In January, the New York Times Company spent $75 million for a 15 percent ownership stake in the Boston Red Sox. The purchase had little to do with baseball.
Bizarrely, it was the latest example of how the challenge of a broadband digital future is shaping the business-side strategy of newspaper companies.
"[The Times company] has no particular interest in owning a baseball team," says Martin Baron, editor of The Boston Globe, another Times property. "It does have an interest in getting involved in television."
The Times was after a stake in the New England Sports Network cable channel that came with the team. Yet the venerable Times moving into cable television seems only a tad less odd than its acquiring a sports team. And what could the marriage of the two old fogies like television and newsprint have to do with the digital media future?
In fact, there is a digital media rationale. The explanation for the Times' mysterious move into cable TV is summarized in a buzzword: convergence.
With a wary eye on technological developments, the newspaper industry is preparing for change, and even if some of the accompanying rhetoric isn't entirely convincing, convergence with broadcast and online media is the shape of things to come for newspapers.
Despite the gloom over the current advertising downturn and the certain doom for newspapers predicted by rabid techno-futurists, key industry leaders interviewed recently by OJR were sanguine about the future.
Confronting the challenges of a fragmented media marketplace, they cannot know exactly how the future will shake out. But they are getting ready for whatever comes, moving to acquire assets and expertise in other media, and mobilizing their vast networks of reporters to produce content for print, TV, online and other media.
It would be deeply worrying if change wasn't in the air. Newspapers face clear challenges. The older "mass media" are losing ground in a marketplace fragmented by the multiplication of cable channels and Web sites. Meanwhile, budgets are squeezed by the industry recession and by profit-taking pressure from Wall Street; papers are losing vital classified ad revenue to online operations like Monster.com and CarPoint; and the decades-long slow constriction of circulation threatens to close the arteries unless newspapers can somehow snag the next generation of readers.
Then there's the great long-term unknown of technology-driven change: It just seems inevitable that someday digital delivery of in-depth, personalized information -- including text, audio and video -- to electronic devices will supplant the trucking of heavy physical loads door-to-door. If newspapers are to survive, change has to happen.
"If we're going to define ourselves by our history, then we deserve to go out of business," said Arthur Sulzberger Jr., chairman of The New York Times Company and publisher of its flagship newspaper. Sulzberger, the latest family steward of his company's glittering history, is guiding it now toward a future of multiple media "platforms."
"Newspapers cannot be defined by the second word -- paper. They've got to be defined by the first -- news," Sulzberger said in a recent interview with OJR. "All of us have to become agnostic as to the method of distribution. We've got to be as powerful online, as powerful in TV and broadcasting, as we are powerful in newsprint."
Today's users routinely tap specialized cable channels and Web sites for 24/7 access to news and information. In the broadband future, access to the online world will come not through computers alone but also through wireless devices and television sets. At the same time, online content will move beyond text to on-demand audio and video. When that happens, these two media -- television and the Internet -- will converge.
"Implementing our long-range vision also requires that we become more familiar with television," Sulzberger explained in a January speech marking the Times' 150th anniversary. "At some point in the not-too-distant future, achieving critical mass on the Internet will depend, to a large degree, on our ability to marry the printed word with the moving image."
Hence the rationale behind the Times company's Red Sox move: it's not about baseball; it isn't even about television or the Internet as we know them; it's about the future video-rich broadband Internet.
In April, two months after the Red Sox deal, the Times paid another $100 million for a half share in the Discovery Civilization cable channel.
Meanwhile, it's not neglecting online development: Its successful newspaper Web sites, including NYTimes.com and Boston.com, now run a profit, and the New York Times Digital division is also experimenting on the cutting edge. In April, the company did a deal to supply news content to Web loggers who use Radio Userland content management software. Web loggers -- who often tout themselves as the new wave of decentralized journalism -- will be able to post news feeds from the New York Times on their sites. The Times seems to know how to co-opt potential threats.
Sulzberger sees no reason to be intimidated by the Internet. Reminded of remarks by Microsoft executive Dick Brass -- whose standard stump speech asserts that e-books will replace magazines and newspapers and predicts the last paper edition of the New York Times in the year 2018 -- Sulzberger replies with a frustrated "Who cares?"
"I do not care when we print our last newsprint edition," Sulzberger said. "We will remain the major source of news and information in this country and perhaps the world." Then, in a coda of Churchillian defiance, he adds: "We will do it on the Web. We will do it on television. We will do it in print."
It's a comforting story for newspapers: as the media platforms change, the business survives intact and the audience, instead of shrinking, grows to potentially vast international proportions. In the short term, television and online media can bring in new revenue from advertising sold in multiple-media packages. Since print news can be fed into television news reports and journalists make decent pundits, there is even synergy -- that great business-side rationale for any merger.
It's also a vision flattering to print journalists. The essence of their work resides in the words, not the paper. The medium is only the bottle and they provide the wine.
The trouble is, it's not a practical vision at all.
Sure, many newspapers and print journalists have successfully moved from print to the Web. That's because the Internet is still dominated by text. But in a future dominated by video, newspapers will not translate so easily.
Baron, the Boston Globe editor, is one of Sulzberger's key editorial-side leaders. He accepts the business case for diversification. But in practical working terms, he sees limits to the collaboration between two such different media as television and print.
"It's hard for me to envision some of the people in my newsroom writing television programming," Baron says. "As we begin to discuss what to do with the New England Sports Network it's fairly apparent to me that we wouldn't know where to begin. We have no training in that. We don't know the first thing about it."
The two media, in other words, are still oil and water. The "backpack journalist" -- a superhack master of multimedia who can do it all and who routinely packs a laptop and a video camera along with the tape recorder and steno notebook -- may be the subject of avant-garde j-school courses, but it's not likely to become the norm. Rather than multimedia super-reporters, The New York Times Company will for the most part simply have distinct television people and newsprint people.
Convergence is going to be a lot harder than some of the rhetoric would have us believe.
Still, some companies have made a start. Every morning, from a TV studio in its Virginia headquarters, Gannett is video-feeding news of the day's top USA Today stories to 21 TV stations it owns in 15 states. Tribune Interactive is providing news feeds to AT&T wireless subscribers. And at the Tampa News Center in Florida, news reporters and producers at the Tampa Tribune newspaper, WFLA-TV News Channel 8 and TBO.com (Tampa Bay Online) -- all owned by Virginia-based Media General -- collaborate out of the same building.
"I believe it is inevitable that the economic pressure of fragmentation will drive us to produce newspapers, TV news, radio news and interactive news out of a common newsroom," said Jack Fuller, president of Tribune Publishing, in a January keynote address to a Poynter Institute conference.
Fuller, author of "News Values: Ideas for an Information Age," is a dyed-in-the-wool newsman. A former editor of the Chicago Tribune, a Pulitzer Prize winner and a staunch defender of journalistic independence, he now heads the newspaper arm of one of the most powerful media companies in America. Tribune is the third largest newspaper chain in the country, but unlike Gannett and Knight-Ridder, its presence is concentrated in the largest metropolitan markets. In addition to the Chicago Tribune, Tribune publishes the L.A. Times and New York's Newsday. Since it has also owned the Chicago Cubs for just over twenty years, one may guess that Tribune is well ahead of the pack when it comes to convergence. Indeed, it has a long history of investment in broadcasting, owning 24 major-market television stations. It just bought another in April.
That points to one of the likely consequences of convergence: more consolidation of media ownership as the giants among newspaper companies extend their reach.
Last July, Fuller testified before the Federal Communications Commission -- "as passionately as I could," he says -- asking it to dump the cross-ownership ban on owning newspapers and television stations in the same market. Because of grandfathered ownership, Tribune already owns both in the top three markets of New York, Los Angeles and Chicago. Fuller says Tribune sees lots more opportunities if the ban on same-market ownership is lifted, as is widely expected to happen. If so, large media companies will go shopping for acquisitions and will likely swap properties among themselves so that they end up with same-market newspapers and TV stations.
The upside for Tribune, Fuller told OJR, would be the capacity to spread the costs of its news operations across multiple distribution systems. His newspaper people will reap the revenue benefit and he sees no downside as long as they are firmly empowered by Tribune to protect their editorial independence. The net effect on his newspapers? It would help preserve the economic basis of their world-class news operations, Fuller says.
Increased concentration of media power in a few hands is an inevitable consequence of the "radical fragmentation" of the media market, Fuller says.
"How do you finance great journalism into the 21st century?" he asks rhetorically. "Keeping your enterprise small and singular is probably not the right answer."
A glance across the newspaper landscape shows smaller regional operations challenged by the same media fragmentation are sometimes coming up with different answers.
Seattle Times publisher Frank Blethen foresees one major near-term shift: two-newspaper metro areas should expect to lose a paper. Blethen should know. The flagship newspaper of his family-owned company goes head-to-head every morning with Hearst's Seattle Post-Intelligencer. Though the two share business-side resources in a joint operating agreement, to Blethen the JOA is anachronistic artificial life support. He's contractually obliged to accept it for now, but he cannot see its indefinite continuation.
"Once you get beyond the top six markets," says Blethen, "any large metro community -- like Seattle -- if they have two papers, they're on borrowed time."
Blethen will shed no tears if Seattle becomes a one-paper town; he expects that his newspaper will be the one to survive and that the city will retain plenty of diversity in its alternative and suburban papers.
Ironically, on a national level, Blethen is a vocal opponent of newspaper consolidation. He labels the increased concentration of ownership and the attrition of family-controlled newspapers as nothing less than a "crisis of American democracy." In contrast to Fuller, he is lobbying hard against a change to the FCC cross-ownership restriction. He attacks the big publicly traded chains for buckling under Wall Street pressures and "morphing into financially-owned companies that don't have news values or community service values."
Interviewed immediately after he'd learned that his paper had contentiously lost out on the Pulitzer Prize for investigative reporting, Blethen was nevertheless at ease and bullish about the future. The Seattle Times suffered more than most in the 2001 downturn because of a ruinous seven-week strike in the fall of 2000 that led to the departure of some star editorial talent and saddled the company with debt just before the economy headed south. Already however, the paper seems to have turned a corner and is now hiring again.
Like the national operators, Blethen is moving his newspaper toward "multiple formats in terms of form and distribution." Yet he points out that local independent newspapers will continue to make economic sense on their current business model for many years to come.
"Newspapers, particularly if privately owned and not driven by some short-term financial model, make damn good money," says Blethen, undeterred by the horrors of the past year.
Across Lake Washington, one Blethen competitor is investing heavily in the old business model. Peter Horvitz, president of Horvitz Newspapers, a chain of small community papers serving mainly the suburbs of Seattle, is currently pouring $20 million into a brand new printing facility.
Smaller newspapers will thrive, says Horvitz, simply because "they are the only source of news and information that is local."
It's precisely because all news gathering is ultimately local that, in small rural markets and major metro markets alike, newspapers remain the primary generators of news.
"Only the newspapers are economically organized to gather vast amounts of information," asserts John Morton, of Morton Research Inc., a Silver Spring-based media consulting firm and a columnist for the American Journalism Review. "Television doesn't do it. None of the Internet operations do it." Bill Gates, he points out, tried and failed to do it with his online city guide venture Sidewalk.
"Newspapers have an immense database and they are experts at manipulating it, massaging it and getting it distilled down to usable size," says Morton.
Any journalist knows how other media feed off that news coverage. In Seattle, you cannot hear the morning news announcer on the local NPR "news and information" station actually turning the broadsheet pages as she reads the local news, but the bulletin is usually culled without embarrassment or credit from the front pages of the two metro papers. "There's an old joke," says Morton, "If you want to see television stations panic, go to a town where the newspapers are on strike."
In an era of technology, the newspaper industry's core asset -- vast networks of information-gathering journalists -- is often overlooked. It's an asset other media cannot match and that newspapers can leverage as they move into new digital technologies.
In 2001, the worst advertising year since perhaps the Great Depression, the newspaper operations of the publicly traded companies still managed an average profit margin of 18 percent, according to Morton. All indications are that newspaper companies will remain thriving and profitable businesses and that news will be delivered on paper for a very long time. They have that breathing space to experiment with new technology, new markets, new business models and new media.
There will be casualties as the industry copes with change. But even when paper finally loses its primacy, newspaper companies' key asset -- their networks of reporters -- should ensure that they will remain the gatekeepers to news.