When the business desk covers itself

By Sarah Rabil

It’s no secret that media companies are big business. Happenings at big companies are big news, and a media outlet’s own company is no exception.

But what do business media outlets do when their parent company is making potential headline news?

Take The Wall Street Journal and the rest of its parent Dow Jones & Co., for instance. It’s worth $5 billion, or $60 per share — at least by Rupert Murdoch’s estimation. Murdoch and his company News Corp. recently made an unsolicited takeover bid for Dow Jones, which includes, among the Journal, Barron’s, MarketWatch.com and Dow Jones Newswires. His bid valued the company at a roughly 67 percent premium based on the stock price when news of the offer broke.

The media mogul’s bid raises questions about whether the nation’s largest financial daily would retain editorial independence. Many Journal reporters have begun a campaign to appeal to the Bancroft family, who own 24.7 percent of shares outstanding but 64.2 percent of the voting power, to reject the offer.

In the midst of the uncertainty, Journal reporters had to stay on top of the unfolding news and recover from the surprising scoop by CNBC. And it turns out that the newspaper’s top editor knew about the bid, but decided not to run the news.

They're not alone, either. Business journalists at the Reuters wire service have been faced with the unenviable task of writing about their company's discussions to be acquired by Thomson Corp. for $17.6 billion.

As the media industry has gone through the ups and downs of takeovers, consolidation, layoffs and attempts to redefine its products to compete with new technology, news organizations have become the subjects of business news.

With the recent rush of news about the media business as a reminder, news outlets have had to weigh how to cover themselves. Many media outlets ignore financial coverage of their company, while others have actively delved into the inner business workings for readers to see.

It’s a decision that many organizations aren’t taking lightly because of the potential impact on credibility with readers and on the perception of conflict of interest.

“When a newspaper’s covering its own story it has to be especially tough and unrelenting to prove it’s not trying to cover anything up,” said Phil Meyer, Knight Chair in Journalism professor at the University of North Carolina at Chapel Hill. Meyer is also the author of The Vanishing Newspaper, Precision Journalism and Ethical Journalism.

Watching the Watchdog

Media outlets have gone through turmoil in recent years with newspaper circulation declining, as has trust in the media. Many argue that solid credibility and hard-hitting watchdog journalism is the way to lure or maintain newsreaders and audiences.

As mainstream media has consolidated into bigger media conglomerates, the issue has only become more pressing.

“The power of the press is becoming more concentrated, and that means it’s more important to have somebody watching the watchdog, and so media have to watch each other,” Meyer said.

The growth of the Internet has had a significant impact because many bloggers now act as the watchdogs of the media, he said.

But many experts and journalists in the field argue that you can’t always leave it to someone else. Some news outlets choose to aggressively cover their company. Others try to balance their interest in the story against the interests of readers. Other times when big news involves the media, that organization will bring in an outside party to handle the coverage.

The media must also consider how the public views insider coverage. Meyer suggests that it may be a community of interest and not a conflict of interest when reporters are involved in coverage of their own company in which they clearly have a vested interest.

“The problem is that the public might perceive you as being biased,” Meyer said. “I trust reporters to separate fact from fiction even where their own interests are involved.”

But when there’s concern about the perception of bias — which is really all that matters with readers — Meyer said that bringing in an outside reporter for the coverage may be a good way to handle the problem. That outside reporter could even be part of the same chain, just from a different location.

Coverage from the Inside: News Corp.’s Bid for Dow Jones

On May 1, financial news channel CNBC scooped The Journal on Murdoch’s unsolicited takeover bid for Dow Jones. It was the kind of story the Journal is rarely scooped on. The Journal was beat not only on a major deal proposal, but on one that hit surprisingly close to home.

The New York Times reported in an article May 8 that Paul E. Steiger, the paper’s top editor knew of Murdoch’s offer but decided not to publish any news of it.

“The Journal’s decision raises a nettlesome issue for the media: What are a news organization’s obligations to report important market-moving news about itself or its parent company before the news is officially disclosed?” wrote Times reporters Andrew Ross Sorkin and Richard Pérez Peña in the article “Wall St. Journal Editors Held News of Murdoch Bid.”

Since the announcement that the man behind Fox News could potentially control the Journal, tensions have been running high inside the Journal newsroom, according to accounts published in various news outlets.

Despite news that hit home for Journal reporters afraid of losing their jobs or succumbing to editorial influence, several reporters had to cover the big business news for the paper.

In the wake of all the rumors and uncertainty, Steiger sent a memo to Journal employees offering guidance soon after the news broke. Jon Fine of BusinessWeek posted the memo on his blog “Fine on Media.”

In the memo, Steiger told the staff that the higher-than-market bid was a testament to the high integrity and quality of their work. But he also included a reminder of their mission in the wake of the acquisition offer: “It is always crucial to be accurate and fair. It is intensely crucial when we are the subject of the story.”

Variety ran an article on May 4 analyzing how the media outlets involved handled the news in which they had a vested interest.

In the article “In the loop with Rupe: CNBC getting juicy news leaks,” Steven Zeitchik looked at CNBC’s “improbable” leading of the coverage ahead of both the Journal and Murdoch’s News Corp.-owned Fox News — two companies involved in the proposed merger.

Fox News promptly scheduled the News Corp. chief on "Your World With Neil Cavuto,” where Murdoch pled his case.

On the other hand, the Journal didn’t have an interview with Murdoch for the breaking news.

“Here was the biggest business story of the day, and the respected paper didn't have an interview with the principal — the exact interview that the Journal usually gets ahead of everyone else,” Zeitchik wrote.

“So the decision was made to post the transcript of Murdoch's chat with Cavuto on the Journal's Web site, making for the unusual instance of a potential buyer getting a platform in the very publication he's seeking to purchase,” Zeitchik further noted.

Jonathan Higuera wrote in a May 2 posting on www.BusinessJournalism.org that the Journal bypassed an angle that all other major newspapers included in their coverage. “All the stories in the large dailies, except for The Wall Street Journal piece, noted the opposition from the union representing many Journal newsroom staffers,” Higuera wrote in the article “Fear and Loathing at the WSJ.”

Within hours of CNBC’s initial report of Murdoch’s bid, the Independent Association of Publishers’ Employees, which represents hundreds of business journalists who work at the Journal and other Dow Jones media, issued a statement opposing the buyout proposal.

“Mr. Murdoch has shown a willingness to crush quality and independence, and there is no reason to think he would handle Dow Jones or The Journal any differently,” according to a prepared statement from IAPE on May 1. “Despite our differences of opinion with current management, we strongly encourage the Bancrofts to continue to stand up for the institution's independence, and to walk away from this offer.”

But Josh Mills, professor of journalism at Baruch College, said in an e-mail that the Journal’s coverage of the takeover proposal has been “an example of how you can use your familiarity to sharpen the coverage.”

The Journal’s features and focus on the Bancroft family have been well done, Mills stated. “On the other hand, the coverage I've seen has been less strong in focusing on Murdoch's track record and history,” he wrote.

Another media player connected with the newsmaker was Murdoch’s New York Post. The next day’s paper didn’t refer to its owner’s bid until page 37 in the business section.

Maintaining Credibility When Covering Your Own Company

Covering your own company is a terrible assignment because there are so many ways to make so many people mad at you, professor Meyer said.

“But the fact is, because a newspaper depends on trust for its success, it’s got to cover its own news-making activities as relentlessly and as pitilessly as it does anybody else,” Meyer said.

Three years ago, James Madore, then a media reporter at Newsday, received such an assignment.

In February 2004, several smaller advertisers filed a lawsuit against Newsday alleging circulation fraud. The company initially disputed the accusations. But as details unfolded, Newsday began to realize the magnitude of the story about its business side.

“We’re always exposing people for problems, and if we’re going to be credible, if we have a problem, we have to tell our readers about it,” said Madore, still at Newsday, but now covering politics.

Newsday assembled a team of reporters including an editor, Madore and four other reporters, each with a different specialty, who all spent a year on the investigation of their own company. Rather than one big investigative piece, the team published daily stories as soon as they gathered enough information about a particular area of the saga.

“We did not want someone else to tell our story. We wanted to tell our story,” he said.

The investigation exposed sham street-hawker operations that fraudulently boosted circulation numbers at the Tribune-owned Newsday and Hoy. The scams stretched back at least three years to 2001. The scandal led to the firing of over a dozen circulation managers and the retirement or ousting of several top officials, including Newsday publisher Raymond Jansen. Multiple executives were indicted and pled guilty, Madore said.

“We have the oldest investigations team in the country, and we have a tradition of covering ourselves very vigilantly,” Madore said. “This was not the first time we had covered a problem dealing with the paper.”

There’s a direct link between how good a media outlet covers its own company and credibility with readers and advertisers, Mills said. But the link is only with those who care about the issues, a portion which might only make up a fraction of business section readers.

“I don't think many people who pick up the paper for movie reviews or sports or comics (or local news) are going to care all that much about earnings and other business issues,” Mills said in an e-mail.

The Insider Ball Game of a Sale

Some media outlets have taken the sale of their publication as an opportunity to probe and print the insider ball game of the business deal. Bo Burlingham, author of Small Giants: Companies That Choose to Be Great Instead of Big and editor-at-large at Inc. magazine, did just that in a September 2005 cover story.

In “The Anatomy of a Sale — Ours”, Burlingham gives the play-by-play of Inc.’s parent company Gruner + Jahr AG’s decision to sell its U.S. magazine business and the ensuing auction of Inc. and Fast Company.

In a lengthy, uniquely first-person account of the one-month, whirlwind process, Burlingham, who has been at Inc. since 1983, traces the reactions and business lessons of the sale of the magazine. When an Inc. management buyout proved unfeasible, in came bidders such as Joe Mansueto (founder and CEO of Morningstar), Advance Publications, The Economist Group, Abry Partners and another private equity firm called Alta Communications.

Burlingham traces the roller coaster ride of speculation and weighs the pros and cons of each potential suitor from his insider’s perspective. Twenty-nine days after it all began, Mansueto emerged the victor, purchasing the two financial magazines for roughly $32.75 million.

In a phone interview, Burlingham said he chose to write the article as a player and an insider because “it would have been too phony for us to write it as if we weren’t there. We have to be real about it.”

But Burlingham said that he and the rest of the newsroom were initially skeptical of then-Inc. editor-in-chief John Koten’s idea to write a story about the process of going through a sale. But he soon realized the business lessons it could impart on Inc.’s entrepreneur audience.

“For us, the experience of going through the sale was just like a tremendous learning experience,” he said. “You learn a lot about business in going through that sale, and that was knowledge we wanted to share with our readers.”

Inc. had long urged its readers to practice open book management, and Burlingham said this story was a big step for the magazine to practice what it preached.

“We sort of took this as a way to say to our readers, ‘This is what we’re about. This is the kind of magazine we want to be, and this is the kind of company we’re going to be,’” he said.

Also, an editor’s note that ran alongside the story said this type of story wasn’t common. It read: “We don't plan to make a habit of writing about ourselves. In fact, when G+J announced in May that it was putting Inc. (and sister magazine Fast Company) up for sale, it never occurred to us that we might end up writing a story about our auction. Obviously, we can't be as dispassionate about our own business as we try to be with others, but it's rare that we have ringside seats for such an interesting process and we learned so much that we decided to share it with you.”

Burlingham emphasized that this article was strictly for the insight it could offer Inc. readers, who he said responded with fascination. “We did not write this for the journalism community,” he said. “Even though we knew they were all going to be looking at it.”

Balancing Self-Coverage with Readers’ Interest

During last year’s sale of Knight Ridder newspapers to McClatchy, The Charlotte Observer, which had been part of the Knight Ridder chain, had to determine how to cover the evolving deal. The newspaper wasn’t one of the Knight Ridder papers being spun off by McClatchy. It also wasn’t based in the same place as its parent company in San Jose.

“There wasn’t any top down direction on how we covered it, generally just that sort of guiding principle of, ‘Are we getting caught up in our own story, or is this something readers really care about?’” said Patrick Scott, business editor at the Observer.

Scott said it’s easy to get caught up in what’s going on inside one’s own company. However, it’s also easy to mistakenly assume that it’s the most fascinating thing going on.

The Observer opted for a combination of articles from Knight Ridder news service in San Jose, Associated Press wire and Observer staff.

“I think in the beginning … we had the old Knight Ridder structure, so we were relying on San Jose (bureau reporters) for the breaking news on that and the inside sources since they were at the heart of the story,” Scott said.

The local staff focused on Carolina-centric articles or enterprise coverage, such as an in-depth look McClatch’s online media focus.

“When it’s in the field of takeover and buyouts ... and it seems like they’re a dime a dozen … you have to be aggressive on those stories as well in questioning the metrics of the deal,” he said.

“But it was kind of tricky in our position when the two main companies were not in our city and were not our companies … so it wasn’t as big of a story for us throwing a lot of reporting strength in it because we already had people in the chain doing that.”

McClatchy complete the acquisition of Knight Ridder and its 32 daily newspapers in June 2006. Twelve former Knight Ridder newspapers were soon spun off and sold.

When it comes to mergers and acquisitions, the Observer tries to scrutinize whether to cover stories about itself the same way it would scrutinize whether to cover other major companies in the area. Scott said he looks at whether there is interest in the story from readers and whether its watchdog or enterprise coverage.

Scott is one business editor among many trying to discover the perfect formula for covering business news of one’s own company. If recent events are any indication, media consolidation and fledgling reader trust are only going to complicate the matter. It’s a time when business news needs to be gaining readership trust more than ever if traditional media wants to survive in the face of constantly smarter technology and a sea of blogger watchdogs.

But even the nation’s top financial daily has yet to get it down to a science.

Sarah Rabil is a business journalism student at the University of North Carolina at Chapel Hill. She interned at the Charlotte Observer's business desk last summer

Posted May 8, 2007