advertisers may have to adopt a few new methods as well.
Here are some interesting reader comments of this article:
From the Far East:
In Asia Pacific we have the oldest (Japan) fastest growing (Korea, Singapore, Taiwan) and largest (China) aging consumer populations in world. The under 50 population in China will actually shrink by 117 million people over the 10 years to 2018.
Opportunities are far broader than daipers, hearing aids and mobility. Age neutrality will become the new mantra in our business world. A world where products and services are no longer defined by the age of people who use them and the age of people no longer define the products they use.
From New Jersey:
It's about time a respected research and analytical institution as Nielsen puts its weight, experience, assessment, knowledge AND hutzpuh behind these observations. Credible observations...'logic' for those looking for another term...make self-evident that marketers oftentimes place too much emphasis on a quixotic audience base...at best.
I agree that the 18-49 segment carries much opportunity, if not simply allure, for those wishing to establish a product or service beach head...along with supposed loyalties. BUT...the 'over-the-hill'...'post 49' crowd still carries the megabucks...AND are still alive enough to appreciate a marketer's attempt to influence their buying behaviors.
I am in that audience bucket...and still look to advertising and marketing efforts to influence and sway my buying behavior. To literally abandon "my" audience will serve to infuriate and move my consumer dollars to other, more influential persuasions coming at me. Nielsen's data is right on.
Finally! As a 47 year-old, single mother of a 5 year old, fit, attractive and looking to be in the work place and spending mode for the next 20 to 30 years, I am your NEW target. I am the face of the NEW Boomer. I will be buying through the school years and for my own personal needs too. And, my needs will be demanding and change as my lifestyle expands. Good marketing is about spotting trends and niches, following the masses is what has lead to poor quality, mass marketing and failure in the economy.
The boomers represent over 30% of the population and, perhaps close to 75% of total wealth. Historically the boomers have attacked life head on and were a free-spending, luxury loving demographic. They were, arguably the key drivers of the boom economies of the last 2 decades.
While approaching retirement and the effects of the recession may permanently change spending habits across all demos, including the boomers, it is important to note that Gen-X is only half the size of the boomer generation and cannot make up for the shortfall as boomers begin to dial it back.
Gen-Y is another huge group, but it may be a few years yet until enough of them have joined the workforce to make their economic presence felt. Until that time, it makes great sense to target boomers before they get deeper into the retirement cycle.
July 22, 2010
How far will your $20 get you?
Try to Imagine the Difference in Consumer Prices From 1990 to 2010 - How far will your $20 get you?
(Ed's Note: This article by Chris
McDaniel is from the Yuma Daily Sun in Arizona.)
By Chris McDaniel
As Yuma residents shop and eat locally during the $20 on July 20 event, they may be interested to know just how far their Andrew Jackson green back will go as compared to 20 years ago.
One dollar in 1990 had the same buying power as $1.71 in 2010, and there has been annual inflation over the last 20 years of 2.73 percent.
(Ed's Note: The author of this
article is dead wrong about the annual inflation rate for the past 20 years – it
is not 2.73%. I thought he may have meant the average inflation rate per year
using the 2.73% figure. But even 2.73% times 20 years is only 54.6%. The actual
inflation rate for the period from 1989 to 2009 was 74.35%, or an average of
3.72% per year. I am not even going to address the stupidity of saying that $1
in 1990 in now worth $1.71 in 2010. It's obvious that this calculation is even
further off the mark.)
In 1990 the average person earned an income of $28,970 per year as compared with $33,070.30 in 2010.
In 1990 a new house cost $123,000. The median price in the western United States is now $221,300.
Back in 1990 the world was a much different place. The Cold War was grinding to a halt, James "Buster" Douglas knocked out Mike Tyson to win the World Heavyweight Boxing crown, Nelson Mandela was released from prison in South Africa, the Hubble Space Telescope was launched, President George H. W. Bush signed the Americans with Disabilities Act, Iraq invaded Kuwait, East Germany and West Germany reunified and the first successful trial run of the World Wide Web was carried out.
One ad that ran in the Yuma Daily Sun in 1990 stated a brand new computer at Radio Shack could be purchased for $1,299. Today a new computer can be bought for between $300 and $1,000 on average.
Another Radio Shack ad that ran on July 20, 1990 offered a new car cell phone for $299, a camcorder for $799 and a VCR for $279.95.
On the airwaves and bumping from boom boxes all over America were songs like Sinead O'Connor's "Nothing Compares 2 U," Madonna's "Vogue," Deee-Lite's "Groove Is In the Heart" and M.C. Hammer's "U Can't Touch This."
A CD cost between $5 and $6 in 1990 and between $3 and $5 now.
Big movies that year included "Ghost," "Home Alone," "Pretty Woman" and "Teenage Mutant NinjaTurtles."
The average price for a movie ticket in 1990 was $4.23 as compared to $7.95 in 2010.
The cost of a new car was generally cheaper two decades ago. In 1990 the average cost of a new car was $16,000. The average price for a new vehicle in January 2010 was $29,404.
An ad that ran on July, 20 1990 for Seabury Chevrolet stated a brand new 1/2-ton truck was $9,995. A separate ad for Country Club Honda on the same day stated a new Accord was $13,903. Another ad offered a new 1990 Ford Bronco for $19,194.
Not only were the cars cheaper, but the gas as well. In 1990 a gallon of gas was $1.34. As of July 16, gas in Yuma was between $2.59 and $2.91.
Food was also cheaper in the past. An ad that ran in the paper in July of 1990 reported a pound of hamburger meat was 97 cents a pound. As of July 17, an ad for Fry's stated ground beef is now about $1.97 a pound.
A dozen eggs at Fry's on July 20, 1990 was 59 cents, a pound of margarine was 39 cents and a gallon of two percent milk was $1.69.
Today, on a national average, a dozen eggs cost about $2, a pound of margarine about $3 and a gallon of milk is about $3.
Beer drinkers were also given a break. A 12 pack of Miller Genuine Draft was $4.89. Now the same type and amount of beer is between $8.99 and $10.99.
A 12 pack of Keystone Beer was $3.39 in 1990 but is now about $7.79 for the same type and amount of beer.
Cigarettes were also cheaper. A pack of Camels in 1990 was $1.23. Today a pack of the same will cost about $7 in Yuma.
Note to the reader from Chris McDaniel: the figures and information written here were gathered from Answers.com, Dollartimes.com, Realestateabc.com, nationmaster.com, arizonagasprices.com, Edmunds.com, thepeoplehistory.com, Wikipedia.com, moviemojo.com and the Yuma Sun Archives.
July 11, 2010
Hint – It's Not David Letterman's Top 10 List
Zach Carter Outlines His Choices for America's 10 Most Corrupt Capitalists
(Ed's Note: Wall Street's captains of
industry, and top policymakers in Washington are often the same people,
according to Zach Carter. A lot of them get rich by playing for both teams. Find
out who they are and how they do it in this guest article that appeared in
alternet.com in May 2010.)
By Zach Carter
The financial crisis has unveiled a new set of public villains -- corrupt corporate capitalists who leveraged their connections in government for their own personal profit.
During the Clinton and Bush administrations, many of these schemers were
worshiped as geniuses, heroes or icons of American progress. But today we know
these opportunists for what they are: Deregulatory hacks hell-bent on making a
profit at any cost. Without further ado, here are the 10 most corrupt
capitalists in the U.S. economy.
1. Robert Rubin
Where to start with a man like Robert Rubin? A Goldman Sachs chairman who wormed his way into the Treasury Secretary post under President Bill Clinton, Rubin presided over one of the most radical deregulatory eras in the history of finance.
Rubin's influence within the Democratic Party marked the final stage in the
Democrats' transformation from the concerned citizens who fought Wall Street and
won during the 1930s to a coalition of Republican-lite financial elites.
Rubin's most stunning deregulatory accomplishment in office was also his greatest act of corruption. Rubin helped repeal Glass-Steagall, the Depression-era law that banned economically essential banks from gambling with taxpayer money in the securities markets.
In 1998, Citibank inked a merger with the Travelers Insurance group. The deal
was illegal under Glass-Steagall, but with Rubin's help, the law was repealed in
1999, and the Citi-Travelers merger approved, creating too-big-to-fail behemoth
That same year, Rubin left the government to work for Citi, where he made $120 million as the company piled up risk after crazy risk. In 2008, the company collapsed spectacularly, necessitating a $45 billion direct government bailout, and hundreds of billions more in other government guarantees.
Rubin is now attempting to rebuild his disgraced public image by warning
about the dangers of government spending and Social Security. Bob, if you're
worried about the deficit, the problem isn't old people trying to get by, it's
corrupt bankers running amok.
2. Alan Greenspan
The officially apolitical, independent Federal Reserve chairman backed all of Rubin's favorite deregulatory plans, and helped crush an effort by Brooksley Born to regulate derivatives in 1998, after the hedge fund Long-Term Capital Management went bust.
By the time Greenspan left office in
2006, the derivatives market had ballooned into a multi-trillion dollar casino,
and Greenspan wanted his cut. He took a job with bond kings PIMCO and then with
the hedge fund Paulson & Co. -- yeah, that Paulson and Co., the one that
colluded with Goldman Sachs to sabotage the company's own clients with
Incidentally, this isn't the first time Greenspan has been a close associate of alleged fraudsters. Back in the 1980s, Greenspan went to bat for politically connected Savings & Loan titan Charles Keating, urging regulators to exempt his bank from a key rule.
Keating later went to jail for fraud, after, among other things, (apparently
saying some inflammatory things about regulator William Black). Nice friends
you've got, Alan.
3. Larry Summers
During the 1990s, Larry Summers was a top Treasury official tasked with overseeing the economic rehabilitation of Russia after the fall of the Soviet Union. This project, was, of course, a complete disaster that resulted in decades of horrific poverty.
But that didn't stop top advisers to the program, notably Harvard economist Andrei Shleifer, from getting massively rich by investing his own money in Russian projects while advising both the Treasury and the Russian government.
This is called "fraud," and a federal
judge slapped both Shleifer and Harvard itself with hefty fines for their
looting of the Russian economy. But somehow, after defrauding two governments
while working for Summers, Shleifer managed to keep his job at Harvard, even
after courts ruled against him.
That's because after the Clinton administration, Summers became president of Harvard, where he protected Shleifer. This wasn't the only crazy thing Summers did at Harvard --he also ran the school like a giant hedge fund, which went very well until markets crashed in 2008.
By then, of course, Summers had left Harvard for a real hedge fund, D.E.
Shaw, where he raked in $5.2 million working part-time. The next year, he joined
the Obama administration as the president's top economic adviser. Interestingly,
the Wall Street reform bill currently circulating through Congress essentially
leaves hedge funds untouched.
4. Phil and Wendy Gramm
Summers, Rubin and Greenspan weren't the only people who thought it was a good idea to let banks gamble in the derivatives casinos. In 2000, Republican Senator from Texas Phil Gramm pushed through the Commodity Futures Modernization Act, which not only banned federal regulation of these toxic poker chips, it also banned states from enforcing anti-gambling laws against derivatives trading.
The bill was lobbied for heavily by
energy/finance hybrid Enron, which would later implode under fraudulent
derivatives trades. In 2000, when Phil Gramm pushed the bill through, his wife
Wendy Gramm was serving on Enron's board of directors, where she made millions
before the company went belly-up.
When Phil Gramm left the Senate, he took a job peddling political influence at Swiss banking giant UBS as vice chairman. Since Gramm's arrival, UBS has been embroiled in just about every scandal you can think of, from securities fraud to tax fraud to diamond smuggling.
Interestingly, both UBS shareholders and their executives have gotten off
rather lightly for these acts. The only person jailed thus far has been the tax
fraud whistleblower. Looks like Phil's earning his keep.
5. Jamie Dimon
J.P. Morgan Chase CEO Jamie Dimon has done a lot of scummy things as head of one of the world's most powerful banks, but his most grotesque act of corruption actually took place at the Federal Reserve.
At each of the Fed's 12 regional offices, the board of directors is staffed
by officials from the region's top banks. So while it's certainly galling that
the CEO of J.P. Morgan would be on the board of the New York Fed, one of J.P.
Morgan's regulators, it's not all that
But it is quite uncommon for a banker to be negotiating a bailout package for his bank with the New York Fed, while simultaneously serving on the New York Fed board. That's what happened in March 2008, when J.P. Morgan agreed to buy up Bear Stearns, on the condition that the Fed kick in $29 billion to cushion the company from any losses.
Dimon -- CEO of J.P. Morgan and board member of the New York Fed -- was
negotiating with Timothy Geithner, who was president of the New York Fed --
about how much money the New York Fed was going to give J.P. Morgan. On Wall
Street, that's called being a savvy businessman. Everywhere else, it's called a
conflict of interest.
6. Stephen Friedman
The New York Fed is just full of corruption. Consider the case of Stephen Friedman. As the financial crisis exploded in the fall of 2008, Friedman was serving both as chairman of the New York Fed and on the board of directors at Goldman Sachs.
The Fed stepped in to prevent AIG from collapsing in September 2008, and by November, the New York Fed had decided to pay all of AIG's counterparties 100 cents on the dollar for AIG's bets -- even though these companies would have taken dramatic losses in bankruptcy.
The public wouldn't learn which banks
received this money until March 2009, but Friedman bought 52,600 shares of
Goldman stock in December 2008 and January 2009, more than doubling his
As it turns out, Goldman was the top beneficiary of the AIG bailout, to the tune of $12.9 billion. Friedman made millions on the Goldman stock purchase, and is yet to disclose what he knew about where the AIG money was going, or when he knew it.
Either way, it's pretty bad -- if he knew Goldman benefited from the bailout,
then he belongs in jail. If he didn't know, then what exactly was he doing as
chairman of the New York Fed, or on Goldman's board?
7. Robert Steel
Like better-known corruptocrats Robert Rubin and Henry Paulson, Steel joined the Treasury after spending several years as a top executive with Goldman Sachs. Steel joined the Treasury in 2006 as Under Secretary for Domestic Finance, and proceeded to do, well, nothing much until financial markets went into free-fall in 2008.
When Wachovia ousted CEO Ken
Thompson, the company named Steel as its new CEO. Steel promptly bought one
million Wachovia shares to demonstrate his commitment to the firm, but by
September, Wachovia was in dire straits. The FDIC wanted to put the company
through receivership -- shutting it down and wiping out its shareholders.
But Steel's buddies at Treasury and the Fed intervened, and instead of closing Wachovia, they arranged a merger with Wells Fargo at $7 a share -- saving Steel himself $7 million. He now serves on Wells Fargo's board of directors.
8. Henry Paulson
His time at Goldman Sachs made Henry Paulson one of the richest men in the world. Under Paulson's leadership, Goldman transformed from a private company ruled by client relationships into a public company operating as a giant global casino.
As Treasury Secretary during the
height of the financial crisis, Paulson personally approved a direct $10 billion
capital injection into his former firm.
But even before that bailout, Paulson had been playing fast and loose with ethics rules. In June 2008, Paulson held a secret meeting in Moscow with Goldman's board of directors, where they discussed economic prognostications, market conditions and
Treasury rescue plans. Not okay, Hank.
9. Warren Buffett
Warren Buffett used to be a reasonable guy, blasting the rich for waging "class
warfare" against the rest of us and deriding derivatives as "financial weapons of mass destruction." These days, he's just another financier crony, lobbying Congress against Wall Street reform, and demanding a light touch on-get this-derivatives!
Buffet even went so far as to buy the support of Sen. Ben Nelson, D-Nebraska,
for a filibuster on reform. Buffett has also been an outspoken defender of
Goldman Sachs against the recent SEC fraud allegations, allegations that stem
from fancy products called "synthetic collateralized debt obligations" -- the
financial weapons of mass destruction Buffett once criticized.
See, it just so happens that both Buffet's reputation and his bottom line are tied to an investment he made in Goldman Sachs in 2008, when he put $10 billion of his money into the bank.
Buffett has acknowledged that he only made the deal because he believed Goldman would be bailed out by the U.S. government. Which, in fact, turned out to be the case, multiple times. When the government rescued AIG, the $12.9 billion it funneled to Goldman was to cover derivatives bets Goldman had placed with the mega-insurer.
Buffett was right about derivatives -- they are WMD so far as the real
economy is concerned. But they've enabled Warren Buffett to get even richer with
taxpayer help, and now he's fighting to make sure we don't shut down his own
10. Goldman Sachs
No company exemplifies the revolving door between Wall Street and Washington
more than Goldman Sachs. The four people on this list are some of the worst
offenders, but Goldman's D.C. army has includes many other top officials in
this administration and the last.
Joshua Bolton, chief of staff for George W. Bush, was a Goldman man.
Current New York Fed President William Dudley is a Goldman man.
Current Commodity Futures Trading Commission Chairman Gary Gensler has been
a responsible regulator under Obama, but he was a deregulatory hawk during
the Clinton years, and worked at Goldman for nearly two decades before that.
A top aide to Timothy Geithner, Gene Sperling, is a Goldman man.
Current Treasury Undersecretary Robert Hormats is a Goldman man.
Current Treasury Chief of Staff Mark Patterson is a former Goldman lobbyist.
Former SEC Chairman Arthur Levitt is now a Goldman adviser.
Neel Kashkari, Henry Paulson's deputy on TARP, was a Goldman man.
COO of the SEC Enforcement Division Adam Storch is a Goldman man.
Former Sen. John Corzine, D-N.J., was Goldman's CEO before Henry Paulson.
Rep. Jim Himes, D-Conn., was a Goldman Vice President before he ran for
Former House Minority Leader Dick Gephardt, D-Mo., now lobbies for Goldman.
And the list goes on.
(Background: Zach Carter is an economics editor at AlterNet and a fellow at Campaign for America's Future.)
(Ed's Note: A friend of mine had this reaction to this article: "I can pick one bone with this report. CT Representative, Jim Himes, did work for Goldman in the past; he quit that because of his own volition and dissatisfaction to work in the private sector in a non-profit role. He is NOT one of THEM! Among the best known names here is Warren Buffett (sadly) included for his current role rather than past dealings. Top of the list are Rubin and Greenspan, which is disappointing but not surprising." I leave it to you, dear reader, to sort all of the people mentioned in this article, and decide their culpability.)
June 25, 2010 - 2nd Article
They Make More Money Even When Their Businesses Don't
So Just How Much Do These Media Moguls Make? The Answer: More Than Your Wildest Dreams
(Ed's Note: Aaron Elstein writes a blog for Crain's New York Business and covers all aspects of Wall Street.)
By Aaron Elstein
After years of domination by Wall Street, Crain's Fortunate 100
ranking of the city's best-paid executives has a surprising new set of leaders.
Media-related executives took the top 4 slots in 2009.
Predictably, their rise was made possible in part by Wall Street's calamitous year, but what is surprising is that so many media executives did so awfully well despite dismal conditions in their own businesses.
In fact, that seeming contradiction has caused more than raised eyebrows. In the cases of 3 names atop our list -- the heads of Sirius XM, CBS and Viacom -- investor advisory firm Glass Lewis gave all of them failing marks for their compensation practices.
"There was pretty horrible linkage between pay and performance at these companies," says Glass Lewis Managing Director Warren Chen.
The three have something else in common, as well. All trace their roots back to legendary media mogul Sumner Redstone, chairman of both Viacom and CBS.
Mr. Redstone has long been able to reward himself and his deputies richly with nary a peep from shareholders because he controls 80% of the class of stock that gives him unchallenged control at both Viacom and CBS. Sirius XM Chief Executive Mel Karmazin used to be Mr. Redstone's top deputy as Viacom's president.
Meanwhile, Viacom's largest shareholder after Mr. Redstone is none other than Mario Gabelli, who heads fund manager Gamco Investors Inc.
Mr. Redstone declined to comment.
The three media companies justify their CEOs' pay largely by noting that their chiefs did relatively well during a dismal economy. In the case of Sirius, the board gave Mr. Karmazin a huge new pile of options when it became clear that the ones he got when he joined the struggling company would never pay off. And why should they?
Since Mr. Karmazin joined Sirius six years ago, the satellite radio provider has suffered billions in net losses. Last year, its stock price fell as low as 6 cents a share. Not to worry, though. Last summer, Mr. Karmazin forfeited his worthless options and was awarded 120 million in fresh options -- the major reason why his pay reached $43.5 million last year.
Sirius declined to comment.
CBS and Viacom, for their part, measured their top executives' performance in ways that are literally hard to understand.
CBS's Leslie Moonves, for example, was awarded $43 million last year, nearly all of which was a performance-related bonus that he got even as CBS revenues slid by 7% and operating cash flow more than halved. While CBS swung back to profitability after a dismal 2008, net earnings were still 82% below 2007 results.
Even by the metrics used by the board to determine pay, CBS's performance wasn't good. Adjusted operating income dropped by $750 million, about $350 million short of the board's own target.
In addition, "free cash flow," which the board also watches, fell by 50%.
Nonetheless, CBS directors handed Mr. Moonves a $30 million raise, citing
"solid underlying performance of operations within management's control."
A CBS spokesman declined to comment.
Over at Viacom, CEO and longtime Redstone legal adviser Philippe Dauman got $34 million. There, operating income grew by 15%, while revenues fell 7% and cash flow from operations fell by 43%.
Viacom says Mr. Dauman's pay was in part based not on cash flow, or even free cash flow, but on what the company calls "operating free cash flow," which Viacom defines as cash flow minus capital expenditures and a nearly $1 billion hit from shutting down a financing program. Ignore all that messy stuff and cash flow soared 17%, the company says.
Even a company spokesman acknowledges that Viacom's regulatory filing describing Mr. Dauman's pay "is not as clear as it should be" as to which definition of cash flow was actually used to compensate him.
As for the rationale behind Mr. Gabelli's chart-topping $43.6 million, that is refreshingly simple. Under a 2008 agreement with his board, he pockets 10% of his firm's pretax profits and gets management fees on top of that. Like Mr. Redstone, he holds the vast bulk of his company's voting shares and has no worries about shareholder disquiet.
One other media executive had an awfully good 2009. AOL Chief Executive Timothy Armstrong earned the sixth slot on our list with $25.5 million in compensation, of which $15 million came from options granted after the company's spinoff from Time Warner.
Mr. Armstrong could have done even better. Instead, he turned down a $1.5 million bonus, citing his painful decision to lay off hundreds of employees as part of a restructuring.
June 24, 2010
The Answer Will Surprise You
Why Do People Read Newspapers? And Why Are So Many People Now Reading the Internet Instead?
(Ed's Note: This analysis by Jack Fuller first appeared in the Nieman Reports newsletter, published by the Nieman Foundation for Journalism at Harvard University. Jack Fuller, who won a Pulitzer Prize for Editorial Writing, was editor and publisher of the Chicago Tribune and president of Tribune Publishing Company.)
By Jack Fuller
Here is the deepest and, to many serious journalists, most disturbing truth about the future of news: The audience will control it. They will get the kind of news they choose to get. Not the kind they say they want, but the kind they actually choose.
To the extent that news needs to produce profits, the demand ultimately will shape the supply. But even if unlimited nonprofit funding for serious journalism were suddenly to appear, demand would still control.
That is because, no matter what
its business model might be, journalism will fail to deliver to the broad public
the civic education our society requires unless it can persuade large numbers of
people to pay attention to it. So the choice is not between giving people what
they want or what they need. The challenge is to induce people to want what they
How to do that with everything in constant motion? New technologies, new services, new competitors seem to arise every day. All this activity can mask a more important trend -- the audience itself is changing rapidly.
As a consequence, the disciplined, professional presentation of news
perfected over the 20th century no longer commands the widespread respect it
once did. The influence of undisciplined news voices grows.
Journalists know all about responding to the next new thing. We leap like Dalmatians at the sound of the fire bell. But to understand what is happening to the news audience today we need to get beyond the clang of the alarm.
We have to get past the immediacy of each hot new idea and begin with
something deeper and more durable. We need to understand what the transformation
of our information environment has done at the most fundamental level to the way
people take in news.
My struggle with this question led me to the science of how the brain processes information, especially the way emotion directs attention. Of course, it did not take the rise of modern neuroscience to prove that emotion holds an audience.
Sophocles knew that when he wrote his drama of incest and violence, "Oedipus
Rex." So do the editors of supermarket tabloids. Count on fear and sex to
attract the eye.
Evolution provides the reason: Our ancestors became our ancestors by being able to spot danger and the opportunity to mate. So it was inevitable that as competition for attention exploded with the revolutionary information technologies of the late 20th and early 21st centuries, message senders raised the emotional volume.
Serious journalists tended to decry this as infotainment or worse. Perhaps
they never themselves quite lived up to the professional ideal of utter
disinterest and detachment, but they did learn to draw back from raw emotional
The audience did not. This baffled many of us. How could people be taken in by screaming commentators (on everything from health care to basketball), by celebrity gossip, by reports characterized at best by truthiness rather than the rigors of verification?
Here is where the implications of the rapidly developing science of the mind help. It turns out that certain kinds of cognitive challenges (challenges to our thinking) produce emotional arousal. And an emotionally aroused brain is drawn to things that are emotionally charged.
Give normal humans a tricky anagram or a long division problem involving two numbers out to six decimal points, and they will begin to show emotional arousal -- think of it as stress. Give them a strict time limit, and their level of arousal will rise. Throw new information at them (some of it useful, some irrelevant, some just wrong) while they are working on the problem, and their emotional temperature will go up even more.
Then distract them (say by calling their names or having their smartphones
signal that somebody is trying to reach them), and their arousal level will
If that sounds familiar, it is. All too familiar. Information overload, time pressure, and distraction characterize our era. The very nature of the information environment in which we all live creates emotional arousal.
We are available every moment to everyone we know, and an enormous number of people we do not know.
We continuously receive messages: messages of a particular sort -- the kind
that are directed specifically to us. They come from people who know us
personally or from people or institutions that have learned something about what
In effect, these ubiquitous messages call out our names. Consequently we live in a continuous state of interruption and distraction. Time pressure is enormous. Even after leaving the Tribune Company to write books, I discovered that people expected me to respond to e-mails within a couple of hours, if not a couple of minutes, and were offended if I did not.
So not only has the explosion of competition among suppliers of information -- news, advertising and entertainment -- caused producers to increase the emotional temperature, the recipients of information have become more attracted to emotional heat.
This helps explain why heavy news seekers turn to the intensity of Fox
News or MSNBC and away from CNN. (It also
explains why the once rather restrained National Geographic
channel has so many shows about predator species that prey on humans -- species
that include Homo sapiens themselves.)
Where Journalism Fits
This rise in emotional intensity poses a real problem for serious journalists, as I describe in my book "What Is Happening to News: The Information Explosion and the Crisis in Journalism".
We have been trained for many good reasons to shy away from it in the presentation of news. But we see our audience drawn to it. And we do not even have a way of discussing which uses of emotion are misleading or manipulative and which actually can help people understand their world.
(Editor's Note: Chapter Six, "The
Two Searchlights," in Jack Fuller's book describes neuroscience research about
emotion and attention and how it is relevant to the way journalists present
The sciences of the mind offer a lot of help if we are willing to learn from them. They explain, for example, why the immediate crowds out the important. Why bad news attracts attention more than good news does. They can show us how emotion interacts with the human brain's inherent mental shortcuts to lead us systematically to erroneous conclusions.
They can also point us to the ways in which search algorithms interact with
emotions and these mental shortcuts to mislead people about the relative
importance of various pieces of information. They can even help us understand
the way our ability and impulse to read other people's minds draws us to a story
and light up other secrets of how and why narrative works.
It should be clear by now that the challenge for journalists from here forward is not only the steadfast adherence to the values of accuracy and independence and the social responsibility to provide a civic education but also the development of new ways of thinking and talking about how to advance the social mission of journalism in a radically and rapidly evolving environment.
The answer is not to figure out how to transport 20th century news
presentation into 21st century delivery mechanisms but rather to create a new
rhetoric of news that can get through to the changed and changing news audience.
To conclude where I began, the audience will determine the future of news. Serious journalists must understand to the very essence the minds that make up this audience in order to know how to persuade people to assimilate the significant and demand the accurate.
Anything less is the neglect of our most important social responsibility.
(Ed Bagley's Note: Following are some online responses to Jack Fuller's analysis. My editorial comments follow in italics.)
The old problem was how to control the public, which you thought was best accomplished by giving the public what you thought it "needed." The new problem is that you can't escape the knowledge that the public will accept what it wants, not what you want. So you think your new task is to control what the public wants, so that it will want what you think it needs. Voila, control restored! Unfortunately for you, you can't control what people want, either.
(This is a damn good point – you can
only control yourself.)
There never has been a time, and certainly not in the last 50 or so years of American mainstream journalism, when journalists did not use their craft to the utmost of their ability to push their own political and social agendas. The problem was not that they had an agenda. The problem was that they were dishonest about it, and that it was an agenda most people came to be hostile to, and no longer would pay to have shoved down their throats.
(Amen, brother, amen. Personal journalism replaced objective reporting years ago. We went from being given the facts to being told how to interpret the facts as if we did not have a brain in our head to figure it out for ourselves.)
I think it important that you recognize that your experience in journalism was that the three major networks and the big papers sold to captive markets, and that fact allowed journalism to think that it could force "what's good for them" down their customers' throats. How sweet it is now with the advent of the PC, desktop publishing, the Internet, blogs, and forums that are easily accessible.
(And let's not forget that those same 3 major networks were spoon-fed the news that our government wanted us to hear, and not what was actually going on. The 3 networks were – in effect – shills for the government that regulated their existence.)
We are seeing in the media what we have witnessed in the American diet: an addiction to junk news food and empty content calories. It dates, I believe, back to the transition of the conception of individuals as consumers rather than citizens.
As Fuller notes, in a profit-based system the audience determines the future
and what is needed is the equivalent of Jamie Oliver's Food Revolution: a
determined effort to make what is "good for you" also enjoyable and satisfying
to consume. I hope that there is a way to do this that moves us beyond the
mindless pap that is most local news (in any medium) or the hyperventilated
opinion-journalism of Fox, MSNBC, etc.
Good storytelling has been fundamental to human societies for millennia and length need not signify quality. Before blogs there was the column and the short story. Before Twitter there was haiku. But until we begin to think of ourselves as citizens again -- and take on the responsibility of becoming well informed enough to make the decisions required of citizens -- most will gorge themselves on the journalistic equivalent of soda and chips.
(This may be the most telling remark
so far. At what point did we stop being citizens and chose to be spoon-fed
fodder for facts?)
Most fundamental human needs are emotionally based. Whether it be the need for love and affection, creation, understanding, esteem or self actualization . . . therefore it's completely understandable that tabloid journalism and the like would be popular. Humans are ruled by emotional response. It only stands to reason through repeated exposure to "emotionally heated" journalism that the public would begin to react in an almost Pavlovian manner.
(Ah, so that's how it happened – we
became willing lapdogs.)
Maybe it is the "way" that important information is presented that turns people off, not the fact that it is important. The dry, voiceless style of yesteryear is difficult to process for your average, undereducated American. Important issues can, and do, have great "emotional heat." It's just that journalists and editors drain it all out in the interest of "balance." Tell the important stories, and tell them well, and people will listen.
(Well said. This is why we have read books for years, and will continue to read them because the author becomes a great storyteller of his or her message.)
June 17, 2010
He Should Know
Robert Reich Says "Don't Listen to the Cheerleaders, the Main Street Economy Isn't Improving"
(Ed's Note: This guest article by Robert Reich originally appeared on his web site at RobertReich.org. Reich is a former Secretary of Labor in President Clinton's Administration, and currently a Professor of Public Policy at Cal-Berkeley.)
By Robert Reich
Today's most important economic news: U.S. household debt fell for the 7th
straight quarter in the first three months of 2010 as Americans continued to
respond to the recession's fallout.
But like all economic news, its significance depends on where you're standing -- whether you're a typical American or someone at the top.
The common wisdom is that excessive debt-financed spending was one of the causes of the recent recession, so the news that household debt is dropping is being celebrated by business cheerleaders as reason to believe we're on the mend.
Baloney. The reason so many Americans went into such deep debt was because their wages didn't keep up. The median wage (adjusted for inflation) dropped between 2001 and 2007, the last so-called economic expansion.
So the only way typical Americans could keep spending at the rate necessary
to keep themselves -- and the economy -- going was to borrow, especially against
the value of their homes. But that borrowing ended when the housing bubble
So now Americans have no choice but to pare back their debt. That's bad news because consumer spending is 70 percent of the economy. It helps explain why we so few jobs are being created, and why we can't escape the gravitational pull of the Great Recession without far more government spending.
It's also a bad omen for the future. The cheerleaders are saying that for too long American consumers lived beyond their means, so the retrenchment in consumer spending is good for the long-term health of the economy. Wrong again.
The problem wasn't that consumers lived beyond their means. It was that their
means didn't keep up with what the growing economy was capable of producing at
or near full-employment. A larger and larger share of total income went to
people at the top.
So in the longer term, it's hard to see where the buying power will come from unless America's vast middle class has more take-home pay. Yet the economy is moving in exactly the opposite direction: Businesses continue to slash payrolls. And the hourly wage of the typical American with a job continues to drop, adjusted for inflation.
Here's more news: A Federal Reserve report Thursday showed the net worth of Americans rose a 4th straight quarter in January-March. Don't be fooled by this one either. That increase was almost entirely based on the stock market's rise in the first quarter. But the market has since fallen back to where it was at the start of the year.
More to the point, most Americans don't have many assets in the stock market.
To the extent they have any net worth, it's in their homes. And home prices
continue to languish.
Don't be fooled by the cheerleaders. The economic news continues to be dismal.
May 20, 2010
Say It Ain't So, Bennie
Federal Reserve Chair Does Not Need to Be a Toady in Defending the Interests of Big Banks
(Ed's Note: This guest article by Dean Baker first appeared in The Huffington Post. Baker is co-director of the Center for Economic and Policy Research in Washington, DC.)
By Dean Baker
While it may not be the job of the Chairman of the Federal Reserve Board to deceive Congress to advance the interests of the big banks, apparently no one has informed Ben Bernanke of this fact.
Some people may recall the role that Mr. Bernanke played in helping to get the TARP through Congress. As part of the effort to build fear among members, he told Congress: "The credit markets aren't working. Corporations aren't able to finance themselves through commercial paper."
This was a big deal. Most large corporations are now dependent on selling commercial paper to finance their ongoing operations. They borrow money on the commercial paper market to meet their payroll and pay suppliers. If major companies were not able to sell commercial paper, they would quickly be unable to pay their bills and the economy really could shut down.
The extent to which the commercial paper market was actually in danger of freezing up is debatable. However, what is not debatable is the fact that the Federal Reserve Board had the ability to single-handedly keep the commercial paper market operating.
In fact, the weekend after Congress approved the TARP, Bernanke announced
that he was establishing the Commercial Paper Funding Facility. This facility
directly purchased commercial paper from non-financial companies, ensuring that
they had the money to stay in business.
In other words, even if the commercial paper market was shutting down, as Mr. Bernanke told Congress, there was no reason that Congress had to rush to pass the TARP. The Fed already had the ability to keep the commercial paper market going and Mr. Bernanke was prepared to exercise this authority before any TARP funds would be entering the system.
Bernanke was helping to create the atmosphere of fear that was needed to get
Congress to authorize $700 billion in TARP funds for the banks, with few
It seems that Bernanke is again in his "fool Congress" mode. Yesterday (5-12-10) he sent a letter to the Senate arguing that it should remove language that the Agriculture Committee put into the financial reform bill that would require banks to spin off their derivative trading units.
The intent of this language is to
separate out the business of the commercial banks, which operate with government
insured deposits, from the more risky operations associated with derivative
There are reasonable arguments that can be made on this issue, but these did not appear in Mr. Bernanke's letter. At the center of Bernanke's argument are two points that are just not true.
He argues that the legislation would prevent banks from buying derivatives to hedge interest rate risk. This was not the intent of the rules and this is not how most people other than Bernanke are interpreting them.
The issue is whether commercial banks
should be acting as the intermediaries in trading derivatives, not whether they
can buy derivatives as end users, just as any other end user would.
The other false concern raised by Bernanke is that derivative trading will be taken away from relatively closely regulated bank holding companies and transferred to more poorly regulated parts of the financial system.
This is a false concern because the Ag Committee language only requires that
trading be taken away from the commercial banks that are protected by government insurance. Banks would be allowed to spin off divisions that are still within the bank holding company, however these divisions would not enjoy the special protections provided to commercial banks.
Finally, Bernanke effectively dismisses the concern that motivates removing trading from commercial banks by asserting that the era of "too big to fail" (TBTF) banks has ended. If Mr. Bernanke believes this, he is among a tiny minority of economists.
While the financial reform bill includes many elements that will improve
oversight and limit risk, there are few economists who believe that if Citigroup
or Goldman Sachs were facing bankruptcy, the government would just allow them to
Of course the whole point of pulling derivative trading away from commercial banks is to ensure that taxpayers will not be liable for the mistakes that banks may make in the derivative trading business. Derivative trading is considerable more risky than the personal and business loans that are the normal business of commercial banks.
If we assume that there are no banks
that are now TBTF then we need not be concerned about a taxpayer bailout, but
few, if any, economists would be as sanguine about this risk as Mr. Bernanke.
In short, this looks like the same sort of effort to misrepresent issues to Congress as we saw with the TARP. Mr. Bernanke is a very accomplished economist and he no doubt has much wisdom to share with Congress. It would be a big step forward if he saw this as being his job, instead of defending the interests of the big banks.
May 11, 2010
Bloomberg News Survey of CEO Pay
Leslie Moonves, Columbia Broadcasting System's Top Exec, Was Apparently Overpaid by $28 Million in 2009
(Ed's Note: Most successful politicians understand that nothing hits closer to home with potential voters than money issues. When a politician's vote takes money out of his constituent's pocket, he is in trouble. This is why politicians want nothing to do with reforming Social Security or Medicare. You would think that fat-cat CEOs of mega-companies would be more sensitive to ripping off their customers, but apparently not so. Some continue to get outrageous compensation for very little production. Trust me when I say that the rich live a very different life than we do.)
By Jessica Silver-Greenberg and Alexis Leondis
Using formulas he developed over 30 years in the business, Crystal crunched
the numbers to see whether higher shareholder returns, the gold standard of
performance for investors, led to higher pay, and vice versa. No matter how he
sliced the data, the answer was no.
"The return explained none of the variations," said Crystal, 76, in a telephone interview from his home in Las Vegas. "Simply put, companies don't pay for performance."
If CEOs were paid according to shareholder return, Moonves would take a $28 million pay cut under a model that Crystal developed. Schmidt would get more than a $17 million raise.
At CBS, "more than 85 percent of Mr. Moonves's compensation is keyed to performance-based measures" and is "closely aligned" to shareholders' interests, Dana McClintock, a spokesman, said.
$9.29 Million Overpaid
Crystal's model reapportioned pay according to a formula based two-thirds on shareholder return, and one-third on company size, measured by its sales.
Among those who would lose money in the redistribution were CEOs who received raises in 2009, when most of their peers took pay cuts. After a 61 percent boost to $12.6 million, Eastman Kodak Co.'s Antonio Perez made $9.29 million more than the Crystal model said he should.
AT&T Inc.'s Randall Stephenson -- up
85 percent to $29.2 million in 2009, primarily from an increased pension
contribution -- deserved $20 million less, according to Crystal.
The CEO who would receive the most if shareholder return ruled in board rooms: Ford Motor Co.'s Alan Mulally, 64, who would move up to $19.6 million from $17.9 million.
Ford, based in Dearborn, Michigan, was alone among U.S. automakers in
avoiding bankruptcy last year. Ford boosted U.S. market share through March to
17.4 percent, up 2.7 percentage points from a year earlier. Its shares rose more
than fourfold in 2009, and about 310 percentage points more than the Standard &
Poor's 500 Index.
Eight Times Value
The CEO whose actual pay was most out of line in the Crystal model was Cephalon Inc. founder Frank Baldino Jr, 56. He took home $11.1 million, more than eight times the $1.34 million allotted him by the formula.
Tying Baldino's compensation to stock price wouldn't appropriately reflect his value to the biotechnology firm, or the strength of the company, said Sheryl Williams, a spokeswoman for Frazer, Pennsylvania-based Cephalon. "We don't pay our executives based on changes in the price of the stock," she said. "We pay them based on growth in sales and earnings."
The drugmaker reported net income last year of $342.6 million, a 78 percent gain, on $2.19 billion in sales. Shares were off 19 percent for the year as the company had more research and development failures than successes, Williams said.
'Angers Main Street'
Crystal's model was devised amid rising concern that executive pay is too high and calls from President Barack Obama and others that CEOs should suffer when companies mess up.
"It angers Main Street when it sees what executive pay looks like, especially on Wall Street," Feinberg, 64, the U.S. paymaster, said in an interview. Warren Buffett, CEO of Berkshire Hathaway Inc., said in his shareholder letter this year that he wants to see "meaningful sticks" tied to the "oversized financial carrots" that are part of CEO and director pay packages.
Shareholder return is a "much better barometer of performance than any type of guaranteed salary," Feinberg said.
Ira T. Kay, an independent compensation consultant in New York, said Crystal and Feinberg are talking about the wrong performance gauge. Eighty percent to ninety percent of CEOs' bonuses in 2009 were tied to earnings growth, which is highly correlated to stock price appreciation, according to Kay.
"It's a mythology among the American public and media that there is no pay for performance," he said. "If measured properly, there is tremendous pay for performance."
'Too Many Influences'
Stock prices can move at the whim of the market and aren't the best way to evaluate CEO performance, said Tim White, a partner at Dallas-based Kaye/Bassman International, an executive search and recruitment firm. "There are far too many influences on stock price that the leader can't control," White said.
Crystal acknowledges his model isn't perfect. For one thing, he said, it assumes that the aggregate $2.7 billion that CEOs in the study received represents the appropriate level. If it were up to him, CEO compensation would be reduced across the board, he said.
Shareholder return is the best determinant of pay because it's the only gauge of success that's external and can't be manipulated by accounting tricks or shifts in performance targets, Crystal said.
Throughout his career, which began in 1959 after he saw an ad for a wage and salary analyst in the Los Angeles Times, Crystal said he noticed that CEOs rarely saw their pay packages docked when their companies' stock plummeted.
"On the down side, it's never the CEO's fault," he said. "Yet if the company has a good year, guys gather around him like he's Julius Caesar."
For his study, Crystal included companies in the S&P 500 that had filed proxy statements for their 2009 fiscal years by April 16. Only CEOs who were in the position in 2008 and 2009 were included, for accurate comparisons.
He found that 159 of the 271 CEOs would get raises if the total CEO payroll last year were redistributed according to his return-heavy formula.
The most underpaid of the "bargain" CEOs, Google's Eric Schmidt, received $245,322 last year, 99 percent below pay adjusted for shareholder return. Schmidt owns 9.4 million shares of the Mountain View, California-based company, according to a company filing. His restraint contrasts with other CEOs who have fortunes in stock and still take big packages, Crystal said.
Oracle Corp.'s Larry Ellison, 65, who owns shares worth about $30 billion, was paid $56.8 million in the company's latest fiscal year.
Not 'Entirely Altruistic'
Oracle, based in Redwood City, California, wasn't included in the Crystal study because its fiscal year ended May 31, before the latest batch of proxy filings covering the calendar year. Google and Oracle officials didn't return calls and e- mails seeking comment.
Like Schmidt, Jeff Bezos, 46, of Amazon.com Inc. was rated as underpaid with a $1.78 million package, compared to the $18.3 million he would get under Crystal's model. Stock of Seattle- based Amazon beat the S&P 500 by 136 percentage points in 2009. Bezos holds 92 million shares worth about $12 billion.
Bezos's decision to take such low compensation "isn't entirely altruistic," because it acts to moderate pay demands by Amazon's employees, said Steve Wallenstein, a professor at the University of Maryland's Smith School of Business, who studies corporate directors.
A 'Shared Sacrifice'
On the opposite end of the spectrum was Kodak's Perez, 64. Kodak, based in Rochester, New York, lost $210 million last year as its revenue fell 19 percent and its shares shed a third of their value. The company, undergoing a transformation from film to digital products, cut 4,100 jobs and has its lowest workforce since the 1930s.
The compensation committee of Kodak's board approved a 9.8 percent base salary reduction for Perez, which its proxy filing said was larger than guidelines would have dictated, because of Perez's "desire to lead in the shared sacrifice."
The sacrifice didn't extend to the
rest of Perez's package -- where directors changed terms in ways that benefited
the CEO. The board said it was responding to what it saw as "strong incentive"
for Perez to retire this year because parts of his employment agreement were
Kodak gave Perez an option for 500,000 shares valued at $1.05 million, by amending his employment contract. It accelerated to 2009 an equity payout originally scheduled for 2010, helping Perez get a $6.18 million stock award. The company also retained its 2008 metrics for "target annual variable pay" adding $1.71 million to Perez's package.
A Successful 2009
Perez's total pay package was $12.6 million, up 61 percent.
Kodak had a successful 2009 and achieved the profitability and cash generation goals that were communicated to investors early in the year, according to David Lanzillo, a spokesman for the company.
"We have seen a lot of symbolic cutting of cash salaries," said Brandon Rees, deputy director of the AFL-CIO's office of investment in Washington. "That's a tiny fraction of total compensation" versus "the millions of dollars in other forms of compensation."
Some of the misalignment between shareholder return and CEO pay arises from competition among companies. Compensation committees routinely peg a substantial portion of CEOs' pay to competitors, often at the 75th percentile. That means that pay flows even when shares fall, so long as CEOs in the selected peer group do well, said Robin Ferracone, executive chair at Los Angeles-based Farient Advisors, an executive compensation firm.
The CEOs of Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Citigroup Inc. each earned at least 89 percent less than the return-driven pay calculation in the Crystal model. After receiving aid under the Troubled Asset Relief Program during the financial crisis, they heeded coaxing from Feinberg and Obama to restrain executive compensation.
In 2010, Goldman Sachs and JPMorgan reversed themselves and made special awards to their leaders that they attributed to 2009 performance. Goldman Sachs gave Lloyd Blankfein a $9 million all-stock bonus, and JPMorgan's Jamie Dimon was awarded stock and options worth about $17 million.
An exception to the underpaid bank CEOs was Henry Meyer III, 60, the CEO of Cleveland-based lender KeyCorp. Although the bank was barred under TARP from paying cash bonuses, Meyer's total compensation rose 21 percent as KeyCorp's stock fell 34 percent. His $8.15 million package was $5.28 million more than the return model dictated.
CEO 'Fraternity Club'
In its proxy filing the company said it changed its performance goals for the CEO and his direct reports last year "as a result of the then-unfolding financial crisis and the uncertainty about the compliance obligations to be imposed for TARP participants."
Meyer's base salary, paid in shares, was increased $623,193 to $1.64 million.
Citing the need to retain talent, the compensation committee boosted his option
award by $1.29 million to $2.14 million. The salary shares can't be sold until
the full repayment of the $2.5 billion TARP investment in KeyCorp stock by the
The compensation committee acted to recognize "substantial efforts of management in strengthening Key's capital levels, liquidity and funding ratios" last year, said William Murschel, a KeyCorp spokesman. The company's $1.34 billion loss in 2009 narrowed from a loss of $1.47 billion in 2008.
Metrics can shift quickly to accommodate an elite "fraternity club" of CEOs, said Ron Ashkenas, a managing partner at Robert H. Schaffer & Associates LLC, a management consulting firm in Stamford, Connecticut. He said compensation is "based far more on a mythical sense of competitive pressure than on any real indicators of value."
As ways to better align pay with shareholder returns, Crystal recommends giving stock options that can't be exercised for five years with a strike price that's the average of the last 90 days before being awarded. He said he sees that as a way to avoid "opportunistic" option pricing at advantageous prices and to tie performance to long-term results.
He also suggests "negative bonuses"
-- or placing a portion of bonuses awarded annually into accounts that could be
reduced if executives fail to meet subsequent years' incentive targets.
Some of Crystal's former clients have called him a Judas for being a part of the system for so long and then turning on it. His standard rejoinder is that he prefers to be compared to Mary Magdalene in the second phase of her life.
"Maybe I was a hooker," Crystal said. "But I'm hoping to end my life as a saint."
A Synopsis of Hits and Misses on the
CEO Compensation Trail:
Leslie Moonves, chief executive officer of CBS Corp., was the highest paid CEO in the Bloomberg survey, earning $43.2 million in 2009.
Antonio Perez, chief executive officer of Eastman Kodak Co., got a 61 percent raise last year, while Eastman Kodak's stock dropped 36 percent in 2009.
Eric Schmidt, chief executive officer of Google Inc., was the most underpaid, according to Crystal's analysis, taking home $245,322.
Alan Mulally, chief executive officer of Ford Motor Co., who should have been the highest paid, according to Crystal's analysis, instead took home $17.9 million.
Frank Baldino Jr., chief executive officer of Cephalon Inc., was the most overpaid, according to Crystal's analysis, getting more than eight times the $1.34 million allotted him.
Larry Ellison, chief executive officer of Oracle Corp., wasn't included in the survey, but was paid $56.8 million despite owning Oracle shares worth about $30 billion.
Jeff Bezos, chief executive officer of Amazon.com, was underpaid by 90 percent, based on Crystal's findings, earning $1.78 million last year.
Henry Meyer III, chief executive officer of KeyCorp, saw his total
compensation rise 21 percent, even as KeyCorp's stock fell 34 percent
Randall Stephenson, chief executive officer of AT&T Inc., should have gotten $20 million less than AT&T's board awarded him, according to Crystal's analysis.
April 17, 2010
They Sure Are Broke (Wink, Wink)
Health Insurance and Life Insurance Companies Have Invested Nearly $2 Billion in Fast-Food Chains
(Ed's Note: Well, I guess you can't leave $2 billion in profit in your stinky socks at the office. It's a real hardship finding some place to stash an extra $2 billion in profits, but some insurance companies have really smart bean counters—they figured it out.)
By Candy Sagon
The fast-food industry is regularly criticized for contributing to Americans’ obesity and other health problems, yet a new study shows that major health and life insurance companies have invested nearly $2 billion in McDonald’s and other popular fast-food chains.
Researchers at the Cambridge Health Alliance and Harvard Medical School looked at the stock holdings of major health and life insurers in 5 leading fast-food companies.
The results, published online
recently in the American Journal of Public Health,
found that insurance firms have
invested $1.9 billion in stock of companies like Jack in the Box, Burger King
and Yum! Brands, owner of Pizza Hut and Taco Bell, among others.
The researchers used shareholder data from the Icarus database, which draws on Securities and Exchange Commission filings and other information.
The $1.9 billion represents only about 2 percent of the total value of fast-food company stock, but the researchers argue that insurers "ought to be held to a higher standard of corporate responsibility." They call for insurance companies to divest themselves of holdings in fast-food firms because of the firms’ negative impact on public health.
"Life and health insurance firms profess to support health and wellness, but their choice of financial investments has raised doubts," the researchers write.
At least one insurer, however, rejected the study’s findings. A spokesman for Massachusetts Mutual Life Insurance, which the study said had invested more than $366 million in fast-food stock, said in an e-mail that the figures were "absolutely incorrect."
Spokesman Mark Cybulski wrote that, as of Dec. 31, 2009, MassMutual’s fast-food-related holdings were approximately "$1.4 million, representing less than one-hundredth of one percent of cash and total invested assets of $86.6 billion."
A spokesman for Prudential Financial, which the study also cited as a substantial investor in fast food, declined to discuss specific investments. However, Theresa Miller, Prudential’s vice president for global communications, added in an e-mail that the company has a responsibility to its clients to seek "strong investment performance … while managing risk and investing responsibly."
Senior author J. Wesley Boyd, M.D., an assistant professor of psychiatry at Harvard Medical School, contends insurers are more concerned with making a profit than in helping people stay healthy.
"Based on their investments, these companies are showing themselves to be amoral. They’re just about making money, and they will make money off bad habits even if those habits are making you sick or killing you," he says.
But Mark Pauly, a professor of health care management at the Wharton School at the University of Pennsylvania, thinks trying to pressure insurers to divest their fast-food holdings is a bit naive.
"It may be a nice gesture for insurers to say they’re not investing in evil things anymore," he says, "but it’s hard to imagine that it would have a substantial impact."
A better idea, he says, "would be for the insurance companies to invest a lot more in fast food, then go to the company’s annual meeting and get them to change their policies."
March 15, 2010
Grabs a 32.5% Share
For the First Time Ever, Digital Advertising Will Outstrip Print Media Advertising as the Internet Grows in Influence
(Ed's Note: As a former newspaper publisher and current book publisher, I know this day was bound to come with the advent of the Internet and the lack of adequate response of the print industry to compete with it.)
For the first time ever, spending on digital advertising will outstrip that
targeted toward the print sector. A study by Outsell predicts Web
ads will jump 10 percent in the coming year, meaning 32.5 percent of the $368
billion will be spent on the Internet, versus just 30.3 percent on print.
Outsell vice president Chuck Richard calls it a "watershed moment," and he's
March 1, 2010
The Push Gets Harder
Changing Models: A Global Perspective by Nielsen on Paying for Content
By Nic Covey
Will consumers pay for online news and entertainment they now get for free? Nielsen asked more than 27,000 consumers across 52 countries, and the answer
is a definite "maybe".
As expected, the vast majority (85%) prefer that free content remain free.
Yet there are opportunities to be found in the details. Indeed, when asked to
focus on specific types of content, survey participants are more willing to at
least consider paying for particular
categories, especially if they have done so before.
What They Will or Will Not Pay to See
Online content for which consumers are most likely to pay—or have already
paid—are those they normally pay for offline, including theatrical movies,
music, games and select videos such as current television shows. These tend to
be professionally produced at comparatively high costs.
Consumers are least likely to pay for content that is essentially homegrown online, often by other consumers at fairly low cost. These include social communities, podcasts, consumer-generated videos and blogs.
In between are an array of news formats—newspapers, magazines, Internet-only news sources and radio news and talk shows—created by professionals, relatively expensive to produce and, in the case of newspapers and magazines, commonly sold offline. Yet much of their content has basically become a commodity, readily available elsewhere for free.
Compensation Conditions Are Important
Whatever their preferences, consumers worldwide generally agree that online content will have to meet certain criteria before they shell out money to access it:
1) Better than 3 out of every 4 survey participants (78%) believe if they already subscribe to a newspaper, magazine, radio or television service they should be able to use its online content for free.
2) At the same time, 71% of global consumers say online content of any kind will have to be considerably better than what is currently free before they will pay for it.
3) Nearly 8 out of every 10 (79%) would no longer use a web site that charges them, presuming they can find the same information at no cost.
4) As a group, they are ambivalent about whether the quality of online content would suffer if companies could not charge for it—34% think so while 30% do not; and the remaining 36% have no firm opinion.
5) But they are far more united (62%) in their conviction that once they purchase content, it should be theirs to copy or share with whomever they want.
How to Charge Consumers for Online
Material Is the Real Issue
Despite the growing consensus that the media may only be able to generate appreciable online revenues by charging consumers for content, there is little agreement on just how to do that. Companies are experimenting with a range of payment models, from full service subscriptions to individual transactions, or micropayments.
Among those surveyed by Nielsen, about half (52%) favor the latter, albeit
micropayments have proved cumbersome to implement in the past. But a more
manageable system may be no more enticing. Only 43% say an easy payment method
would make them more likely to buy content online.
Regardless of what systems they choose, media companies will almost certainly not abandon advertising; and consumers will doubtless still see ads along with paid content. For the 47% of respondents who are willing to accept more advertising to subsidize free content, that may be tolerable. Yet it will probably not sit well with the 64% who believe that if they must pay for content online, there should be no ads.
February 26, 2010
In Your Face Doesn't Seem to Work
After Three Months, Only 35 Readers Are Willing to Pay for Newsday's Web
Site Content – Yikes! No Wonder Newspapers Are in So Much Trouble
By John Koblin
In late October (2009), Newsday, the Long Island daily that the Dolans bought for $650 million, put its web site, newsday.com, behind a pay wall. The paper was one of the first non-business newspapers to take the plunge by putting up a pay wall, so in media circles it has been followed with interest.
Could its fate be a sign of what others, including The New York Times,
So, three months later, how many people have signed up to pay $5 a week, or $260 a year, to get unfettered access to newsday.com? The answer: 35 people. As in fewer than three dozen. As in a decent-sized elementary-school class.
That astoundingly low figure was revealed in a newsroom-wide meeting last week by publisher Terry Jimenez when a reporter asked how many people had signed up for the site. Mr. Jimenez didn't know the number off the top of his head, so he asked a deputy sitting near him. He replied 35.
Michael Amon, a social services reporter, asked for clarification.
"I heard you say 35 people," he said, from Newsday's auditorium in Melville. "Is that number correct?" Mr. Jimenez nodded. Hellville, indeed.
The web site redesign and relaunch cost the Dolans $4 million, according to Mr. Jimenez. With those 35 people, they've grossed about $9,000.
In that time, without question, web traffic has begun to plummet, and, certainly, advertising will follow as well.
Of course, there are a few caveats. Anyone who has a newspaper subscription is allowed free access; anyone who has Optimum Cable, which is owned by the Dolans and Cablevision, also gets it free. Newsday representatives claim that 75 percent of Long Island either has a subscription or Optimum Cable.
"We're the freebie newsletter that comes with your HBO," sniffed one Newsday reporter.
Mr. Jimenez was in no mood to apologize. "That's 35 more than I would have thought it would have been," said Mr. Jimenez to the assembled staff, according to five interviews with Newsday staffers.
"Given the number of households in our market that have access to Newsday's Web site as a result of other subscriptions, it is no surprise that a relatively modest number have chosen the pay option," said a Cablevision spokeswoman.
Nevertheless, traffic has fallen. In December, the web site had 1.5 million unique visits, a drop from 2.2 million in October, according to Nielsen Media Online.
In the short time that the Dolans have owned Newsday, it's been a circus. When they were closing the deal to buy the paper in May 2008, they had their personal spokesman scream at an editor who assigned a reporter to visit the Dolans, seeking comment; there was a moment back in January of last year, when Newsday editor John Mancini walked out of the newsroom because of a dispute over how the paper was handling the Knicks; in the summer, the paper refused to run ads by Verizon, a rival; Tim Knight, the paper's publisher, and John Mancini, the editor, eventually both left.
The paper, which traditionally has been a powerful money maker, lost $7 million in the first three quarters of last year, according to Mr. Jimenez at last week's meeting.
In October, the web site relaunched and was redesigned. One of the principals behind the redesign is Mr. Mancini's replacement, editor Debby Krenek.
To say the least, the project has not been a newsroom favorite. "The view of the newsroom is the web site sucks," said one staffer.
"It's an abomination," said another.
And now the paper is in the middle of a labor dispute in which it wants to extract a 10 percent pay cut from all employees. The cut was turned down by a lopsided vote of 473 to 10, this past Sunday.
Things are bleak in old Hellville, the pet nickname some reporters have established for life on Long Island.
"In the meeting with Terry, half the questions weren't about labor issues, but about why isn't this feature in the paper anymore?" said one reporter. "People are still mad about losing our national correspondents, our foreign bureaus and the prestige of working for a great newspaper. The last thing we had was a living wage, being one of the few papers where you're paid well. And to have that last thing yanked from you? It's made people so mad."
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January 27, 2010
Sign of the Times?
Looks Like the New York Times Will Begin Charging to Read All Content on Its Website
(Ed's Note: This guest article gives readers a look at the future when reading the New York Times.)
By Michael Calderone
The New York Times, after lengthy deliberations, is planning to announce that it will start charging for its website. New York Magazine reports that the Times is planning to follow a metered model similar to the Financial Times "in which readers can sample a certain number of free articles before being asked to subscribe."
One personal friend of [publisher Arthur] Sulzberger said a final decision could come within days, and a senior newsroom source agreed, adding that the plan could be announced in a matter of weeks. (Apple's tablet computer is rumored to launch on January 27, and sources speculate that Sulzberger will strike a content partnership for the new device, which could dovetail with the paid strategy.)
It will likely be months before
the Times actually begins to charge for content, perhaps
sometime this spring. Executive Editor Bill Keller declined to comment. Times
spokesperson Diane McNulty said: "We'll announce a decision when we believe that
we have crafted the best possible business approach. No details till then."
The Times, reports Gabriel Sherman, considered three strategies: a Wall Street Journal-style pay wall (part free, part subscription); a FT-style metered system; and an NPR-style membership model. The Times, Sherman reports, also opted against partnering with Steven Brill's Journalism Online start-up or work with Rupert Murdoch's News Corp. The decision resulted from lots of internal discussions among top editors and executives.
The decision to go paid is monumental for the Times, and culminates a yearlong debate that grew contentious, people close to the talks say. In favor of a paid model were Keller and managing editor Jill Abramson. Nisenholtz and former deputy managing editor Jon Landman, who was until recently in charge of nytimes.com, advocated for a free site.
The argument for remaining free was based on the belief that nytimes.com is growing into an English-language global newspaper of record, with a vast audience –20 million unique readers—that, Nisenholtz and others believed, would prove lucrative as web advertising matured. (The nytimes.com homepage, for example, has sold out on numerous occasions in the past year.)
As other papers failed to survive the massive migration to the web, the
Times would be the last man standing and emerge with even more
readers. Going paid would capture more circulation revenue, but risk losing
significant traffic and with it ad dollars. At an investor conference this fall,
Nisenholtz alluded to this tension: "At the end of the day, if we don't get this
right, a lot of money falls out of the system."
January 22, 2010
She's Got It Going On
Arianna's Huffington Post Doubles in Traffic From the Same Month in 2008
(Ed's Note: The following article by Amanda Ernst apparently appeared in mediabistro.com. My site had 5.57 million visitors in 2009. Arianna Huffington's Huffington Post site (HuffPo) had 9.8 million unique visitors during the month of December 2009 alone.)
By Amanda Ernst
In December 2009, the Huffington Post saw unique visitors climb more than 150 percent from the year before, and without the help of an election to drive readers to the site as well known for its political bloggers as for its broad aggregation.
According to ComScore data released last week, HuffPo had 9.8 million unique visitors last month, compared to 3.8 million in December 2008. This increase could be attributed in part to the site's launch of a number of new verticals, including HuffPost Sports, which debuted in November. (That month drew 7.9 million unique visitors.)
With numbers like this, the site is quickly climbing past other newspapers' sites."It simply validates what we do and reaffirms our goal to become America's online newspaper," the Huffington Post's president Greg Coleman told FishbowlNY.
Coleman, who took over the newly created post in September, said reaction to the numbers internally and among advertisers and marketers has been "through the roof."
"When I joined, I didn't know that our numbers were going to shoot up like a rocket," he added. "When I started, our unique visitors were at about 6.8 million, and now 9.8 million is starting to get right up there, solidly ahead of The Washington Post and the Los Angeles Times and Wall Street Journal, and getting close to The New York Times."
Although Coleman agreed that HuffPost Sports could be behind the recent rise in visitors, thanks in part to its coverage of the Tiger Wood's scandal in recent weeks, he also said the numbers can't be attributed to just one thing.
"This is my belief: we're at a tipping point, and I think we've hit a nerve,"
he told us. "It's all part of the viral nature of what we do here, with word of
mouth and being able to get some of the most important stories high on the
Google ranking. It's a mix between our Facebook Connect application, search
engine optimization and picking the right stories with the right blend of hard
news and entertainment."
In the past year, the Huffington Post has gotten flack for pairing sensational entertainment content (slideshows of red carpet fashions and barely dressed actresses) and link bait next to serious content about world events, politics and philanthropy. Coleman told us that mix is what makes HuffPo so successful.
"Every reader wants certain kinds of information, and we've figured out a way to put that together," he explained. "For example, my friends who work on Wall Street, they can't go to the office unless they've read Page Six. We let people read a story on Afghanistan, then a big entertainment piece, then sports. People have a variety of interests. We've figured out the formula for what people want to read."
Now it's time for Coleman and his team to monetize the site's growing readership, which is highly educated and affluent, making it especially attractive to advertisers. To accomplish this, Coleman has assembled a team including a handful of people he worked with at Yahoo.
And Coleman and his team might have even more visitors to boast of to advertisers, thanks to new, enhanced site metrics. Last month, HuffPo revealed the first data from ComScore's newest measuring system, ComScore Direct, which uses site "beaconing" instead of panel-only measurement. For November, the site had 17.7 million unique visitors, according to this new measurement, and in December that number reached 20 million.
"The growth of this property, particularly one that people thought would be petering out after the election, is just incredible," Coleman said. "It just continues to rock."
January 22, 2010 – 2nd Article
Following the Money
Deal or No Deal, Tech or No Tech, It's Really About Phones, Smartphones to Be Exact
(Ed's Note: Anyone who has a website and wants readers should be aware of this developing trend.)
Gartner analysts say there will be 1.82 billion (and still climbing)
Internet-enabled phones in the hands of consumers in 2013, compared to 1.78
Logically, in three short years, your visitors and listeners might very well be more likely to hit your site and stream with a mobile phone than on a desktop.
The tech business analyst expects mobile to become the primary revenue driver for the industry in 2010. They expect 52 million smartphones to sell this year, for nearly $17 billion in shipment revenue. That clearly tops the expected notebook sales of more than 30 million units.
January 12, 2010
The Print Assault Continues
Irish Professor Claims Newspapers Are in Peril as Trends Change in the Age of New Media
(Ed's note: The plight of newspapers that are diminishing in importance reaches across the pond from the United States to Ireland. Here is an insightful piece by Roy Greenslade that appeared in The Irish Times. Greenslade is a Professor of Journalism at City University London. I have changed the British spellings of words to our spellings here in the United States.)
By Roy Greenslade
To imagine the media future, it is important to take you on a trip into the media past and remind you of the media present. I plan to guide you on a journey to 2020, to what I will call the post-media age, but I need to set the scene with history and context.
News traveled slowly for centuries, going only as fast as human messengers could travel, whether by foot, horse or ship. It also tended to be specific—from individual to individual—and controlled. The people received only the news the authorities, church or monarch, deemed fit to release.
That changed in various European countries from the mid-17th century with the foundation of newspapers. Though they had a long struggle to secure the freedom to publish, they did impart "unauthorized" knowledge.
Editors, however, were dependent for their material on relatively slow, if exotic, communication systems.
In the autumn of 1845, for instance, a young man called Paul Julius Reuter used carrier pigeons to convey the stock market news from Paris to Berlin because they were swifter than the available train.
Some six years later, with the development of telegraphy, the
man now renowned for starting the Reuters news agency made the birds redundant.
News was now on the move through electrical wires. Some 25 years afterwards, the
first telephones were in use, though international networks took an age to
By 1935 reporters were beginning to use telex machines and they enjoyed a long life. I recall that as recently as 1986, I was still receiving telexed copy from Sunday Times foreign correspondents.
Just before the dawn of the 20th century, wireless telegraphy (aka radio) arrived. Then, within 40 years, came television. In diverse ways, newspapers, TV and radio spawned all manner of innovations that increased the range and speed of news transmission.
At each stage of technological progress, not only did the quantity of news increase but also the style of presentation. Moving pictures, quite obviously, made a huge difference.
Then came the personal computer and, in 1991, the foundation of the global system of interconnected computer networks we know as the Internet. Hard on its heels came the mobile phone, a device that allowed people to talk and send messages from wherever and whenever they fancied.
The digital revolution was under way and within the last decade it has transformed the way people across the world communicate, especially with the spread of ever-faster broadband speeds. It has enabled millions to publish their words, pictures and films without needing to beg for permission from traditional mainstream media moguls or state bureaucrats.
The net has created a new media hierarchy headed by a range of brands—Microsoft, Apple, Google, Yahoo and Amazon—that have either generated profits on a scale the great giants of the industrial revolution could never have imagined or secured audiences that promise a golden future.
The names of social networking web sites, such as Facebook, MySpace, Bebo and Twitter, are known to millions of people on every continent. Young people use these sites as naturally as they walk and talk. They upload photographs to Flickr. They upload videos to YouTube. They seek information from Wikipedia. They strike bargains on eBay.
In Britain, people routinely watch television programs online
by using the BBC’s iPlayer service.
RTÉ’s web site is offering a similar kind of "catch-up TV". In the United States, Hulu allows people to see major shows from TV networks to be screened online. Whatever is shown on a computer can also appear on increasingly sophisticated mobile phones too.
Nor should we forget the new, improved generation of e-readers either. Scores of books and copies of daily newspapers can be downloaded on to devices slimmer than a paperback. They are catching on fast.
The net has not eradicated old media but it has certainly hollowed out the profits of newspapers and commercial TV and radio outlets by attracting the advertisers who funded their content. Some companies have gone to the wall, though the wiser, and more financially stable, have sought to cuddle up to the new media, trying to find an accommodation that will allow them to continue in some form, to go on turning a profit.
Did I say wiser? Well, let us get that in perspective. I am referring in most cases to short-term commercial wisdom. Their chances of survival to 2020 look slim because the digital revolution has a good way to run yet. Even those who regard themselves as digital revolutionaries have no clear idea what is around the corner.
Could anyone in 2004 have forecast that by the following year
a site set up merely to receive video clips from all and sundry would become one
of the most accessed sites on the web? That is YouTube.
Even so, I have a dream of the future, a dream that I also realize could just as well turn into a nightmare. Let me share the sweet dream with you first.
There may not be as many newspapers, but there will be plenty of journalism. It will have assumed a new form in which, to use Jay Rosen’s unmatchable phrase, "the people formerly known as the audience" will play a key role in the gathering and transmission of news events.
They will surely do this on a local or, to use another
fashionable buzzword, hyperlocal, basis. Their work will appear largely online,
on sites that are unlikely to be connected to the major publishing chains that
have ruled the news roost in the United States and Britain for so long.
A similar change will be wrought at the national level. There will be fewer print titles, though online audiences previously attracted by the strength of a brand name will ensure its survival. But there will be much fewer journalists in full-time employment.
It does not mean
the elimination of professional journalism, by which I mean people paid to carry
out daily journalistic work in order to hold power to account, which is the
prime task of our trade. Simple economic reality will ensure that news
outlets—whether they are publishing brands that exist today or small
start-ups—will not host large staffs on the old newspaper model.
These professional news "hubs" will work in concert with, for want of a better term, amateur journalists. Call it participation or collaboration or, to borrow a term coined by Alan Rusbridger, the editor of the Guardian, mutualisation. It is how news-gathering is already developing and, in 10 years that will have become the norm.
Start-ups will be common. Many young would-be journalists, especially those streaming out of university courses in the coming years, will have set up their own sites because jobs in old "big media" will have vanished. Entrepreneurial journalism will flourish, servicing niche interests. These may be as unspecific as generalized "investigative journalism" or narrowly focused, on travel, say, or the transport system or health.
Did I hear someone, Rupert Murdoch perhaps, ask a pertinent question about funding? Who will be paying for this collaborative journalism in 2020? I predict that we will have a mixed economy—advertising, subscription, micro-payments, sponsorship, philanthropy, donation, charity and a range of payments for add-on services formed around news hubs.
People will not pay to place classified ads, but large-scale advertisers will be drawn to support sites that achieve either high volumes of traffic or attract niche audiences. State funding is unlikely, though I imagine that the BBC’s and RTÉ’s license fee arrangements will still exist on a roughly similar basis as today.
Then again, the further fragmentation of TV audiences by 2020
will reduce the advertising take for broadcasters—in favor of online—which will
be a threat to RTÉ unless it can renegotiate higher license fee income.
Online journalism will secure funding because, despite the current cynicism about the big media corporations that tend to dominate in every market across the world, collaborative journalism will give it a new credibility. Indeed, smaller outlets will have a greater chance of gaining public trust.
So there is a dream. A new news paradigm. An unmediated media emerges with a public service remit. It will not mean the termination of human interest journalism, of course. There will be plenty of celebrity sites to satisfy the appetites of those who seek tittle-tattle.
But let me also concede that the idealistic dream of a smaller scale journalism unfettered by commerce could turn into a nightmare. One undoubted advantage of big media is that it has the size to mobilize populations when wrong is done, especially by the state. Newspapers and broadcasters strive to keep governments honest.
Now consider a world in which the state, freed from scrutiny by powerful watchdogs, seeks to control content. China has devoted untold resources to seal off its population from net freedom. Even the technologically challenged states of Burma and Iran managed to block the web. In Britain, anti-terrorism legislation has the power to curb online freedoms.
Down the centuries, people have fought for the right to know more. It would be truly ironic if that struggle were to be halted in the face of history’s most liberating communications technology.
January 11, 2010 - 2nd Article
Here Are the Top 10 Media Blunders During 2009 for Your Consideration
(Ed's Note: Staff and Owners of the media try to get it right, but oftentimes cannot resist pushing it just a little to promote their own point-of-view and hopefully influence unaware readers and viewers, most of whom can smell a pile of stink a mile away. Read Michael Calderone's take from politico.com.)
By Michael Calderone
Upheaval in the media world continued in 2009, with 15,000 newspaper jobs lost, some glossy magazines killed and Washington bureaus either cut back or shuttered completely. And yet, online outlets sprouted—a few beefing up the ranks in D.C.—while more journalists embraced Twitter, blogs and platforms that don't require ink on paper.
While a number of this year's more noticeable media blunders
occurred through simple carelessness, some could be also considered growing
pains in adjusting to changes in the media, such as reporters jumping the gun on
Twitter, experimenting in video, cutting-and-pasting text from a blog or getting
caught when homemade video surfaces on YouTube.
Here Are the Top 10 Media Blunders
1) CNN Mistakes Coast Guard Drill for Attack. On Sept. 11, of all days, CNN blasted the following via Twitter: "BREAKING NEWS: Suspicious boat in river near Obama in DC. Police scanner reports of shots fired. Circumstances unclear." As it turns out: very unclear.
What the CNN reporter actually heard over the
scanner were conversation about a training exercise taking place on the Potomac.
But the false alarm spread quickly over Twitter, and the network quickly
corrected the report on-air shortly thereafter. Still, the White House wasn't
amused. Press secretary Robert Gibbs slapped CNN on the wrist,
saying that "before we report things like this, checking would be good."
2) The Washington Post's "Salongate". It's understandable that newspapers are seeking new revenue streams, but the Post took things to another level this summer. The newspaper sent a flier to lobbyists and potential corporate backers promising an off-the-record, non-confrontational sit-down with editors and reporters in the home of publisher Katharine Weymouth. The price per salon: $25,000.
Shortly after the news broke of what smelled like a
pay-to-play operation, the paper canceled the series. But the Post's
top brass continued dealing with questions on how the salons were organized
and promoted for months to come.
3) Fox's Tea Party Trifecta. Fox News had a banner ratings year, and throughout 2009, it gave extensive coverage of Obama administration opponents, especially the so-called tea party movement's events on April 15 and Sept. 12. But coverage of that latter event led to a couple of apologies later on.
Video surfaced of a Fox News producer rallying
protesters for a live shot, while Sean Hannity mistakenly used the 9/12 footage
in describing a smaller rally on Capitol Hill later in the fall. (Hannity owned
up to the error, apologizing to of all people, Jon Stewart!). Ironically,
Fox News had actually criticized other networks in a full page newspaper
ad claiming they "miss[ed] the story" of the 9/12 rally.
4) ABC Correspondent Tweets Obama's OTR "Jackass" Swipe. While a tweet is at most 140 characters, one blasted to more than a million followers can ping-pong around the Internet within seconds. That's what happened when ABC correspondent Terry Moran tweeted some preliminary, off-the-record chatter between President Barack Obama and CNBC's John Harwood.
He wrote: "Pres. Obama just called Kanye West a 'jackass.'"
Moran's apology for publishing the off-the-record banter didn't end the matter,
as audio, and later video,
of the exchange made its way online. Harwood thought that Moran erred in tweeting the comment, but took things in stride, calling the ABC reporter "a class act and a good journalist."
5) MSM Misses Van Jones, ACORN Stories. The resignation of an environmental adviser in the White House may not be Watergate, but the Van Jones controversy –propelled by conservative blogs and right-wing talkers like Glenn Beck—showed the potential for partisan media to move the news cycle even as most mainstream outlets ignored the story.
Similarly, Andrew Breitbart's BigGovernment.com conducted an
undercover investigation of ACORN that prompted follow-up in the press and calls
for investigations from public officials. The New York Times, for
one, took notice, with top editor Bill Keller even assigning an editor afterward
to start monitoring the budding controversies in the opinion media.
6) NY Post's Obama/Chimp Cartoon. The New York tabloid thrives off attention-grabbing tabloid covers and some of the best headlines on the planet. But the paper can also go too far when it comes to attracting eyeballs, such as publishing a cartoon showing two police officers shooting a monkey, with the text reading: "They'll have to find someone else to write the next stimulus bill."
The cartoon immediately struck some as a racially motivated
slight against the president and resulted in apologies from the paper and, a few
days later, from the man on top: Rupert Murdoch.
7) Milbank-Cillizza Web Show Gets Pulled. The first-ever White House beer summit - remember that?—prompted a lot of jokes in the media. And Washington Post writers Dana Milbank and Chris Cillizza mocked the summit on their "Mouthpiece Theater" Web show, by coming up with what beers political leaders would likely drink.
Their suggestion for Secretary of State Hillary Clinton—"Mad
Bitch beer"—did not go down well with bloggers, drew a rebuke from women's media
groups and resulted in a great YouTube parody. Both Milbank and Cillizza
apologized; Post executive editor Marcus Brauchli went a step
further—he killed the video show.
8) Dowd Borrows from TPM (by way of "friend"). New York Times columnist Maureen Dowd is a Pulitzer Prize-winning writer. So the fact that she had borrowed a passage nearly verbatim from Talking Points Memo inevitably drew attention, and the reason she gave—that a "friend" had sent it to her—failed to end the mini-controversy.
While the Times corrected the column, the paper
wouldn't answer whether it's accepted policy to allow columnists to use passages
from others without any attribution. The episode was also a bit ironic
considering that Dowd was the one who reported on Joe Biden plagiarizing a
British politician just over two decades earlier.
9) Olbermann, Maddow Misquote Murdoch and Limbaugh. It's not always easy to admit you're wrong—but it must sting a bit more when you have to apologize to ideological foes in the process. MSNBC's Keith Olbermann had to issue a correction over comments he attributed to Murdoch, a frequent target on "Countdown."
Olbermann had quoted Murdoch as saying that News Corp. has
"never been a company that tolerates facts"—actually, he said "fat." Later in
the year, Rachel Maddow acknowledged having falsely attributed a quote to Rush
Limbaugh about wishing to honor Martin Luther King Jr.'s assassin—that's
something the top radio host never said.
10) WaPo's Public Enemy Correction Goes Viral. Craig Silverman, of RegretTheError.com, called it the "the correction that launched a thousand tweets." And he's right. Last month, the Post noted that an "article in the District edition of Local Living incorrectly said a Public Enemy song declared 9/11 a joke. The song refers to 911, the emergency phone number."
It was a simple mistake that occurred in the editing process,
but the correction somehow hit the sweet spot in media and pop culture and led
to imitators on Twitter offering their own faux Post corrections
in a chain that followed long after the correction was made.
Dishonorable mention: And My Bggest Blunder of 2009? Another example of how one line quickly posted on a blog can reverberate the wrong way. When Louisiana Gov. Bobby Jindal walked out to respond to Obama's speech before Congress in February, someone on MSNBC uttered "Oh God." I blogged that it was Olbermann, before listening again and writing a few minutes later that who said it was unclear (Indeed, it was actually Chris Matthews.). It landed me on Olbermann's "world's worst person" list the following night. After explaining the mistake in a subsequent blog post, there was redemption – I was on the next night's "best persons" list.
January 11, 2010
An Interesting Take on Why Some Readers Today Prefer the Internet Over Reading Newspapers
(Ed's Note: Michael Kinsley is a columnist for The Atlantic magazine, which first published this guest article.)
By Michael Kinsley
One reason seekers of news are abandoning print newspapers for the Internet has nothing directly to do with technology. It's that newspaper articles are too long. On the Internet, news articles get to the point.
Newspaper writing, by contrast, is encrusted with conventions
that don't add to your understanding of the news. Newspaper writers are not to
blame. These conventions are traditional, even mandatory.
Take, for example, the lead story in The New York Times on Sunday, November 8, 2009, headlined "Sweeping Health Care Plan Passes House." There is nothing special about this article. November 8 is just the day I happened to need an example for this column. And there it was. The 1,456-word report begins:
Handing President Obama a hard-fought victory, the House narrowly approved a sweeping overhaul of the nation's health care system on Saturday night, advancing legislation that Democrats said could stand as their defining social policy achievement.
Fewer than half the words in this opening sentence are devoted to saying what happened. If someone saw you reading the paper and asked, "So what's going on?" you would not likely begin by saying that President Obama had won a hard-fought victory.
You would say, "The House passed health-care reform last
night." And maybe, "It was a close vote." And just possibly, "There was a
kerfuffle about abortion." You would not likely refer to "a sweeping overhaul of
the nation's health care system," as if your friend was unaware that health-care
reform was going on. Nor would you feel the need to
inform your friend first thing that unnamed Democrats were bragging about what a big deal this is-an unsurprising development if ever there was one.
Once upon a time, this unnecessary stuff was considered an advance over dry news reporting: don't just tell the story; tell the reader what it means. But providing "context" as it was known, has become an invitation to hype.
In this case, it's the lowest form of hype—it's horse-race hype--which actually diminishes a story rather than enhancing it. Surely if this event is such a big, big deal—"sweeping" and "defining" its way into our awareness—then its effect on the next election is one of the less important things about it.
There's an old joke about the provincial newspaper that reports a nuclear attack on the nation's largest city under the headline "Local Man Dies in NY Nuclear Holocaust."
Something similar happens at the national level, where
everything is filtered through politics. ("In what was widely seen as a setback
for Democrats just a year before the midterm elections, nuclear bombs yesterday
obliterated seven states, five of which voted for President Obama in the last
It could be worse. Here is The Washington Post's lead on the same health-care story:
Hours after President Obama exhorted Democratic lawmakers to "answer the call of history," the House hit an unprecedented milestone on the path to health-care reform, approving a trillion-dollar package late Saturday that seeks to overhaul private insurance practices and guarantee comprehensive and affordable coverage to almost every American.
Give The Post points for at least attempting to say what the bill does, but take them away again for the bungled milestone metaphor (you don't "hit" a milestone if you hope to reach the next one), and for allowing Obama to fill the first 13 words of the piece with tired rhetoric.
The Times piece, by contrast, waits until the third paragraph to quote Representative George Miller, who said, "This is our moment to revolutionize health care in this country." That is undeniably true. If there was ever a moment to revolutionize health care, it would be the moment when legislation revolutionizing health care has just passed.
But is this news?
Did anybody say to anybody else, "Wait'll you hear what George Miller just
said"? The quote is 11 words, while identifying Miller takes 16. And there's
"Now is the chance to fix our health care system and improve the lives of millions of Americans," Representative Louise M. Slaughter, Democrat of New York and chairwoman of the Rules Committee, said as she opened the daylong proceedings.
(Quote: 18 words; identification: 21 words.)
Meanwhile, Republicans oppose the bill. Yes, they do. And if you haven't surmised this from the duly reported fact that all but one of them voted against it, perhaps you will find another quote informative.
"More taxes, more spending and more government is not the plan for reform the people support," said Representative Virginia Foxx, Republican of North Carolina and one of the conservatives who relentlessly criticized the Democrats' plan.
(Quote: 16 words; identification, 19 words.)
Quotes from outside experts or observers are also a rich source of unnecessary verbiage in newspaper articles. Another New York Times story from the November 8 front page provides a good example here.
It's about how the crackdown on some Wall Street bonuses may have backfired. Executives were forced to take stock instead of cash, but then the stock went up, damn it. This is an "enterprise" story—one the reporter or an editor came up with, not one dictated by events. And the reporter clearly views the information it contains as falling somewhere between ironic and appalling, which seems about right.
But it's not her job to have a view. In fact, it's her job to
not have a view. Even though it's her story and her judgment, she must find
someone else—an expert or an observer—to repeat and endorse her conclusion.
These quotes then magically turn an opinionated story into an objective one. And
"People have to look at the sizable gains that have been made since stock and options were granted last year, and the fact is this was, in many ways, a windfall," said Jesse M. Brill, the chairman of CompensationStandards.com, a trade publication. "This had nothing to do with people's performance. These were granted at market lows."
Those are 56 words spent allowing Jesse M. Brill to restate the author's point. Yet I, for one, have never heard of Jesse M. Brill before. He may be a fine fellow. But I have no particular reason to trust him, and he has no particular reason to need my trust.
The New York Times, on the other
hand, does need my trust, or it is out of business. So it has a strong incentive
to earn my trust every day (which it does, with rare and historic exceptions).
But instead of asking me to trust it and its reporter about the thesis of this
piece, The New York Times asks me to trust this person I have
never heard of, Jesse M. Brill.
Of course this attempt to pass the hot potato to a total stranger doesn't work, because before I can trust Jesse M. Brill about the thesis of the piece, I have to trust The New York Times that this Jesse M. Brill person is trustworthy, and the article under examination devotes many words to telling me who he is so that I will trust him. (By contrast, it tells me nothing about the reporter.)
Why not cut out the middleman? The reason to trust this story,
if you choose to do so, is that it is in The New York Times. What
Jesse M. Brill may think adds nothing. Yet he is only one of several experts
quoted throughout, basically telling the story all over again.
In the current financial crisis, The New York Times and other papers seem to have given reporters more leeway than ever before to express their opinions directly. Editors may have realized that these issues are hard enough to explain without running into roadblocks at every turn labeled Warning: Opinion Territory Ahead. But the old wordy conventions survive.
Quotes from strangers restating the reporter's opinion are
one. Another is adding protective qualifiers to statements about which there is
no real doubt (as when I wrote above that the bonus restrictions "may have"
backfired). A third-illustrated by the headline on that story, "Windfall Seen as
Bonuses Are Paid in Stock"—is to attribute the article's conclusion to unnamed
others. Somebody sees a windfall. We're just telling you about it.
The software industry has a concept known as "legacy code," meaning old stuff that is left in software programs, even after they are revised and updated, so that they will still work with older operating systems. The equivalent exists in newspaper stories, which are written to accommodate readers who have just emerged from a coma or a coal mine.
Who needs to be
told that reforming health care (three words) involves "a sweeping overhaul of
the nation's health care system" (nine words)? Who needs to be reminded that
Hillary Clinton tried this in her husband's administration without success?
Anybody who doesn't know these things already is unlikely to care. (Is, in fact,
unlikely to be reading the article.)
Then there is "inverted-pyramid style"—an image I have never quite understood—which stands for the principle of putting the most-crucial information at the top of a story and leaving the details for below. Pyramid style is regarded as a bit old-fashioned these days, hence all those florid subordinate clauses at the top of both the Times and the Post versions of the health-care story.
The revolt against pyramid style is also why you get those you'll-never-guess-what-this-is-about, faux-mystery narrative leads about Martha Lewis, a 57-year-old retired nurse, who was sitting in her living room one day last month watching Oprah when the FedEx delivery man rang her doorbell with an innocent-looking envelope . . .and so on. (The popularity of this device is puzzling, since the headline—"Oprah Arrested in FedEx Anthrax Plot"—generally gives the story away.)
But ruthless adherence to classic inverted-pyramid style can
also lead to repetition of the story again and again, with one or two more
nuggets of information each time.
And then, finally, comes the end, or "tag." Few writers can resist the lure of closure—some form of summing-up or leave-taking. Often this is a quote that repeats the central point one last time, perhaps combining it with some rueful irony about the limits of human agency.
The Times health-care article
does this. "'Our plan is not perfect, but it is a good start toward providing
affordable health care to all Americans,' said Representative Peter A. DeFazio
of Oregon." The same day's story in The Post does it too, with a
quote too long to quote.
On the first day of my first real job in journalism—on the copy desk at the Royal Oak Daily Tribune in Royal Oak, Michigan—the chief copy editor said, "Remember, every word you cut saves the publisher money." At the time, saving the publisher money didn't strike me as the world's noblest ideal. These days, for anyone in journalism, it's more compelling.
October 29, 2009
Important News About Newspapers, What We Grew Up With and Still Want to Enjoy Reading
(Ed's Note: Mark Fitzgerald is the Editor-at-Large for Editor & Publisher magazine, the nation's most famous and well-respected magazine covering the newspaper industry in America. Fitzgerald assesses the state of the industry today, why it will survive, and where it is headed.)
By Mark Fitzgerald
Difficult as it may seem at the moment, newspapers will
eventually work their way out of this worst-ever industry economic trough. But
on the other side of the Great Recession, ironically, they are likely to ask
themselves the same question they repeated at the depth of the crisis: Now what?
What should newspapers do with the increased resources they will have in a recovered economy? Where can they get the biggest return on investment inside the newspaper? Or does it make more sense not to plow any more money into the traditional departments of a newspaper business?
Newspapers in this bewildering industry crisis have become so used to cutting—and cutting in places that were once considered untouchable—that it's no sure bet they will return to bulking up any part of their businesses, from the newsroom to the carrier force.
In 2009's second quarter, many newspaper companies surprised Wall Street and each other by managing to eke out profits, despite declining advertising revenue—only because of deep cuts in manpower and material. On conference calls with analysts, several CEOs referred to those cuts as "permanent expense elimination"—suggesting that those lost jobs, standalone sections, larger page counts and bigger news holes were gone and never coming back.
That prospect alarms some increasingly vocal industry observers who fear newspapers are learning all the wrong lessons from their cost-cutting. A sizable contingent believes the absolute best place to bulk up is the segment of the newspaper herd thinned the most—the newsroom.
But other academics, economists and executives just as vocally disagree about where to devote newspaper resources, which surely will be more abundant in better days but will almost as surely be scarce compared with historical cash-flow and profit-margin levels.
Some say newspapers must begin marketing themselves like other businesses. With the recent increases in revenue contributions from circulation, that area deserves more investment than it has traditionally received, one argument goes.
Good work good for business? For others, however, there is no argument: Journalism—news content—is the principal business of newspapers, and without investment there, all is lost.
"Destroying the editorial value of an editorial product could be commended only in an asylum," noted British newspaper editor Harold Evans wrote recently in The New York Times Book Review, condemning "slash-and-burn strategies" that weaken the newsroom.
Indeed, there's a solid business argument for investing in journalism, a number of prominent American academics argue.
This summer, Esther Thorson, dean of graduate studies and research at the University of Missouri's School of Journalism, as well as Shrihari Sridhar and Murali Mantrala from Missouri's Trulaske College of Business, presented research taken from the extensive confidential financial data compiled in Inland Press Association's annual Cost and Revenue Study.
They probed the spending on newsrooms, circulation and advertising sales and developed an econometric model to see how much revenue would be affected if the mix of spending was altered.
"Could they have distributed those dollars differently to make more money with good journalism?" Thorson asks. "And the answer is virtually always yes, very consistently across hundreds of newspapers. They under-spend in newsrooms by a pretty significant amount, and they overspend in circulation—though not nearly as much as they overspend in advertising."
Specifically, their model suggests that "under-spending" in the newsroom isn't just missing an opportunity for greater revenue—it actually damages the business. Cutting back investment in the newsroom just 1% is 3 times worse than the same percentage cut in circulation or distribution, and 7 times worse than making that cut in ad salespeople. The deeper the newsroom cut, the worse the damage, this research contends.
Thorson's conclusions didn't surprise Stephen Lacy, a professor and associate dean for graduate studies at Michigan State University's School of Journalism. "Newspapers have to continue to invest in the product, because every single piece of academic research I've ever seen indicates newsroom investment is the thing you've got to do," he says.
shortchange the quality of the content and expect people to spend time with
it—particularly if you're going to charge them for it."
It's simple economics, Lacy argues. Any monopoly or quasi-monopoly—a status that newspapers enjoyed until recently—that takes ever-bigger profits, as newspapers took ever-bigger margins, and does not invest in the product invites competitors. One oft-cited example is the American car industry in the late 1960s and 1970s, which let quality slip as it maximized profits, and found a big share of its market taken away by Japanese and other foreign automakers.
That's how it works in the world of newspapers, too, says Lacy. One of his studies looked at counties where the dominant paper was a daily owned by a publicly traded chain, which typically needs to produce bigger profit margins, even if that means cutting newsroom spending. They were contrasted with counties where the dominant paper was family-owned or otherwise privately held.
"The county with
the publicly traded daily had an average of one more weekly in it than counties
with the private daily," Lacy says. "The rules of economics don't just apply to
cars—they apply to media, too."
Rick Edmonds, the former St. Petersburg Times managing editor and now a media business researcher and writer at the Poynter Institute, worries that newspapers "are flirting with the tipping point of seeming expendable to discerning readers" because of the cuts. He notes that a reader complaint arising more frequently on the Web sites of newspapers is that "there's nothing there" in the print product.
"It's just my overall sense that some of the papers are dangerously small," says Edmonds. "Maybe of necessity, since you have to live within your means. But I would hope there would be some reinvestment in the product, or at a minimum redoubled efforts to be sure what's in there is good and reflects the added-value that good reporters can bring to the conversation."
Tim McGuire, the former top editor at the Minneapolis Star Tribune, agrees the newsroom should be first in line for more investment—but the content it produces has to change. "If you look at newspaper Web sites and printed newspapers, you see story after story after story that you can find in a whole lot of other places. There's simply not enough work being done in producing value-added stories," says McGuire, now the Frank Russell Chair for the business of journalism at Arizona State University's Walter Cronkite School of Journalism and Mass Communications.
Newspapers will have to invest in both digital and print, with each a very separate product. "Obviously, anybody who doesn't see we're in an online world is an idiot," says McGuire. "But I see The Arizona Republic and the Star Tribune still selling to 300,000-plus customers every day, and that seems to my little peanut mind there's got to be a business there, and probably serious money again in a non-recessionary environment—especially if you give people something they want."
Careful spending on content is critical, agrees Missouri's Thorson: "If you put a bunch of money into the newsroom and everybody just takes a couple more trips, it doesn't do you much good."
Feeding the 'Black Holes'
As far as Earl Wilkinson is concerned, however, increasing
newsroom resources amounts to sinking more money into a "black hole." The
International Newsmedia Marketing Association (INMA) executive director says too
many editorial dollars go to coverage the consumer no longer wants: "We've
over-served them—but over-served them with stuff they don't want."
Wilkinson's not picking on editorial, he hastens to add, but on all the big cost centers of newspapers. The other "black holes," in his view: "Big printing monstrosities, preservation of departmental silos, payouts of enormous dividends, and the pursuit of large advertisers at the expense of the small."
What newspapers have to do instead, he insists, is spend more on marketing and research and development. Under-spending on marketing has been a newspaper problem for 30 years, he argues, with newspapers typically spending 1.5% of revenue, and only half of that on marketing to consumers.
"We spend just a small fraction of what we tell advertisers they should spend," says Wilkinson. "We've got an attention-deficit consumer culture. People need to be reminded of why they need to read newspapers every day."
Advertisers, too, he adds: "The game is not about building a
bigger magnet anymore, and pulling advertisers in. We've got to go and get
them." To do that, newspapers should devote 5% of revenue to marketing and
another 2% to R&D, Wilkinson advises. He also thinks spending in the advertising
department could be adjusted to pursue smaller advertisers and equip them with
self-serve technology, rather than always chasing the big accounts.
Mark G. Contreras plans for the newspaper business'
post-recession future not from the perspective of an academic or industry
advisor. He's E.W. Scripps' senior vice president/newspapers, responsible for
the day-to-day operation and strategic direction of 28 dailies and community
When Contreras is asked about where to devote resources—newsroom or advertising?—his answer recalls the old commercial for Certs breath mints: Stop, you're both right.
Scripps leaders, he says, came to that conclusion after spending a great deal of time in the past year thinking about how to organize the company in a changed media environment. One of the first steps was to bring in the restructuring firm FTI Consulting Inc. Out of that came a corporate reorganization of Scripps that was announced in August.
"We fancied ourselves pretty good at analyzing our business," Contreras says, "but their first question was, why are you guys organized the ways you are organized?" What FTI found was a company that basically replicated everything 13 times in every market. "We asked ourselves, what really is going to add enduring value, and the conclusion we came to was that it's content and advertising sales," he says.
There was another disconnect, he adds: "If you look across the company, you see 20% to 25% of our bodies are in either the news department or ad sales, and 75% are not. And that's because we're in a corporate model where the form and structure is more labor-intensive."
Over a period of time that proportion is going to reverse, Contreras says—but he cautions that the "overall pie is going to shrink." The absolute number of employees is likely to go down, especially as Scripps looks to trim expenses again in the third and fourth quarters of this year. But the percentage of the remaining workforce devoted to editorial or sales will grow, he projects.
Shrink the workforce outside of the newsroom if you must, Missouri dean Thorson says in a final word of advice—but stop shrinking the physical newspaper. And not just because loyal readers are beginning to complain.
"There's very clear evidence that advertisers, too, are very sensitive to what's in a newspaper, and what's missing," she says. "A big newspaper is like a big party—you want to be there."
After the recession, INMA's Wilkinson and Michigan professor Lacy agree, newspapers will find themselves continuing to face issues that should have been addressed long ago.
"Not to spend, not to invest would be a mistake," Lacy says. "But I wrote something to that effect 16 years ago. People didn't listen then, and I suspect they won't listen now."
September 25, 2009 – 2nd Article
Be Cautious About Giving Information to Census Workers
(Ed's Note: Everywhere there are con artists wanting to take the easy way out—they lie, cheat and steal for a living, rather than working for a living and paying taxes to support our free enterprise system. Corrupt census takers are no exception.)
With the U.S. Census process beginning, the Better Business
Bureau (BBB) advises people to be cooperative, but cautious, so as not to become
a victim of fraud or identity theft.
The first phase of the 2010 U.S. Census is underway as workers have begun verifying the addresses of households across the country. Eventually, more than 140,000 U.S. Census workers will count every person in the United States, and will gather information about every person living at each address including name, age, gender, race, and other relevant data.
The big question is
- how do you tell the difference between a U.S. Census worker and a con artist?
The BBB offers the following advice:
If a U.S. Census worker knocks on your door, they will have a badge, a handheld device, a Census Bureau canvas bag, and a confidentiality notice. Ask to see their identification and their badge before answering their questions.
However, you should never invite anyone into your home that you do not know personally.
Census workers are currently only knocking on doors to verify address information. Do not give your social security number, credit card or banking information to anyone, even if they claim they need it for the U.S. Census.
While Census Bureau
representatives might ask for basic financial information, such as a salary
range, it will not ask for your social security, bank account, or credit card
numbers, nor will employees solicit donations.
Eventually, Census workers may contact you by telephone, mail, or in person at home. However, they will not contact you by e-mail under any circumstances, so be on the lookout for e-mail scams impersonating the Census.
Never click on a link or open any attachments in an e-mail that are supposedly from the U.S. Census Bureau.
September 20, 2009
A Big City Newspaper Story That Only a Newspaperman Could Most Appreciate
(Ed's Note: Michael Sokolove is a contributing writer for the New York Times Magazine, where this article first appeared (apparently on 9-9-09). After a 20-year career in the newspaper business, I re-publish it here because newspapers are like children for those of us who have spent a good deal of our adult working life in the newspaper industry. For me, the death of a newspaper is almost like the death of a child, always taken too soon and never able to be replaced. For those who understand, read on. For those who do not understand, you have other fish to fry.)
By Michael Sokolove
On a recent trip into Philadelphia, after I exited the Interstate and coasted to a stop at the first traffic light, a man walked up to my car. He wore a black apron with a change pouch and held aloft a copy of The Philadelphia Daily News, the city’s tart, irreverent tabloid. It gave me a warm feeling.
Of course it did! I’m a newspaper guy. I worked as a reporter for The Daily News in the 1980s, and later for what we called "big sister," the sober, broadsheet Philadelphia Inquirer. Even in better times, I would have been happy to see the product being hawked, but these days any small sign of life in the newspaper industry, even just the sight of someone reading a paper, feels positively uplifting.
I handed over 75 cents for my Daily News, then drove on toward the center of the city — and U.S. Bankruptcy Court, where a hearing was soon to begin, part of an ongoing process that will determine the fate of the city’s newspapers.
Philadelphia is, of course, the city of Ben Franklin, a printer by trade who published The Pennsylvania Gazette, a newspaper, as well as Poor Richard’s Almanac. It is where the Founding Fathers drafted the nation’s most important documents — the Declaration of Independence and the Constitution.
Word of the Declaration went out to the people on July 6, 1776, when it was published in the pages of The Pennsylvania Evening Post. By the early 20th century, the raucous, elbows-out era of American newspapering, there were 10 daily papers in the city.
Now down to a besieged two, Philadelphia is a particularly good place to observe what appears to be big-city journalism’s last stand, when many of America’s metropolitan newspapers must quickly figure out how to become profitable again or face likely extinction.
The stakes extend in many directions. Newspapers remain the primary source of news-gathering in America. And unlike so many Internet "sites," they are firmly grounded in a geographical place. To read a newspaper is to know what town you’re in. As a young reporter, I covered the trial of a well-known Philadelphia mobster, Harry (the Hunchback) Riccobene, who had been tried, convicted and incarcerated numerous times previously.
I approached him during a break on the trial’s first day and asked if he was nervous. He wasn’t. "What’s the expression?" he said to me. "My record speaks for itself." I was pretty proud when that made it into print. I felt as if I’d shared a joke with a whole city, one that I knew appreciated that kind of wise guy humor.
No one would say that the history of journalism in America is one of unremitting excellence. Plenty of smaller communities, and some big cities, have never been blessed with anything better than lackluster newspapers.
Certainly The Inquirer and The Daily News, when owned by Walter Annenberg, Philadelphia’s postwar press baron, were undistinguished, in no small part because they were subject to Annenberg’s political and personal pique. (He was said to have a blacklist of names that could not appear in print, an eclectic group that included Ralph Nader, Imogene Coca and Zsa Zsa Gabor, as well as the city’s NBA franchise, when it went uncovered for a season because Annenberg had a beef with its owner.)
Annenberg’s sale of The Inquirer and The Daily News in 1969 to the Knight newspaper chain (which later became Knight Ridder) had the effect of elevating the journalism. The Inquirer established a formidable reputation by winning 17 Pulitzer Prizes between 1975 and 1990, a total second only to that of The New York Times in that period.
It is certainly less ambitious now than in its peak years, when it sent reporters to cover every big national story and maintained a half-dozen foreign bureaus, but it remains a force in its region and capable of the kind of "watchdog" journalism essential in cities like Philadelphia, which seem to breed corrupt politicians.
The Daily News, with a reduced staff that covers fewer stories, remains aggressive, and its distinctive voice is taken seriously in the city’s corridors of power.
But the journalistic worthiness of the two newspapers has not protected them. And what was seen as a possible salvation in 2006, the purchase of the newspapers by Philadelphians with deep roots in the city (the first local investors since Annenberg), has, to this point, produced only a ghastly hemorrhage of money.
The new owners put up $150 million of their own. Before filing for bankruptcy, they stopped payment on $400 million in debt. They have not, however, given up, and are locked in a standoff with lenders that Brian Tierney, the leader of the ownership group, has framed as a battle to preserve quality journalism in Philadelphia.
Tierney is the central figure in Philadelphia’s newspaper drama today — an imperfect, improbable savior who in his previous role as the city’s most prominent public-relations executive was hyper-aggressive, and often bullying, in his interactions with reporters. No one would compare him with Franklin, except perhaps in his self-confidence. But he has taken to newspapering with a convert’s devotion.
In one of our conversations, he had to stop talking for a moment as tears came rolling down his cheeks. He was telling me about a speech he gave to an adult-education group, a routine appearance until the moderator asked everyone to join hands and pray for The Inquirer and The Daily News.
"It was unbelievable they would say a prayer for us," Tierney said as he reached under his glasses to dry his eyes. "But they care. You know, it’s not like we’re some radio station thinking about switching from Top 40 to a salsa format. This is the people’s work, a public trust."
Bankruptcy proceedings in which the parties do not amicably come together on terms for restructuring debt are fluid and unpredictable. The Philadelphia newspaper case has been particularly rancorous.
A possibility exists, probably remote at this point, that the papers could just fold, making Philadelphia the winner of a dubious sweepstakes: first major American city to be left without a daily newspaper. Alberto Ibargüen, president of the Knight Foundation, which finances journalistic innovation, told me, "It’s going to happen somewhere."
What you notice first about Tierney is his stocky, strong-looking build and the restless physical energy he gives off, as if he’s always an instant away from rushing the line and tackling a quarterback. Now 52, he grew up in Philadelphia’s blue-collar suburbs but was educated at its elite schools, Episcopal Academy on the Main Line followed by the University of Pennsylvania.
His father drove a cab before starting a window-glass company; his mother worked as a hatcheck attendant. Short on money to run the newspapers, Tierney sometimes seems as if he’s trying to post Philly street cred as collateral.
In a city where some old-timers still identify their neighborhoods by the Catholic parishes they live in, he makes a point of saying that after work on most nights he drives back to the suburbs on a route that takes him past "Roman and Hallahan" — Roman Catholic and John W. Hallahan, the high schools his father and mother attended.
He has taken his public relations mind-set to newspapering. He says he thinks the industry shares too much bad news about itself — "The audience for TV news is tanking, but do you ever hear them talk about that?" — and he was an early advocate for the idea that newspapers ought to begin charging for online content, a notion that has recently gained momentum. He can be a loose cannon.
Testifying before Congress in April, he attempted a strained metaphor that involved a "dance club" charging high prices for beer but not paying its dancers, or what might be termed the content providers. "Was that example in reference to a gentlemen’s club?" Representative John Convers asked. "That’s the kind of club I meant, sir," he responded.
In bankruptcy court that morning, during an interminable recess, the door in the back of the courtroom kept swinging open as Tierney blew in and out, moving between his lawyers, a group of Teamsters-affiliated newspaper truck drivers who came to support him, and the print and radio reporters there to cover the hearing.
At one point, he shared a confidence with reporters — "This is off the record, guys," he said — then returned 20 minutes later and repeated the same thing, just about word for word, on the record.
Like many East Coast and Rust Belt cities, Philadelphia has long had what is sometimes referred to as a challenging union environment. At the newspapers, the Teamsters, whom I remember as physically imposing, tended to call the shots for all the unions, but the passage of time and the onset of job insecurity has mellowed them.
On the sidewalk outside the courtroom, a half-dozen drivers, graying and grandfatherly, held signs that said, "Teamsters for Tierney."
Inside, Jim Phelan, a Daily News driver for 50 years, chatted with Bob Warner, who has had a long career as an investigative reporter at The Daily News. "You remember that Dexter column?" Phelan asked Warner, recalling a long-ago column by Pete Dexter, now a novelist, involving some high jinks with a lynx in a suitcase.
Warner brought up an article by Bill Conlin about a hilariously profane tirade by the baseball manager Dallas Green. The two of them kept one-upping each other with their favorite stories. It felt like a wake, except that the loved one was still on life support.
Tierney’s ownership group, Philadelphia Media Holdings, purchased the Philadelphia newspapers, along with their joint Web site, (Philly.com) for $515 million. The papers had basically been orphaned by the McClatchy chain, which, after buying Knight Ridder, announced plans to immediately unload the chain’s least profitable papers, including the two in Philadelphia.
Tierney told me that under his ownership, The Inquirer and The Daily News have been operating at a profit if you exclude the debt obligations. That sounds almost comical, like a homeowner saying his household finances are in terrific shape except for the mortgage he can’t pay, but it holds out the promise that print journalism without excessive debt, in Philadelphia and elsewhere, may be a sustainable, if not an overly lucrative, business.
Tierney and his partners want to invest additional money and emerge from bankruptcy in financial control of the newspapers — in essence, they hope to buy them again, but this time for about $36 million in addition to the newspaper building and other considerations.
Meanwhile, the papers’ fortunes diminish with each passing month. Circulation for The Daily News has fallen below 100,000, down from a peak in the early 1980s of nearly 300,000, and reporters in its cavernous newsroom work amid rows of empty desks.
The Inquirer still employs more than 300 journalists, a substantial number in this era but about half of what it once had. In the six months ending in April, its daily circulation fell to 288,000 — from 545,000 in 1983 and 352,000 as recently as 2007. Advertising revenue in the last year has dropped precipitously.
Before their industry went into free fall, most Philadelphia journalists would have been apoplectic at the thought of working for Tierney. He was enmeshed in local politics, contributing money to Republican candidates and running campaigns. In the late 1990s, he successfully fought to keep an investigative article involving his best-known client, the local Catholic archdiocese, out of The Inquirer.
The reporter on the story ended up filing a defamation suit against his own newspaper and settling out of court. It was a fiasco for the newspaper, and Tierney was in the middle of it. At Philadelphia Media Holdings, Tierney accepted a pay raise and a $350,000 bonus right before the bankruptcy filing — and after employees agreed to give up their own paltry union raises.
It is a sign of the times that most of those at the newspapers seem to accept and even embrace Tierney, preferring him to Knight Ridder in its last years of ownership; to the bankers they still might work for; and certainly to the prospect of the whole enterprise going belly up.
It doesn’t hurt that journalists are wired to enjoy a good show and that Tierney provides one. A couple of months ago, he staged a big barbecue in the papers’ back lot and put out an advertising-packed special section to celebrate The Inquirer’s 180th anniversary — a less-obvious milestone than, say, a 175th or 200th anniversary.
"He’s like our P. T. Barnum," Craig McCoy, one of The Inquirer’s most respected reporters, told me.
Tierney gave a tour to Annenberg’s widow, Leonore, not long after taking over the newspapers. They sat in her husband’s old office, now Tierney’s, on North Broad Street, looking out over the city skyline. "Walter had nicer furniture," she told him. He also had a more favorable business climate, operating long before Internet powerhouses like Craigslist began to gobble up revenue from classified ads.
It was an article of faith among this generation of newspaper publishers that once they finally "got" the Web and built dynamic, advertising-friendly Web sites, they would prosper. But display advertising never migrated in hoped-for numbers to newspaper Web sites. Then the recession hit, and what had already been disappointing growth in online revenue stopped. For the 12-month period ending in June, the Philadelphia newspapers attracted $12.9 million in online revenue, down from $17.3 million in the same period a year previously.
There is every reason to believe that the big, grab-bag metro daily that mixes its news in with comics, advice columns, obituaries and recipes, and undertakes an expensive manufacturing and delivery operation each day to put the product on the street, will pass into history.
Among the problems faced by Tierney and other publishers is that many of the big thinkers on the periphery of their industry — academics, Web entrepreneurs, former journalists with the wisdom of hindsight — have already moved on. They’re done with paper, ink, trucks, fuel, the whole era.
This drumbeat, a relentless declaration that print is doomed, may be a problem in and of itself, making it easy to cast anyone who wants to save print as a Luddite. In a widely read essay earlier this year, Clay Shirky, a professor at New York University and an Internet consultant, suggested embracing the current moment of flux.
"That is what real revolutions are like," Shirky wrote. "The old stuff gets broken faster than the new stuff is put in its place. . . . When someone demands to know how we are going to replace newspapers, they are really demanding to be told that we are not living through a revolution. They are demanding to be told that old systems won’t break before new systems are in place."
But parts of the system are actually not broken at all. Journalists still know how to gather news. And the Internet is a step forward in disseminating it. What’s broken is the pipeline that sends money back to where the content is created. Most of it is available to readers online, free, including on newspapers’ own Web sites, where it is not sufficiently supported by advertising.
Newspaper Web sites do draw traffic ("eyeballs"). In April, when the beloved voice of the Philadelphia Phillies, Harry Kalas, collapsed in the broadcast booth and died just before an afternoon game, Philly.com quickly put up a comprehensive package, including a photo gallery, articles from the archives and a space for readers to write in their memories.
The site got 3.8 million page views that day, nearly double its average. "The Web is a big part of us being the dominant news source in the region," Tierney told me. "We want it to be what people turn to for breaking news, or to celebrate a big event or to share their sorrow. And that’s already happening."
He is under no illusion, though, that the Web site will come close any time soon to supporting the news-gathering of the 400 journalists he employs. For that, he has the print editions. (The joint Web site for The Inquirer and The Daily News accounts for just 6.5 percent of the company’s advertising revenue, a little below the industry average. On it own, it would support a fraction of the current staff, maybe just a few dozen journalists.)
Tierney has ordered a stop to the practice of putting exclusive Inquirer and Daily News articles up on Philly.com the night before their publication in print. This extends even to reviews. "Are we going to get beat on a restaurant review?" he said. "I don’t think so."
As soon as possible, he wants to begin charging for online content. As he told me this, he banged a bagel on a conference table, which sounded like a rock as it hit. "You hear that?" This bagel stinks, he said. "It’s got the same consistency inside and out, but if you went down to our cafeteria, it costs like $1.25. That’s what people pay for stuff like this, so you mean to tell me I can’t get them to pay that for online access to all the incredible stuff in The Inquirer and Daily News online? People who say that all this content wants to be free aren’t paying talented people to create it."
In an industry currently marinating in self-doubt, Tierney has the appeal of clarity. He may not ultimately be right, but he’s emphatic. Nothing, in his mind, is in place to match the still-powerful newspaper engines. Certainly not television and radio, whose news operations in Philadelphia, as in most cities, largely piggyback on the newspapers. And not blogs or the nascent foundation-supported journalism springing up in Philadelphia and elsewhere.
"We do the brawny work," Tierney said, sounding like the CEO of some smokestack industry. "The Web efforts, they add something. I congratulate them. Let a thousand flowers bloom. But if somebody thinks in any short term, or even medium term, that the answers are those things, they’re kidding themselves. I know I sound like a heretic in that I won’t come out and say, ‘They’re the future.’ But they’re not. The brawny work is what we’re doing, and the brawny vehicle to carry it is the printed product."
I met with Alberto Ibargüen, the Knight Foundation president, at the Newseum in Washington, where he serves as chairman — and where every day, at street level, a sampling of front pages from around the nation is displayed. I looked at them on my way in, and even some of the names sounded like relics from another era: The Elkhart Truth; The Santa Fe New Mexican; The Worcester Telegram and Gazette.
Knight has endowed journalism professorships at universities around the nation, and the health of newspapers has long been a focus of its philanthropy. But as Ibargüen explained it, that has changed — the foundation now seeks to preserve news and information, as distinct from saving newspapers. Knight has been a primary source of financing for MinnPost.com in Minneapolis, and the Voice of San Diego, the two most advanced Web-only local news operations.
It recently gave a grant to Spot.us, a nonprofit start-up that invites citizens to decide what investigative stories are worthy of its financial support — a concept that seems almost designed to send a shiver up the spine of traditional journalists. "Why should an editor have all the fun on deciding what writers are going to do?" Ibargüen said. "This invites journalists to pitch their stories on a Web site and have citizens decide what’s valuable to them. . . . They might say, ‘Here’s $3,000 to do an investigation of the school superintendent.’ "
Ibargüen and others involved in the invention of new-age journalism speak a language I’ve never heard in newsrooms. When I met with Jan Schaffer, director of the Knight-financed J-Lab at American University (and formerly the business editor at The Inquirer), she referred repeatedly to "the media ecosystem."
She said that "news is a process, not a product" and talked of "big-J journalists," those at newspapers and other traditional outlets, and "little-j journalists," citizens who create their own journalism. She said that one of her favorite new outlets is a Web site covering suburban Chappaqua, adding that it was "run by three stay-at-home moms."
Many working journalists in the country regularly check a Web site known to most as "Romenesko" (after its creator, Jim Romenesko), which aggregates industry news and these days consists mainly of layoffs and other dire news. It can be excruciating to read.
Just this year, The Rocky Mountain News perished. The Seattle Post-Intelligencer became a Web-only publication with a tiny staff. Detroit’s daily newspapers are now delivered just three days a week. The Boston Globe, owned by the New York Times Company, and The San Francisco Chronicle, owned by Hearst, each went through near-death experiences as their owners won labor concessions after threatening to shutter the papers.
Smaller newspapers, those with circulations under 50,000, are considered the healthiest part of the industry. "They’re not making 30 percent profit margins like they once did, but most of them are doing fine," John Morton, a newspaper analyst who has followed the industry for decades, told me.
Most analysts predict that the papers with a national profile and brand — The New York Times, The Washington Post, The Wall Street Journal and USA Today — will find a way to survive and stay in print. (It must be noted that few can say exactly how this will happen.)
The most endangered segment is the one occupied by The Inquirer and other big metro papers that once dominated their regions, in some cases had national and even international reach but now struggle to fully staff bureaus in their state capitals. Among those currently in bankruptcy are the papers that are a part of the vast Tribune Company, including The Los Angeles Times, The Chicago Tribune, The Baltimore Sun, The Orlando Sentinel and The Hartford Courant. What the bankrupt and most at-risk papers have in common is that they recently changed hands and the new owners took on debt — immense debt, in the case of the Tribune Company, which listed obligations of $13 billion when it filed for bankruptcy in 2008.
The newspapers that emerge from bankruptcy should have a better chance at survival, but they’ll be different. "Bear in mind that there will be an economic recovery at some point," Morton said. "But I suspect the big metros have lost a substantial amount of their advertising forever. When they return to profitability, it will be at a lower level, and the papers will be diminished in size and journalism."
Much of what will be sorted out in the coming years is the extent to which news will continue to be produced by professional journalists. In May, I attended a meeting of the Knight-sponsored "Commission on the Information Needs of Communities in a Democracy," an impressive group led by the former United States solicitor general Ted Olson and Marissa Mayer, an executive at Google.
Much of the conversation was abstract and airy, but even within that, a kind of clash in worldviews was apparent. One commission member, Danah Boyd, a blogger and fellow at Harvard’s Berkman Center for Internet and Society, expressed her admiration for "journalism by the public, for the public."
She advocated for the need to have universal high-speed access for young people who blur the lines of art, research and news and "like to mash it up and mix it up" — and spoke with passion about how on her way to the airport in Boston she learned more from her Twitter feeds about a traffic backup than from the local all-news radio.
John Carroll, a fellow panelist and a lion of the traditional news business — he edited The Baltimore Sun and The Los Angeles Times — seemed to shift impatiently through much of the all-day meeting. When he spoke, he apologized for not seeming to be sufficiently forward-looking. He said the country needed "a national base line of originally reported news . . . the kind of news produced by professional reporters." Just to be clear, he added, "By reporters, I mean people who go out and dig stuff up."
In January, the Knight Foundation awarded a $200,000 grant to The Philadelphia Public School Notebook. Its editor, Paul Socolar, may be something like the journalist of the future. He is earnest, dedicated to a cause, foundation-financed and, to this point, read by a narrow audience. I accompanied him to a press briefing for the rollout of the Philadelphia school district’s $3.2 billion budget. He quickly imbibed a thick handout filled with charts and long columns of numbers and jotted down questions, which seemed a bit sharper and harder to answer than those asked by the reporters from the city’s two dailies.
The Notebook actually started publishing in 1994, and Socolar, who had two children in the public schools, became its editor five years later. During his tenure, Socolar told me, The Public School Notebook refined its mission: its editors and contributors still consider themselves advocates for change, he said, "but it became equally clear to us that we have to do reporting, have journalistic standards and publish real news stories."
It has largely achieved that.
The Notebook, a five-times-a-year print publication, breaks stories and is notably well written. The grant was to improve its Web site and, as Socolar put it, start a "two-way conversation" with readers. But a broad audience and impact, two goals of traditional journalism, have been hard to attain. Socolar acknowledged that The Notebook’s core readers are insiders — principals, teachers, district administrators and highly engaged parents. "There is a jolt you can get out of an Inquirer story that I know we don’t," Socolar said.
The new money helped energize The Notebook’s Web site, but it will take time before it generates more traffic and hosts a dynamic dialogue. "It’s still pretty modest," Socolar said. "About 400 visitors a day — 500 or 600 on really good days. And some of those folks are stumbling upon it because they’re looking for the movie ‘The Notebook.’ "
In Philadelphia, the Knight Foundation has also supported the Web site Plan Philly, a nonprofit affiliated with the University of Pennsylvania that reports on planning and zoning at a level of detail never approached by the city’s newspapers, as well as the city’s version of EveryBlock.org, a "hyperlocal" that provides microscopic, data-driven information on segments of the city — home sales, crime, health-code violations at restaurants and so forth.
A proliferation of blogs and Web sites cover the arts, sports and food scenes in Philadelphia. A Web site called the Media Mobilizing Project, also underwritten by the Knight Foundation, seeks out the stories of immigrants and other minorities, which newspapers, even at their best, rarely did a good job of telling.
One of Tierney’s first moves was to hire Bill Marimow, a two-time Pulitzer winner when he was an Inquirer reporter, as the paper’s top editor. Marimow, who is 62, had moved on to Baltimore, where he edited The Sun, then to Washington to serve as managing editor for news at National Public Radio.
His return to Philadelphia amounted to a doubling down on labor-intensive, expensive-to-produce, hard-news journalism. It’s not at all clear there’s a business plan in that, but if The Inquirer goes down, it will do so with guns blazing.
In March, Vince Fumo, a longtime state senator from South Philly and power broker in the state capital, was convicted in federal court in a massive public corruption scheme. The main charge involved millions of dollars given to a nonprofit he controlled from donors who sought to remain hidden, including PECO Energy, a state-regulated electric utility that secretly contributed a whopping $17 million. It was Inquirer reporters who first uncovered the conspiracy and identified the sources of the money, and the federal prosecutor, in his closing argument to the jury, took the unusual step of crediting them.
"It only stopped for one reason," Robert Zauzmer, an assistant U.S. attorney, said. "It stopped for the same reason that everything else stops in this case. The publicity starts in The Philadelphia Inquirer . . . and that was the end of the scheme."
The crisis in newspapers is sometimes framed as something that matters mainly to journalists, but it is of course more than that. My conversations in Philadelphia showed a concern far beyond the newsrooms. I asked Zauzmer if he had in mind the papers’ imperiled status when he addressed the jury. "I did, and I was happy to have the opportunity to do it," he said, adding that he would not have done so if there was not also a strategic reason for crediting The Inquirer.
The publicity caused Fumo to try to cover his tracks, he said, and those actions figured into some of the criminal charges. ("The Inquirer will go absolutely BALLISTIC if they ever really find out," Fumo, urging associates to withhold information, wrote in one e-mail message that came out at trial.)
Marimow called my attention to some recent investigative triumphs — a story on a CEO who stole a half-million dollars from his charter school, was charged criminally and had just pleaded guilty; another on a large number of city employees who failed to pay their property taxes. As we talked, he showed me letters and printed-out e-mail from readers responding to emotionally resonant stories. He called them "the irrefutable evidence of the beauty, the importance and the significance of the newspaper."
One letter was in response to an article about a longtime supermarket employee who was fired after he forgot his reading glasses one day and took a pair from a shelf to do inventory. "I want to thank you for your article on Bob Martucci," a reader wrote. "Thank God for the press." Another letter came after an article on the funeral of a slain police officer who was buried with a sonogram of his unborn child. "I sat in a park in midmorning with a Wawa coffee and the paper," it said. "Within minutes I had tears slowly running down my cheeks."
With The Inquirer and The Daily News teetering, many in the city have hoped that the Pew Charitable Trusts would emerge as a white knight. Founded with money from the Sun Oil fortune, Pew is Philadelphia-based and prominent, nationally, in studying, supporting and in various ways participating in the media.
Pew’s managing director for information initiatives, Donald Kimelman, spent two decades at The Inquirer, including four years as its Moscow correspondent. He told me that the Pew did, indeed, look seriously at giving financial backing to a Web-only news operation in Philadelphia but decided against it for a reason that should catch the attention of anyone hoping that foundations are the future of muscular news-gathering: It did not want to give birth to a long-term money drain.
The foundation commissioned a study three years ago, when the Philadelphia papers were passing out of Knight Ridder’s control and some prospective buyers seemed likely to make drastic cuts. "Everyone was thinking of the worst-case scenario," Kimelman said, "and we had to ask ourselves, ‘Is there a role for us to play?’ "
The news site was to be seeded with nonprofit funds but with a goal that it could eventually subsist on advertising revenue. Kimelman concluded that the projections were too optimistic to support even the 30 or so journalists envisioned — and that was before the market for online advertising tanked. "We didn’t want to be in it for two or three years," he said, "and then instead of the for-profit publisher laying people off, we’d be the nonprofit doing layoffs."
The other reason the plan died was that Brian Tierney and his local partners — the largest is Bruce Toll, a founder of the home builder Toll Brothers — won the bidding for the newspapers. "There was some thought that we should be the heroes," Kimelman said. "But we were not going to compete with local ownership. When the Tierney group came in, they became the local heroes."
Tierney and his partners are still operating The Inquirer and The Daily News, but who ultimately owns them is to be determined in bankruptcy court. Some of the banks that initially lent money for the acquisition in 2006 have taken their losses and departed, selling the loans at deep discounts. The owner of the largest share of debt in the newspapers is Angelo, Gordon & Company, a New York firm specializing in "distressed debt."
That firm is also a player in the Tribune Company bankruptcy; in the management of The Minneapolis Star Tribune, which is expected to emerge soon from bankruptcy; and in American Media Company, which publishes The National Enquirer and The Star. A banker at the firm, Bradley Pattelli, is involved in all those properties, making him a highly influential if little-known figure in American newspapers. (I talked to Pattelli twice on the telephone, but he would not speak on the record. At his request I e-mailed him questions, but he did not respond to them.)
The reorganization plan Tierney files in bankruptcy court will offer lenders about $36 million — raised from the initial group as well as some new investors — along with the Inquirer Building, just north of Center City, and its surrounding real estate. The newspapers would either become tenants or move to another location. The lenders will follow with a proposal of their own. They are likely to place a higher financial value on the newspapers, although no one disputes that they are worth far less than the money owed.
Angelo, Gordon, however, appears to want to play a significant role in owning and operating the papers. Tierney contends that the company would quickly close The Daily News and, over time, cut costs in such a way as to decimate The Inquirer. It’s impossible to know. (And, depending on which way the economy turns, Tierney himself, who has already presided over substantial layoffs, could find that he has to make further cuts.)
What is clear is that beyond the hardheaded, dollars-and-sense negotiations, Tierney is making an appeal based partly on emotion. He’s the Philly guy protecting a local resource — and the future of print journalism in a city with a history of, and a continuing need for, great newspapering.
Like Marimow, he kept directing me to examples of recent articles, which he had spread out on the table. One was an investigative series on an arcane city agency discovered to be granting huge tax cuts to insiders.
"This isn’t cheap to do," he said, holding up a newspaper with the big front-page headline, "It’s Who You Know." "Think about the cost of it — the writing, the editing, even the newsprint. But I’m proud of it. It’s what we’ve got to keep doing. People feel that here. I think even our drivers feel like, We’re not bringing in doughnuts. We’re bringing in The Inquirer and Daily News."
May 23, 2009
Here Is One Reason Why Newspapers Have Become Less Relevant to Readers
Copyright © 2009 Ed Bagley
There was an 8-year period of my life when I owned and operated a community publishing company that published a weekly newspaper among other print products.
I made it my business, as the editor and then publisher, to separate news facts from the opinion expressed in our editorials and by our columnists. Some of my paid subscribers did not like the fact that I did not censor my columnists, so I wrote the following personal column in 1977 to express my position on the matter.
I believe that what I had to say then is even more relevant today given the demise of the newspaper industry, and points up one critical reason why newspapers have become less relevant in our lives. Personal journalism simply has no place in news articles and yet it dominates the front pages of major newspapers today.
For the record, I divested myself of my newspaper property in the early 1980s and the publication in question is no longer in existence. Here is what I wrote in 1977:
"If I couldn't stand the heat, I never would have gone into the kitchen 17 years ago when I decided newspapering was fun.
That was back in the day when I slaved over every story because I thought it was the most important thing written since the turn of the century. Accuracy and excellence were my bywords then. I held all stories close to my chest in those days; all inexperienced journalists still do.
When you are young and have ideas about what's wrong with the world and people, you can't stand to have anyone change a single word of your copy. Your ego won't allow you to think that people aren't interested in what you have to say. That was back then; now I know different.
Oftentimes people aren't interested in what you have to say; more often than not, they are interested in finding someone who will listen to what they have to say. And so the rhetoric goes on. Some of it is good; some is not so good—that's my subjective opinion. Yours will no doubt differ. And that seems to be the name of the game lately at The Lacey Leader.
We currently carry a number of columnists who have some pretty definite ideas—including Ken Balsley, Henry Gay, Ron Woodbury, Glen Cole and another addition this week, Joe Dubey. These columnists put their convictions and observations into print because they have feelings and thoughts they want to share with you. They don't ask that you agree with their every word; they would like you to read their thoughts if you are interested.
Despite what some readers think, none of these columnists represent the opinion of The Lacey Leader—that's my prerogative as publisher and I don't intend to share it with any of our columnists unless they start paying the bills.
I do give them space to share their ideas because I do not want a dull paper. Dull papers do not sell and I am in the business of selling papers. I am also in the business of moving information and opinions.
Some people think I'm the wisest person to ever step off the boat. They want me to censor my columnists. I don’t and won't do that for the same reason that I don't and won't censor YOUR opinion.
I don't publish this paper to sit in judgment of my contributors—whether they are paid employees of The Leader, voluntary columnists or readers who write letters to the editor. I am neither smart enough nor rich enough to censor my writers and readers. Besides, I enjoy them.
The fact that they have a place to express their ideas is enough for me.
That's what we are about at The Lacey Leader—a community forum for ideas and information. We don't publish a Bible—just a lot of chapters in an endless book.
I try to remember that not everyone is as smart as they think BUT it increases communication. Some people laugh when they read our material. Others cry. I am not so concerned with a person's reaction to our columnists as I am to the fact that they do or do not react.
I try to remember that the opposite of love is not hate—as you might think—but indifference. I can handle hate; I can't handle indifference. I enjoy living more than existing.
If our columnists jar you from time to time—good.
I oftentimes do not agree with our columnists. I try to reject their ideas without rejecting them as people. I guess that's the humanity in me. And why newspapering is fun. It's a people business. And I like people. I don't know of anything more interesting than people. And their opinions."
May 2, 2009
Struggling Workers Want to Know
Who Should We Really Blame for the Unfair, Excessive Pay of Underperforming Corporate Chief Executive Officers?
Copyright © 2009 Ed Bagley
With the collapse of our America economy and ongoing recession, hardly a day goes by without reading or hearing about an underperforming chief executive officer of a Fortune 500 company getting bounced out on his ear.
On the sideline, workers and investors of the company are cheering wildly and hoping for a better replacement. Then they read that the incompetent CEO that ruined the company and its stock value is walking away with a sweet going away gift of millions in compensation while the company is losing money and struggling to survive.
According to an analysis done by the Associated Press, more than half of all corporate CEOs in America make $8.3+ million a year. Another analysis showed that CEOs make 179 times as much as a rank-and-file worker.
The golden parachutes are beyond ridiculous. When the offending CEO is getting $20 million for running the company into the ground, it makes no sense whatsoever.
Please, do not be so lame as to suggest that it is written in his contract that he gets the payout of a lifetime for screwing up. Who exactly allowed that clause in the contract to be written? It surely was not done by the CEO's authority. You could and should blame the Board of Directors for such a stupid clause when they have no idea of how the CEO would actually perform.
Common sense would dictate that it makes sense to pay bonuses to CEOs for producing positive results, not negative results. Any other arrangement borders on huge risk because there is no guarantee that a CEO will produce positive results, especially if he is walking into a distressed situation at the outset.
Should the CEO in a distressed situation lift the company to profitability and excess profit, he should share in the success. If he then takes the company down the tube with his policies and decisions in the future, there is no way he should be compensated for failing in the process. This would be like burning down your house to get rid of a rat.
So why does this excessive CEO compensation happen? You can lay it right at the feet of the Board of Directors of the company. There is no way a CEO of a major corporation should be hired without the blessing of the members of the Board of Directors.
It is the Board of Directors who are legally charged with the financial viability of the company they are representing. They are the ones who are ultimately accountable; the CEO is responsible for the success or failure of the corporation. The CEO serves at the pleasure of the Board members; the Board members do not serve at the pleasure of the CEO. This is as it should be.
So I keep asking myself two pertinent questions:
1) Are the members of the Board of Directors merely wimps with no backbone to stand up to a controlling, manipulative, strong-willed, egomaniacal CEO? I chose to think not, certainly not in the vast majority of boardrooms.
2) How then is it that these same Board members approve such stupid, outlandish contracts knowing the CEO could run the company into the ground and decimate the value of its stock? Try this answer on for clarity of thought:
What if the offending CEO is allowed to escape accountability with a $20 million, $40 million or $200 million exit bonus. What if each Board of Directors member has been set-up with a secret Swiss bank account, and each director received a kick-back from the CEO of $1 million, all tax free and hidden by being deposited directly by a CEOs dummy corporation to a Swiss bank account from an offshore account.
I believe this is exactly what might be happening in these kinds of situations. Just as vendors at baseball games can sell out of hot dogs, so can corporate board members sell out the company and its stockholders on their way out.
March 17, 2009
Targeting Low Life Scum
Don't Let Me Catch You Today, or I Will Willfully Kick Your Sorry Ass
Copyright © 2009 Ed Bagley
Most people that know me and see me find me to be a very even-tempered guy in control of himself and the situation. But there are days, and this is one, where me Irish temper gets riled up.
It is sad that on St. Patrick's Day I should not be in the best of moods because it is my intention to go straight to O'Blarney's in Lacey, Washington and drink Irish whiskey and eat a corned beef sandwich after finishing this tirade.
But let me make it very clear: Don't let me catch you today, or I will willfully kick your sorry ass. And who is it that I am talking about? I am glad you asked.
Let me start by saying that some of us are lifelong newspaper readers. We even buy the paper at the newstand on the corner, like the Seattle Post-Intelligencer for example. A friend of mine says we may be only 2 of 10 people left west of the Mississippi River to actually read newspapers every day.
Ah yes, back to the business at hand. I start my day by going to me local store to get a copy of the Seattle P-I today and there is none left. Normally, there are plenty of copies left, but not today. You see today is a commemorative edition because it is the last paper edition of the P-I that will be published.
After 146 years of bringing the news to the great city of Seattle, Washington the P-I has died and will be re-born as the largest U. S. daily to try an online-only format. It is a very sad day for the newspaper industry and an even sadder day for the talented P-I writers and support team that will lose their jobs in the change of media delivery.
So just how bad will this decline be for daily newspapers that serve our metro cities around the country? Believe me, within 12 to 18 months these major daily newspapers will go out of business as print media publications:
The Philadelphia Daily News, the Minneapolis Star, the Miami Herald, the Detroit News, the Boston Globe (yes, the Boston Globe which is owned by the New York Times), the San Francisco Chronicle, the Chicago Sun Times (Yes, Virginia, There Is a Santa Claus), the New York Daily News, the Fort Worth Star Telegram and the Cleveland Plain Dealer.
And also the New York Times is on very thin ice as the newspaper industry problems become even more heated. The New York Times borrowed $200 million from the Mexican financier Carlos Slim (the richest person in Mexico and probably among the top 3 richest people anywhere—that includes Bill Gates and Warren Buffet) at 14% interest.
Why? Because no other financial institution would loan them any money.
The big question is: How can the New York Times repay a $200 million loan at 14% interest when it is not even making money. You can only retire debt with net profit, and the New York Times has none (maybe on paper but not for real). If they did, why did they need to borrow $200 million to stay afloat?
Anyway, I am distracted because shutting down a major newspaper is like losing a child to me.
I could not buy a copy of the Seattle Post-Intelligencer today because some low life got up at 5 a.m. and went around to every major grocery store and convenience store in my neck of the woods and bought up every copy of today's commemorative edition. This same low life person will now begin to float these special editions on eBay at probably $25 or more per copy.
This person probably does not even read newspapers, and likely has never read or appreciated the Seattle Post-Intelligencer.
Again, if I catch you today, I will willfully kick your sorry ass. This is not entrepreneurship at work, this is scum of the lowest order. If this same kind of person had the only cure for cancer, they would sell it to the highest bidder and let thousands of children with cancer die.
They most certainly are not Irish. There are only two kinds of people in this world—there be the Irish and those that wish they were Irish. Thankfully, God will take care of both in the end.
Now I am going to drink Jameson whiskey at O'Blarney's and I am not in a good mood. I just may be in a fight before the day is over. If I see someone with 15 copies of the Seattle Post-Intelligencer on the table they are sitting at, I may go over and punch their lights out.
July 24, 2008
Stupid Is as Stupid Does
America's CEOs Could Do Worse Than Heed Warren Buffett's Advice
© 2008 Ed Bagley
Sometimes it seems obvious that too many chief executive officers at America's biggest corporations make really stupid decisions that are driven by greed and avarice rather than sound business practices.
Take for example the two mortgage giants Fannie Mae and Freddie Mac, one of about 90 banks that are in financial trouble—Wachovia—and a former automotive giant that is in serious financial trouble—General Motors.
Our total national debt in July 2008 was $9.5 trillion. The assets of Fannie Mae and Freddie Mac total $1.4 trillion and the outstanding mortgage debt of both companies in March 2008 totaled more than $5 trillion, or 48% of the United States total mortgage debt of $10.6 trillion. Craig Ferguson would react to this with an "I know" on his late night talk show!
Don't even mention the phrase "bad subprime mortgage packages" at the water coolers in Fannie Mae and Freddie Mac. Word on the street is that it may cost $25 billion to rescue these two mortgage giants from poor thinking and stupid decision making. The government will do so, not with government money but with your hard-earned tax dollars.
Let me say that again in clearer terms: we, not our government, will bail these two troubled mortgage giants out with our tax money.
Wachovia Bank, the nation's 4th largest bank by assets, says it lost $8.86 billion in the second quarter, and will cut 6,350 jobs after losses tied to mortgages skyrocketed.
You need only to mention General Motors when talking about long-term decline. GM's workforce went from 255,000 employees in 1995 to 139,000 in 2007, a 54% reduction in a dozen years. GM's market share went from 32.6% to 23.5%, a 28% drop in a dozen years. GM's stock went from $38.88 to $9.84, a 75% loss in value in a dozen years.
Is General Motors one of the worst run companies in America? Nah, General Motors is just one of the biggest companies with really stupid managers and a lame board of directors.
So what would Warren Buffett, the world's new richest man, have to say about these negative business consequences? I do not have to call him in Omaha, Nebraska to find out.
After reading and studying The Tao of Warren Buffett by Mary Buffett and David Clark, Warren would at least say this: "The chains of habit are too light to be felt until they are too heavy to be broken." He was quoting the English philosopher Bertrand Russell.
In short, bad business habits don't become apparent until it is too late. When you see cost cutting after your business is in trouble (Wachovia Bank and General Motors are prime examples), you know the cost cutting should have been done long ago, but the executives were too busy counting their personal assets rather than taking care of the business in their charge.
Businesses that become bloated with unnecessary expenses in times of plenty will sink the fastest when the business climate turns worse.
Fannie Mae and Freddie Mac escape drastic measures because of their relationship to our government. At best, they are private corporations with special privileges, much like the United States Postal Service. They are expected to be self-sustaining, to make money and pay their own way, but will be bailed out of their stupidity by the government in times of need.
Warren Buffett might also say this: "When a chief executive officer is encouraged by his advisers to make deals, he responds much as would a teenage boy who is encouraged by his father to have a normal sex life. It's not a push he needs."
All of these executives would be better advised to read and study what Warren Buffett has to say, rather than showing off their own inept talent as a leader and executive. They are only where they are because a collective board of directors is dumb enough to pay them millions of dollars for their bad advice and guidance.
Read some of my other controversial articles on Business in America—because they are good—on other hot topics, including:
"So Why Should I Subsidize Any Banks Because of Their Greed and Incompetence?"
"If USA Families Ran Finances Like Their Government, They Would Go Bankrupt"
"ISP Providers Decide to Do the Right Thing Rather Than Stuff Their Pockets With Money"
"Washington's Hottest Political Issue Pits PI Attorneys and the Insurance Industry"
"Too Many Overpaid CEOs Are Really Smooth Operators Who Produce Little"
July 16, 2008
They Weaken the Economy
Too Many Overpaid CEOs Are Really Smooth Operators Who Produce Little
Copyright © 2008 Ed Bagley
When you understand that the average CEO in America makes 400 times what the average worker makes, you could get upset. When you have an environment where chief executive officers of companies can rack up a pitiful financial performance and still continue to rake in millions of compensation for being essentially incompetent, it is even more upsetting. What are we to do?
Now imagine if you were a stockholder of that same company as well as an average American worker. Many employees do put a part of their 401K retirement investment funds into stocks of the company they work for, or another company. Now imagine that you are an Enron employee. Go ahead, get really upset.
If you worked for Enron you would already know what I am about to share with you.
Enron was an American energy company before its bankruptcy in late 2001. Enron claimed to be one of the world's leading electricity, natural gas, pulp and paper, and communications companies, claiming revenues of $111 billion in 2000.
Using the words "claimed" and "claiming" in the prior sentence was not an accident. Enron was about to explode. Enron executives had fooled a lot of investors. Even the prestigious business magazine Fortune named Enron "America's Most Innovative Company" for 6 consecutive years. By the end of 2001 it was clear that Enron's financial condition was sustained substantially by an institutionalized, systematic and creatively planned accounting fraud.
On a broader scale, it became fashionable in corporate America to "cook" the books in an attempt to raise stock prices to fuel exorbitant payouts for executives who were purposefully lying, cheating and stealing from customers and investors (stockholders).
This practice continues in corporate America today on a hopefully much lesser scale by those who have not already been caught.
Imagine again an environment today where chief executive officers of companies who appear to be operating legally can rack up a pitiful financial performance and still continue to rake in millions of compensation for being essentially incompetent on the job.
In June of this year the Associated Press released an article identifying the 10 highest-paid CEOs for 2007 at Standard & Poor's 500 companies. The total pay figures were rounded and were based on the AP's compensation formula, which added up salary, perks, bonuses, above-market interest on pay set aside for later, and company estimates for the value of stock options and stock awards on the day they were granted last year.
Here are the 10 best-paid chief executives for 2007:
1) John Thain of Merrill Lynch - $83+ million.
2) Leslie Moonves of CBS - $67+ million.
3) Richard Adkerson of Freeport-McMoRan Copper & Gold - $65+ million.
4) Bob Simpson of XTO Energy - $56+ million.
5) Lloyd Blankfein of Goldman Sachs Group - $53+ million.
6) Kenneth Chenault of American Express - $51+ million.
7) Eugene Isenberg of Nabors Industries - $44+ million.
8) John Mack of Morgan Stanley - $41+ million.
9) Glenn Murphy of Gap - $39+ million.
10) Ray Irani of Occidental Petroleum - $34+ million.
And you thought Alex Rodriguez of the New York Yankees made a lot of money at $27.5 million a year! Make no mistake, business rules and it is not even close.
So let's look at John Thain and his $83.1 million in compensation from Merrill Lynch for 2007. After all, 83.1 million is approximately $1.6 million a WEEK in compensation, or more than $300,000 a DAY for a 5-day work week.
If I were a Merrill Lynch stockholder (and I am not), I would be looking at the 2007 financial statement, which shows Merrill Lynch with a net loss from continuing operations of $8.6 billion (that is billions, not millions). Merrill Lynch had net earnings of $7.1 billion in 2006, so that is a difference of $15.7 billion in one year on the wrong side of the ledger.
Well, I am sure that Mr. Thain has a smooth answer for his performance, whatever it is. I hardly think his answer merited $83.1 million in compensation for going backwards.
If Thain's $83.1 million in annual compensation sounds really high to you, let me introduce you to Chief Executive Stephen Schwarzman of Blackstone Group LP, who received $400 million in compensation in 2006. Since there are at least 365 days in a year, that averages out to more than $1 million a DAY in compensation. Yes, some folks make a lot more than others.
Another glaring example is Bob Nardelli, who apparently did not even make the top 10 best-paid executives for 2007. He nonetheless was given a $210 million exit package (in plain language I think that means fired) by Home Depot.
Nardelli was considered a superstar CEO when Home Depot hired him 6 years earlier. All Nardelli managed to do in his 6 years was watch the company stock languish and lose market share to Lowe's. Yeah, that Nardelli is really a top executive.
"There are certain instances where pay is so excessive and the breach of trust that the board has with shareholders is so terribly broken, it's an outrage," said Rich Ferlauto of the government labor union AFSCME. Well said, Rich.
And so here we are in 2008: The subprime mortgage debacle driven by the greed and avarice by corporate executives has our economy in a free fall—Bear Stearns (a major investment banker and securities and trading brokerage firm) and IndyMac (a bank) have collapsed, Freddie Mac and Fannie Mae are in serious trouble, dozens of other banks and financial institutions are on thin ice, gas prices have skyrocketed out of sight, and food costs are rising faster than a flooding river.
Is all of this the fault of Thain and Nardelli? Of course not. Thain and Nardelli are simply examples of CEOs that are overpaid and underachieved greedy executives.
It may in fact be the failed system of many corporate CEOs and a lack of government regulation that led to America's current slide into an official recession. If it is, big-time executives and politicians have some major amends to make. After all, they get big salaries and perks to run the show, we are just the workers who suffer from their greed and lack of judgment and incompetence.
Read my articles on last year’s football season, including
“Famous Quotes by Vince Lombardi During Football's Annual Bowl Season"
“Famous Quotes by Knute Rockne During Football's Annual Bowl Season"
“Famous Quotes by Lou Holtz During Football's Annual Bowl Season"
"How to Predict When Teams Are Overrated and Due for an Unexpected Loss"
"The Sagarin Ratings: What They Are, How to Read Them and What to Do With Them"
and my 14 consecutive weekly wrap-up articles on the 2007 College Football Season as well as wrap-up articles on all 32 College Bowl Games.
October 31, 2006
It's Just Business:
USPS: It Reminds You of the Army and its Call to "Hurry Up and Wait"
Copyright © 2006 Ed Bagley
Ever walk into your local post
office, see 30+ people waiting in line to mail their packages, and three postal
workers are working as fast as they can to move people through? Sometimes it
takes me more than 30 minutes to hand off a Priority Mail package for delivery
to a client. It reminds me of the song Johnny Mathis made famous, The Twelfth of
Never, or the famous U. S. Army line "Hurry Up and Wait."
Usually I grab my ticket first, go get my mail from my postal box, go next door to buy a copy of USA Today from John's Mountain Home Bakery, think about buying a couple of bismarks and a chocolate milk, and then return to the post office and read my paper until my number is called.
I am a pretty good sport about this because it has been my 30-plus-year experience in business that the United States Postal Service (USPS) does an outstanding job of moving our mail and packages around on time.
Yesterday there was a long wait and people were talking quietly to one another, saying things like, "Geez, can't they get some more help," or "I have never seen workers move so slowly," or "I hate having to wait so long, I have things to do."
After getting up to the counter, I became acutely aware of something I have noticed before but had not registered in my mind. The worker would tap the monitor of their new computer software system, and then wait, I mean literally wait two or three seconds, and then tap it again. I realized the postal worker who looked slow or inefficient was actually waiting on a new computer system that was slow and inefficient.
Imagine yourself running a huge company (in this case a government-owned corporation that is a statutory monopoly) that delivers 212 billion pieces of mail to 144 million homes, businesses and postal boxes (23 million pieces daily in New York City alone), ends up handling more than 44% of the world's card and letter mail volume, and serves more than 7.5 million customers daily in 37,000 post offices. This is all accomplished with 700,000+ employees and 260,000 vehicles.
Your USPS is the third largest employer in the country after the United States Department of Defense and Wal-Mart. Talk about a big business. The USPS has annual revenue of $70 billion.
Now focus on Wal-Mart, a publicly held business with 1,800,000 employees worldwide and nearly 6,500 stores and wholesale clubs in 15 countries. Wal-Mart did $312 billion in revenue last year, $242 billion more than the USPS. I will bet that the USPS would like to net almost $11.2 billion like Wal-Mart did last year.
Given these facts, I ask myself: Would Sam Walton (the founder of Wal-Mart) tolerate a slow, inefficient software system like the USPS uses? Absolutely not. He would find and buy a much faster, much more efficient system to increase productivity, and then pass on the savings to his customers.
After talking to a local manager about the current postal software used in processing mail at the front counter, I found out that this is the United States Postal Services' new system, purchased and implemented within the past year. Is this good management?
With 37,000 postal stations and 700,000+ employees (not all working the front counter, mind you), with perhaps 3 per office working the front counter (that is 111,000 employees), how much time is wasted waiting for some slow software to calculate a transaction? I mean, it was ridiculous the amount of time it took a postal worker to stand there and wait to enter and complete another transaction.
I can swipe a credit card at Wal-Mart and get a transaction approval in a fraction of the time that it takes me to stand waiting at a post office counter with a slow, inefficient software system that crawls through a transaction as if it was going to make a career out of it.
I have no idea what kind of great decisions top management at the USPS makes, but identifying, purchasing and implementing an efficient software system (especially when upgrading) is not one of them.
All of this reminds me of what Thomas Fuller said: Cheat me in the price, but not in the goods. I wonder if the maker of the software the USPS bought sold it to them with a huge discount because it could not find a major, successful business that would touch it with a 20-foot pole.
Usually in the battle between men and machines, it is the man that slows down the machine; in the case of the USPS front counter processing software, it is the machine that is slowing down the man, not to mention annoying customers and aggravating postal employees.
Where is that ergonomics guy when you need him?
October 16, 2010
They Could Give a Crap
The Lure of Greed Allowed Bankers to Ignore the Signs of Trouble on Foreclosures
(Ed's Note: If there is currently a lower life form in America than bankers and financiers, please let me know.)
By Eric Dash and Nelson Schwartz from the New York Times
At JPMorgan Chase & Company, they were derided as "Burger King kids" --
walk-in hires who were so inexperienced they barely knew what a mortgage was.
At Citigroup and GMAC, dotting the i's and crossing the t's on home foreclosures was outsourced to frazzled workers who sometimes tossed the paperwork into the garbage.
And at Litton Loan Servicing, an arm of Goldman Sachs, employees processed foreclosure documents so quickly that they barely had time to see what they were signing.
"I don't know the ins and outs of the loan," a Litton employee said in a deposition last year. "I'm not a loan officer."
As the furor grows over lenders' efforts to sidestep legal rules in their zeal to reclaim homes from delinquent borrowers, these and other banks insist that they have been overwhelmed by the housing collapse.
But interviews with bank employees, executives and federal regulators suggest that this mess was years in the making and came as little surprise to industry insiders and government officials.
The issue gained new urgency on Wednesday, when all 50 state attorneys
general announced that they would investigate foreclosure practices. That news
came on the same day that JPMorgan Chase acknowledged that it had not used the
nation's largest electronic mortgage tracking system, MERS, since 2008.
That system has been faulted for losing documents and other sloppy practices.
The root of today's problems goes back to the boom years, when home prices were soaring and banks pursued profit while paying less attention to the business of mortgage servicing, or collecting and processing monthly payments from homeowners.
Banks spent billions of dollars in the good times to build vast mortgage machines that made new loans, bundled them into securities and sold those investments worldwide.
Lowly servicing became an afterthought. Even after the housing bubble began
to burst, many of these operations languished with inadequate staffing and
outmoded technology, despite warnings from regulators.
When borrowers began to default in droves, banks found themselves in a never-ending game of catch-up, unable to devote enough manpower to modify, or ease the terms of, loans to millions of customers on the verge of losing their homes. Now banks are ill-equipped to deal the foreclosure process.
"We waited and waited and waited for wide-scale loan modifications," said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation, one of the first government officials to call on the industry to take action. "They never owned up to all the problems leading to the mortgage crisis. They have always downplayed it."
In recent weeks, revelations that mortgage servicers failed to accurately document the seizure and sale of tens of thousands of homes have caused a public uproar and prompted lenders like Bank of America, JPMorgan Chase and Ally Bank, which is owned by GMAC, to halt foreclosures in many states.
Even before the political outcry, many of the banks shifted employees into their mortgage servicing units and beefed up hiring. Wells Fargo, for instance, has nearly doubled the number of workers in its mortgage modification unit over the last year, to about 17,000, while Citigroup added some 2,000 employees since 2007, bringing the total to 5,000.
"We believe we responded appropriately to staff up to meet the increased volume," said Mark Rodgers, a spokesman for Citigroup.
Some industry executives add that they're committed to helping homeowners but concede they were slow to ramp up. "In hindsight, we were all slow to jump on the issue," said Michael J. Heid, co-president of at Wells Fargo Home Mortgage.
"When you think about what it costs
to add 10,000 people," said Heid, "that is a substantial investment in time and
money along with the computers, training and system changes involved."
Other officials say as foreclosures were beginning to spike as early as 2007, no one could have imagined how rapidly they would reach their current level.
About 11.5 percent of borrowers are
in default today, up from 5.7 percent from two years earlier.
"The systems were not ever that great to begin with, but you didn't have that much strain on them," said Jim Miller, who previously oversaw the mortgage servicing units for troubled borrowers at Citigroup, Chase and Capitol One. "I don't think anybody anticipated this thing getting as bad as it did."
Almost overnight, what had been a factory-like business that relied on workers with high school educations to process monthly payments needed to come up with a custom-made operation that could solve the problems of individual homeowners.
Gregory Hebner, the president of the MOS Group, a California loan
modification company that works closely with service companies, likened it to
transforming McDonald's into a gourmet eatery. "You are already in chase mode,
and you never catch up," he said.
To make matters worse, the banks had few financial incentives to invest in their servicing operations, several former executives said.
A mortgage generates an annual fee equal to only about 0.25 percent of the
loan's total value, or about $500 a year on a typical $200,000 mortgage. That
revenue evaporates once a loan becomes delinquent, while the cost of a
foreclosure can easily reach $2,500 and devour the meager profits generated from
handling healthy loans.
"Investment in people, training, and technology -- all that costs them a lot of money, and they have no incentive to staff up," said Taj Bindra, who oversaw Washington Mutual's large mortgage servicing unit from 2004 to 2006.
And even when banks did begin hiring to deal with the avalanche of defaults, they often turned to workers with minimal qualifications or work experience, employees a former JPMorgan executive characterized as the "Burger King kids."
In many cases, the banks outsourced their foreclosure operations to law firms
like that of David J. Stern, of Florida, which served clients like Citigroup,
GMAC and others. Mr. Stern hired outsourcing firms in Guam and the Philippines
The result was chaos, said Tammie Lou Kapusta, a former employee of Mr. Stern's who was deposed by the Florida attorney general's office last month. "The girls would come out on the floor not knowing what they were doing," she said. "Mortgages would get placed in different files. They would get thrown out. There was just no real organization when it came to the original documents."
Citigroup and GMAC say they are no longer giving any new work to Mr. Stern's firm.
In some cases, even steps that were supposed to ease the situation, like the federal program aimed at helping homeowners modify their mortgages to reduce what they owed, had actually contributed to the mess.
Loan servicing companies complain that bureaucratic requirements are constantly changed by Washington, forcing them to overhaul an already byzantine process that involves nearly 250 steps.
March 5, 2010
A Really Sleazeball Business
Is Your Stockbroker a Trusted Adviser or a Stock Pusher? Should Stockbroker Activity Come Under Legislative Control?
(Ed's Note: Recently I posted an article on my web site titled "If There Is Currently a Lower Life Form on Earth Than Greedy Bankers, Please Let Me Know". No one has yet contacted me to indicate a lower life form than bankers, but I have stumbled upon another species that rivals bankers—brokers, as in stockbrokers, whose job is to relieve you of your hard-earned money by buying and selling stocks, bonds and associated financial instruments. In other words, they have to use your money to become successful because they can't cut it on their own. Check out this New York Times article by Tara Siegel Bernard.)
By Tara Siegel Bernard
You have probably seen the television commercial, the one where you seem to
be watching an intimate conversation between family members. But at the end, you
learn that the conversation was actually between a broker and his client.
The advertisement is meant to evoke the idea of financial adviser as confidant, and is part of brokerage firms' broader effort in recent years to recast their image—from mere stock pushers to trustworthy advisers.
But in interviews, former and current brokers said the ad told only part of the story. All said their jobs depended less on giving advice and more on closing sales. The more money they brought in, the more they, and their firms, would earn.
"I learned a lot about being a good salesman at Merrill," said David B. Armstrong, who left Merrill Lynch after 10 years and with partners started an advisory firm in Alexandria, VA. "The amount of training I sat through to properly evaluate investment opportunities was almost nonexistent relative to the training I got on how to sell them."
While the issue of broker responsibility is not new, it has resurfaced as Congress has been considering financial overhaul legislation. In his original draft, Senator Christopher J. Dodd, chairman of the Senate Banking Committee, proposed requiring brokers to put their customers' interests first—what is known as fiduciary duty—when providing investment advice. But in recent weeks, the chances of this proposal's making it into the bill began to dim.
Senator Tim Johnson, a South Dakota Democrat on the Banking Committee, has proposed an 18-month study of the brokerage and investment advisory industries, an effort that would replace Senator Dodd's provision.
Imposing a fiduciary requirement could have an impact on investment firms' profits. Guy Moszkowski, a securities industry analyst at Bank of America Merrill Lynch, said that the impact of a fiduciary standard was hard to determine because it would depend on how tightly the rules were interpreted. But he said it could cost a firm like Morgan Stanley Smith Barney as much as $300 million, or about 6 to 7 percent of this year's expected earnings, if the rules were tightly defined. "It's very nebulous, but I think that is a reasonable estimate," he added.
In a research report about Morgan Stanley last year, Mr. Moszkowski wrote, "Financial advisers will be expected to take into account not just whether a product or investment is suitable for the client, but whether it is priced favorably relative to available alternatives, even though this could compromise the revenue the financial adviser and company could realize."
Technically speaking, most brokers (including those who sell variable annuities or the 529 college savings plans) are now only required to steer their clients to "suitable" products—based on a customer's financial situation, goals and stomach for risk.
But Marcus Harris, a financial planner who left Smith Barney 10 months ago to join an independent firm in Hunt Valley, MD, said the current rules leave room for abuse. "Under suitability, advisers would willy-nilly buy and sell investments that were the flavor of the month and make some infinitesimal case that they were somehow appropriate without worrying," he said.
Kristofer Harrison, who spent a couple of years at Smith Barney before leaving to work as an independent financial planner in Clarks Summit, PA, said the fact that brokers were paid for investments—but not advice—also fostered the sales mentality.
"The difficulty I had in the brokerage industry" he said, "is that you don't get paid for the delivery of financial advice absent the sale of a financial product. That is not to say the advice I rendered was not of professional quality, but in the end, I always had the sales pitch in the back of my mind."
Mr. Armstrong, Mr. Harris and Mr. Harrison all said they had decided to become independent because they felt constrained by their firms' emphasis on profit-making and their inability to provide comprehensive advice.
A current branch manager of a major brokerage firm who did not want to be identified because he did not have his employer's permission to speak to the media, confirmed that "you are rewarded for producing more fees and commissions." While he said that "at the end of the day, I think that the clients' interests are placed first and foremost by most advisers," he added that "we are faced with ethical choices all day long."
Brokers are typically paid a percentage of fees and commissions they generate. The more productive advisers at banks and big brokerage firms could collect 50 percent of the fees and commissions they generate, said Douglas Dannemiller, a senior analyst at Aite Group, a financial services research group.
The firms may also make money through other arrangements, including what is known as revenue sharing, where mutual fund managers may, for instance, agree to share a portion of their revenue with the brokerage firm. By doing this, the funds may land on the brokerage firm's list of "preferred" funds.
Some brokerage firms, including Merrill Lynch and Morgan Stanley Smith Barney
disclose their revenue sharing information on their Web sites, or at the point
of sale. Edward Jones discloses it as well, as the result of a settlement of a
class-action lawsuit. UBS and Wells Fargo Advisors declined to comment on
whether it discloses this information.
Unlike fiduciaries, brokers do not have to disclose how they are paid upfront or whether they are have incentives to push one investment over another. "The way the federal securities law regulates brokers, it does not require the delivery of information other than at the time of the transaction," said Mercer E. Bullard, an associate professor at the University of Mississippi School of Law who serves on the Securities and Exchange Commission's (SEC) investment advisory committee.
The legislative language on fiduciary responsibility was one part of the financial overhaul bill aimed at protecting consumers' interests. Another part, setting up an independent consumer protection agency, may also be watered down.
The study proposal by Senator Johnson may be included in the actual bill, which means it would not be subject to debate. And consumer advocates contended that the study would stop regulators from making any incremental consumer-friendly changes until the study was completed. The study would also require the SEC to go over territory already covered in a 228-page study, conducted by the RAND Corporation in 2008 at a cost of about $875,000, the advocates said.
"In my opinion, the Johnson study is a stalling tactic that will either substantially delay or totally prevent a strong fiduciary standard from being applied," said Kristina Fausti, a former SEC lawyer who specialized in broker-dealer regulation.
"The SEC has been studying issues related to investment-adviser and broker-dealer regulation and overall market conditions for more than 10 years," she said. "It's puzzling to me why you would ask an agency to conduct a study when it is already an expert in the regulatory issues being discussed."
Even after the study was completed, legislation would still need to be passed to give the SEC authority to create a fiduciary standard for brokers who provide advice. "As we all know, the appetite for doing this in one or two years is certainly not going to be what it is today," said Knut Rostad, chairman of the Committee for the Fiduciary Standard, a group of investment professionals advocating the standard. His group circulated an analysis that tried to illustrate where answers to the study's questions could be found.
February 2, 2010
Bank Pay Gets Boost on the Sly
If There Is Currently a Lower Life Form on Earth Than Greedy Bankers, Please Let Me Know
(Ed's Note: Banks apparently will not stop paying their top executives more bonus money, many times regardless of the bank's bottom line performance. Here is one example of all but hidden compensation revealed by Aaron Elstein in Crain's New York Business publication.)
By Aaron Elstein
Hoping to mute public outrage over huge Wall Street bonuses, the big banks
are making a show of paying employees with more restricted stock, which cannot
be touched for years, and less cash.
Much less well-known is this: Many of the banks are paying dividends on those shares—even though the employees do not actually own them yet.
While the perk angers some shareholders, the reality is that executives at banks and other large companies routinely collect dividends on shares they do not own. Most companies reveal only scant information about the practice, but a review by Crain's shows that 13 of the 15 best-paid CEOs in New York received them in 2008, the most recent year for which data are available.
The sums can really add up. AllianceBernstein Chief Executive Peter Kraus, for example, pocketed $3.9 million in dividends for 2009—14 times his base salary—on a restricted share grant that does not become entirely his until it fully vests at the end of 2013. Goldman Sachs CEO Lloyd Blankfein was eligible to receive around $190,000 in dividends last year on his restricted shares. J.P. Morgan Chase CEO Jamie Dimon stood to collect as much as $159,000.
AllianceBernstein, Goldman and J.P. Morgan declined to comment on last year's pay.
Payouts Stand to Rise
These little-known dividend payouts will become much larger this year as banks require more employees to take most or even all of their bonuses in restricted stock. The payouts also stand to rise this year as healthier banks begin to raise the dividends they slashed last year to conserve cash.
Mr. Dimon, for one, could see the annual payout on the restricted shares he already holds jump to $1.2 million--$200,000 more than his 2008 salary—if J.P. Morgan restores its dividend to 2008 levels.
To some critics, the payouts smack of a sneaky way to increase pay.
"People at places like Goldman Sachs are going to reap windfalls in dividends from stocks they have not earned yet," says Tony Daley, an economist at the Communications Workers of America.
The union fought similar payouts at General Electric's 2007 annual meeting after CEO Jeffrey Immelt was paid $1.3 million in dividends—equal to 40% of his salary—on shares he did not own. It lost.
"It makes no sense to pay people dividends on shares they do not own," Mr. Daley says. "Shareholders should be outraged."
Compensation experts contend that dividends on unvested shares give employees a greater sense of "value" from their stock grants, many of which are worth substantially less than a few years ago. The dividends also mean the executives reap some benefit while they wait to be handed their restricted stock, which typically takes around three years to vest. Some impatient banks reportedly have shortened waiting periods to mere months.
"Companies are constantly struggling to convince employees that compensation in forms other than cash has real value," says Robert Sedgwick, an attorney who specializes in executive compensation matters at law firm Morrison Cohen.
Still, some companies have seen fit to cut back on the dividend payouts.
IBM stopped paying cash dividends on unvested restricted grants in 2008. Pfizer ceased cash payouts on restricted stock several years ago and requires dividends to be reinvested in additional shares.
Just last month, Morgan Stanley tightened up its rules and no longer awards regular cash dividends on unvested restricted stock. The bank now accumulates the dividends in a separate account, and it tightened vesting requirements so that the awards pay out only after the executive meets performance targets necessary to qualify for the underlying stock. A spokeswoman said Morgan Stanley changed its policies only because of a 2008 accounting rule change.
Some compensation experts expect this issue to get more attention from shareholders and regulators as the dividend payouts grow.
Consider Goldman's Mr. Blankfein. He could get up to $27 million worth of restricted shares as a bonus for 2009, based on the size of his 2007 cash bonus and the fact that he and other top Goldman officials are receiving bonuses only in restricted stock for last year. If so, his 2009 stock grant would pay approximately $250,000 in annual dividends while Mr. Blankfein waits for the prize to become truly his.
A Goldman spokesman points out that the firm's 2009 bonus pool was 20% smaller than 2007's, and Mr. Blankfein's restricted stock bonus could reflect that.
Call It Deep-Pockets Change
Most of New York's highest-paid CEOs also collected tidy dividends on their vested and unvested stock awards—additional income that's almost never directly reported in company filings. Here are some of last year's top-paid chief executives, and Crain's estimates of their dividend income in 2009:
Peter S. Kraus AllianceBernstein Holding $3.9 million
Peter Georgiopoulos General Maritime Corp. $3.5 million
Louis C. Camilleri Philip Morris International $1.8 million
Brian Duperreault Marsh & McLennan Cos. $329,000
Kenneth J. Chenault American Express Co. $308,000
Lloyd C. Blankfein Goldman Sachs Group Inc. $191,000
Jamie Dimon J.P. Morgan Chase & Co. $159,000
Laurence D. Fink BlackRock Inc. $150,000
Ralph Lauren Polo Ralph Lauren Corp. $120,000
John R. Strangfeld Prudential Financial Inc. $99,000
John B. Hess Hess Corp. $84,000
K. Rupert Murdoch News Corp. $37,000
Vikram Pandit Citigroup Inc. $11,000
Source: Crain's Analysis of Company Filings
June 12, 2008
ISP Providers Decide to Do the Right Thing Rather Than Stuff Their Pockets with Money
Copyright © 2008 Ed Bagley
They took their merry time about it, but finally some Internet Service Providers have decided to do the right thing and get about the business of eliminating child porn on the Internet service they provide. That is the good news.
The bad news is that it took a threat by a government official to file a legal suit with charges of fraud and deceptive business practices to eventually get the ISPs to agree.
The legal action would have been justified in that ISPs claim to practice strict rules against transmitting or disseminating sexually exploitative images of children. However, they have heretofore chosen not to enforce their own rules because they loved making money more than exposing innocent children to the mercy of child predators.
How sorry of an executive and individual do you have to be to make that kind of decision? Is it not amazing that pigs do not know that pigs stink! Let it be understood that this remark refers to both child predators and the ISP executives who have allowed this practice to continue because of their sheer greed.
Some day a disenchanted group of people in this country will launch a second revolution, and it will not be to free ourselves from rule by the British, but to free ourselves from our own rich people who love money more than their country and the common people they exploit.
Nonetheless, we will now see if the ISPs in question—Verizon, Sprint and Time Warner Cable—will actually proceed to block access nationwide to people who disseminate child pornography on Internet bulletin boards and web sites.
Let me be clear about this: The evil, slimy, creepy sexual deviants disguised as leeches who encourage, display and participate in child pornography are one of the lowest life forms known to exist on Earth.
How they have been allowed to promote their disgusting practice in the public domain is beyond reasonable and humane comprehension. The reason, of course, is greed in the form of money; that is, ISPs knowingly stuffing their pockets with money at the expense of children being used and abused.
ISP executives might be less likely to make deposits with their greed money if they knew that God was holding a millstone in his hand and opening the door for them at the bank.
ISPs have traditionally reacted to this kind of justified criticism with a fit of righteousness, saying they could not be responsible for content online, given the decentralized and largely unmonitored nature of the Internet. This is a perfect example of how big businesses like to lie, cheat and steal their way to more profit at the expense of their customers.
When ISPs ignored the complaints about the proliferation of child porn on the Internet, their line was "we're not responsible, these (the child porn purveyors and users) are individuals communicating with individuals, we're not responsible." It is too bad that their mothers could not hear these ISP executives talk like this; they just might have introduced them to a little Ivory soap in the mouth to purify their unbridled greed and avarice.
You can thank New York Attorney General Andrew Cuomo and his staff for pushing some ISPs into this clean-up effort. It was only after the ISPs turned a deaf ear to their complaints that the ISPs were threatened with legal action, and then they took weeks of negotiations to act like they are going to comply. We will see if they do comply.
Verizon and Time Warner Cable are 2 of the nation's 5 largest service providers, with approximately 16 million customers between them.
Both of these monolithic cash flow machines (think of a very large and characterless building) can certainly make an impact if they choose to follow through; if they do not, they should be prosecuted to the full extent of the law, and the Federal Communications Commission should take away their licenses to operate.
With big business you really do have to cut their legs off (take away their cash flow, revenue and profit) to get their attention. Their greed knows no end. It you do not think so, just look at the greed and avarice practiced by bankers and financiers who have put our nation into the subprime mortgage debacle.
Many bankers and financiers are another example of lower life forms helping to destroy the "American Dream" in this country. Not all of them, of course, but too many of them have fallen into the cesspool of greed, willing to destroy their customer's home by careless lending so they can ensure their $20 million bonuses at the end of the year. Again, just like child porn purveyors, pigs do not know that pigs stink.
Let us hope that ALL internet service providers find their way to the local car wash, clean up their act, and flush the child porn purveyors down the drain in the process. Do not worry about any harsh treatment for the child porn purveyors, there is an even better plan to take care of them in their future life, or perhaps death.
Read my Social Commentary on other hot topics, including:
"Facts About the Second Most Controversial Topic in America – The First Is Abortion"
"So Why Should I Subsidize Any Banks Because of Their Greed and Incompetence?"
"A Disturbing Trend in Our Society – The Lack of Trust in Our Institutions"
"Washington's Hottest Political Issue Pits PI Attorneys and the Insurance Industry"
October 20, 2007
Remember When: Don't Pass Your Debt to Me
So Why Should I Subsidize Any Banks Because of Their Greed and Incompetence?
Copyright © 2007 Ed Bagley
Try not to read too much about your government and the current banking system in this country because if you do, you may be on the verge of getting riled up like me. Let me explain:
As I understand it from reading the bad news in the nation's most prestigious journals, the banking industry is having some serious problems.
It seems that in its unbridled greed and with the avarice of its associate mortgage brokers, bankers have taken on a bunch of residential paper that amounts to bad loans.
Specifically, loans generated by mortgage brokers who hoodwinked homebuyers into believing that ARMs (adjustable rate mortgages) were an excellent way to qualify for affordable monthly payments, at least in the short term. Therein lies the problem.
The short term is apparently over, the ARM payments are now being readjusted upward, as in way upwards, and the poor, dumb borrowers are now unable to make timely payments, sending many of their homes into foreclosure for nonpayment.
"Banks made unwise business decisions and now they're scrambling to save themselves," says Steve Persky, CEO of Dalton Investments in Los Angeles, who was quoted in a USA Today (10-15-07) story.
No kidding, Steve, bankers are running around like a bunch of rats cornered in a burning barn.
Two days later, another USA Today (10-17-07) story reported Treasury Secretary Henry Paulson saying that the steep housing downturn posed the most "significant current risk" to the economy, adding that the correction was dragging on longer than expected.
Paulson told a Georgetown University law school audience that the government and lenders must move forcefully to aid millions of homeowners whose adjustable-rate subprime (as in poor credit) mortgages will reset to higher levels in the next 18 months.
Apparently delinquencies are even rising among borrowers with good credit and conventional mortgages. My, my, my, sounds like someone has a real big problem. Excuse me while I go to sleep with a clear conscience.
Treasury officials announced two days earlier that they had helped broker a deal among major banks to buy as much as $100 billion in securities, including mortgage-backed bonds, to help calm credit markets. That certainly is "mighty wide" of the Treasury Department to do so.
Now, with whose money do you think they are doing this? That is right, your tax money.
So if you are a fiscally responsible
U. S. citizen, you are now being penalized for being fiscally responsible, and
are being asked to subsidize those who are not fiscally responsible.
I am taking this personally because I care. Maybe you do not.
Let me repeat what I said a moment ago: I am being penalized for being fiscally responsible. Why am I expected to subsidize Bank of America and the nation's next 149 largest banks?
Bank of America is the nation's largest bank since its acquisition of MBNA. In fact, Bank of America (BOA) is one of the largest companies in the world. BOA apparently was the 5th most profitable company in the world in 2006 with a net profit of more than $21 billion.
To understand how much $21 billion is, think of it this way: a billion is a million dollars 1,000 times, so 21 billion is a million dollars 21,000 times.
BOA revenue in 2006 was more than $74 billion. If BOA's net profit was $26 billion, then its net profit was 28% of its revenue, that is a pretty good business. BOA is the No. 1 online bank with 21 million active online banking customers.
Oh yeah, the total consolidated assets of BOA in its 2006 Consolidated Balance Sheet were only $1,459,737,000,000, or $1 trillion, 459 billion, 737 million. Jeez Louise, Bill Gates, the richest man in the world, is worth only $53 billion.
Today I am totally debt free. I live in a house I bought for $40,000 that is now worth $250,000. I have been up and down in my work life. Now I am up, once I was down. I once lost $300,000 (in today's money it would be $1,487,000). The only good thing I can say about that was that I had it to lose.
I am wondering where this government of mine was, and where the banks were, when I was in debt and financially down.
The banks I dealt with could not freeze my business accounts quick enough; they could not kick me to the curb fast enough. I had $60,000 equity in my home and not a single banker or lender would loan me a dime (in today's money it would be $160,000). I survived anyway, and I have now prospered.
Now my tax money is being used to subsidize the largest banks in the country (which made poor loans out of greed), mortgage lenders (who packaged poor loans for personal gain when they knew they were packaging bad loans out of greed), and borrowers (who knew they were getting in over their head and now are stuck financially).
How about having the banks, mortgage bankers, and borrowers take responsibility for their actions, eat their losses, suck it up, and crawl their way back out like I did?
Could they be lacking in the three
necessary ingredients it takes to do so: integrity, right thinking and right
Note: Read my 2-Part Series on "Why Lenders Are Not Your Friends" and "Financial Predators: Vermin, Rodents and Other Insect Pests" and "Shopping Online – Caveat Emptor (Latin for Let the Buyer Beware)". Find these articles and more in my Lessons in Life Archive.
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