Tag Archives: New media

Power, Money, and (Legal) Loopholes

Score one for the “old media” scions of journalism! Thanks to the investigative reporters at CBS News’ Sunday program 60 Minutes, the STOCK Act has now been passed by both houses of Congress and appears to be on its way into the law books.

The Act prohibits members of Congress from engaging in insider trading activities. Once passed, our elected officials will no longer be able to trade on confidential information that they obtain while performing their governmental duties.

It’s always a pleasure to watch the venerable news program, one that came of age over 40 years ago, serve the public interest by practicing the profession of journalism. But isn’t it odd that, at this moment in time, federal officials are still permitted to engage in insider trading?

Loopholes, Loopholes, Loopholes

Apparently, the criminal laws that prohibit insider trading have never covered members of Congress. Although they’ve been employed for decades to imprison business executives from the fictional Gordon Gekko to the real Martha Stewart, they’ve never been applied to our Congressional officials, thanks to loopholes that were written into the law by those same officials.

Such loopholes are, regrettably, relatively common. Elected officials at both the national and local levels, for instance, are often permitted to spend their political campaign contributions for personal benefit. And when Indiana Senator Evan Bayh recently announced that he would retire from government, government officials confirmed that he could dedicate his $13 million campaign fund to any legitimate charitable or political purpose.

To be sure, Bayh has undoubtedly earned far more money after leaving office by joining the “K Street” Washington law firm McGuire Woods and the private equity firm Apollo Global Management. Nevertheless, even though Senator Bayh has never been accused of committing an illegal act, the existence of the campaign contribution loophole — like the existence of the insider trading loophole — feeds the sense of ethical skepticism that Americans harbor about government ethics.

Words vs. Deeds: A National Republican

A similar sense of skepticism is generated when our elected officials fail to take the time to explain technical business concepts to the general public. Consider, for instance, the issue of Republican presidential candidate Mitt Romney’s recent tax returns. According to the Romney campaign, he simply pays the stipulated 15% tax rate that is applicable to long term capital gain transactions.

What they fail to explain, though, is that the vast majority of Romney’s earnings are not classified as capital gains at all. They’re actually deferred earnings, which — due to another loophole in the federal law — are classified as carried interest and are taxed at the 15% rate.

Like Democratic Senator Bayh, Republican candidate Romney follows the law and simply takes advantage of existing loopholes. And yet, by failing to fully explain the technicalities of the situation to the American people, Romney’s campaign arguably feeds a sense of public skepticism in government.

Words vs. Deeds: A Local Democrat

Some loopholes, incidentally, are verbal (and not legal) statements that utilize technical business jargon, albeit in ways that are incomprehensible to the general public. Last week, for instance, in the annual Governor’s State of the State Address in Hartford, Connecticut, Governor Malloy proudly proclaimed that his administration “brought honesty and transparency to the state’s books by moving to GAAP.”

He was referring, of course, to his heavily publicized (and deservedly praised) Executive Order #1, which ordered the Nutmeg State to adopt Generally Accepted Accounting Principles (i.e. GAAP) in lieu of non-traditional budgetary accounting methods. What he didn’t mention, though, was that he followed his Executive Order #1 with a subsequent order to delay GAAP’s adoption by two years. In other words, at the present time, Connecticut is not yet utilizing GAAP.

If a Governor initially announces the adoption of GAAP, and then subsequently delays its adoption, is it fair to assert that his State has moved to GAAP? It depends on how you interpret the phrase “moved to GAAP,” doesn’t it? The vagueness of the phrase itself represents a verbal loophole of sorts, given that very few citizens have any idea what it really means.

Power to the Press

And that’s why press stalwarts like 60 Minutes generate civic value. Once American citizens understand how these loopholes actually function, and what these technical terms truly mean, they can apply pressure to their elected officials to act more transparently and speak more clearly.

The STOCK Act, after all, languished for six years until 60 Minutes presented a story about it last November. Then, in response to public pressure, our Congressional leaders finally began to move it towards passage.

Although “new media” companies have earned a significant amount of respect for contributing to the public discourse, the 60 Minutes story demonstrates that “old media” journalists remain a potent force as well. Whether or not you read newspapers and watch traditional television newscasts, you are undoubtedly benefitting from their investigative activities.

Goodbye, Newsprint? Not So Fast!

Do you still flip through the inky news-printed sheets of a telephone book to search for the phone numbers of your friends? If you do, you were undoubtedly saddened by the recent news that AT&T will no longer distribute phone books to the residents of Houston, Texas, America’s fourth largest metropolis.

The demise of classic telephone books may seem to be inevitable, considering the growth of information search on the internet and the adoption of mobile telecommunication systems. But it might be premature to write off other sectors of the established “paper and ink” media market just yet.

The weekly magazine Newsweek, for instance, just received a new lease on life from the Daily Beast, an online service that values Newsweek’s ink-stained pedigree. This unique marriage of old media and new media organizations may indeed portend the future of the consolidating publishing industry.

Introducing … the Daily Beast’s Print Edition!

The surprising union of Newsweek and the Daily Beast might actually owe its existence to the unexpected success of the most unusual newspaper in Washington, DC. It’s the paper publication of Politico, the web site for political news junkies that launched a year before the 2008 presidential election, and that has arguably become the most influential political news service in the nation’s capitol.

Many web based readers outside of the capitol region are unaware that Politico publishes a traditional paper edition. And yet the print edition is responsible for helping the organization earn much of its revenue. The owners of Newsweek and the Daily Beast were undoubtedly aware of Politico’s successful hybrid model of paper and electronic distribution systems when they decided to merge their own operations.

Newsweek itself, the venerable news magazine that first launched during the Great Depression, was recently sold by the Washington Post after having fallen upon hard times. Meanwhile, Tina Brown’s web based news organization The Daily Beast was searching for a traditional print publication to help diversify its distribution system. Last week’s joint agreement between the decades-old news weekly and the spunky web based upstart appeared to emulate the Politico business model.

Different Ad Formats, Different Prices

Why are traditional printed newspapers so valuable to web based news organizations? The reason is a simple one: newsprint advertisements can be sold for higher prices than online advertisements. Although the circulation statistics of print newspapers continue to fall as young readers flock to the internet, their remaining readers continue to grow relatively older, relatively more homogenous in their needs and preferences, and thus relatively more attractive to firms that focus on middle aged and elderly consumers. Such consumers tend to be closer to retirement age, and thus tend to have accumulated larger amounts of personal wealth, than their younger counterparts.

In a sense, the evolving market for the printed editions of newspapers and magazines is growing increasingly similar to the aging viewer demographics for the flagship evening news broadcasts of the Big Three television networks. Have you ever noticed how many advertisements for heart medications, urinary disorder drugs, and other pharmaceuticals now run on these evening newscasts? As younger viewers leave Katie Couric, Brian Williams, and Diane Sawyer behind, the demographic profiles of their remaining viewers grow more attractive to organizations that sell services to the middle aged and elderly.

That’s not to say that all Newsweek readers are elderly and wealthy, of course. Nevertheless, they are most certainly different than the readers of the Daily Beast’s online content; furthermore, as readers of printed pages, they draw higher prices for advertisements from organizations that wish to reach them. Interestingly, some experts believe that the tactile nature of news print, and the visual ease of reading ink on paper, lengthens and enriches the reading experience, thereby driving up the value (and thus the price) of newsprint based advertising as well.

New Models

What will the new Daily Beast / Newsweek product actually look like? Tina Brown, the founder of the Beast and the new editor-in-chief of the joint entity, can be expected to draw upon her past experience in resuscitating the classic Vanity Fair publication. She might also take heed of Bloomberg’s recent success with Business Week as well.

Vanity Fair was originally a fashion magazine that prospered during the Roaring 1920s; it was later folded into Vogue during the Great Depression. Brown successfully brought back the title for publisher Conde Nast during the prosperous era of the 1980s. And Business Week, like Newsweek, first developed a stable readership base during the Great Depression; it was recently purchased by the online news organization Bloomberg and repositioned in much the same manner as Brown envisions doing for Newsweek.

So it appears that old and new media models are increasingly converging as news organizations continue to search for incremental advertising dollars.  Is there a future for paper telephone books, though? Those relics, unlike printed newspapers, may indeed be obsolete.

And The Winner Is … Network Television!

Congratulations to Kathryn Bigelow, the first woman in history to win an Academy Award for Best Director! From race car driver Danica Patrick to high school football coach Natalie Randolph, and now to Ms. Bigelow, American women have repeatedly shattered glass ceilings during the past two years.

But did you actually watch ABC’s televised network coverage of Kathryn’s historic acceptance speech? Conventional wisdom would predict that you didn’t bother to do so. Instead, you might have learned about her victory through some new media channel.

Readers are turning away from newspapers, for instance, and are using RSS feeds to focus on narrow self-defined topics. And viewers are ignoring the prime time schedules of their favorite networks, instead opting to watch specific episodes that appeal to them on web sites like Hulu, as well as niche cable channels like Food Network.

Conventional Wisdom Beware!

This is indeed the conventional wisdom … but is it true? Are new media outlets truly replacing traditional forms of communication?

Let’s consider the newspaper industry. On the one hand, circulation statistics have been falling for years, and papers in cities as large as Denver, San Francisco, and Seattle have indeed folded. But have you noticed some promising developments at the New York Times? Its web site is now attracting more than 20 million unique visitors each month, and it has publicly announced plans to start charging for access next year.

Furthermore, it has created a global online edition for international readers, and it is developing a special multimedia edition for Apple’s new iPad device. These initiatives are helping the Times reach readers who never could have subscribed to traditional delivery services.

And strangely enough, live network television events from the Super Bowl to the Olympics to the Academy Awards have all recently enjoyed surges in viewership levels. Public interest in these events has reached such heights, in fact, that ABC’s parent company Disney successfully wrestled better contractual terms from cable provider Cablevision by threatening to black out ABC’s live Oscar broadcast on that cable service. Viewers actually missed the first fourteen minutes of the Awards telecast before Cablevision relented and ABC restored the transmission.

So a venerable media company like Disney actually used consumer demand for traditional network television coverage of a decades old Hollywood awards show to help it negotiate a better deal with a cable television provider! How could this have occurred when conventional wisdom is stating that demand for traditional media is waning?

Come and Meet Those Dancing Feet

Disney itself has a long history of supporting traditional entertainment media outlets at times when competitors and customers appear to have abandoned them. In the early 1990s, for instance, it committed to renovating New York City’s historic New Amsterdam Theater, which was built in 1903 and later served as the home of the famed vaudeville variety show Ziegfield Follies.

At the time, many commentators were astonished by Disney’s desire to commit corporate funds to the restoration of a decrepit relic of a bygone theatrical age, located on the seedy side of 42nd Street. But Disney’s then-CEO Michael Eisner believed that audiences would always be drawn to engaging stories presented in traditional mass media outlets, and thus spotted a business opportunity in an ancient format that first engaged audiences several millennia ago, i.e. live theater. And today, global tourists come and meet those dancing feet at live theaters throughout 42nd Street and Times Square.

Likewise, a few months ago, Disney again astonished commentators by releasing an animated film called The Princess and the Frog, utilizing the obsolete two dimensional hand drawn technology that they first employed for Snow White and the Seven Dwarfs in 1937. Although Disney itself discontinued that technology and committed to computer graphics animation when it bought Pixar in 2006, Disney’s now-CEO Robert Iger (like Eisner before him) believes that audiences would always be drawn to compelling tales in traditional formats; he thus resurrected Disney’s fabled hand drawn animation unit. And his instincts were proven correct when The Princess and the Frog soared to the top of the box office listings during the peak holiday season.

Two Steps Forward, One Step Back

Of course, it is important to note that Disney is also extremely active in the world of new media. For instance, its ESPN family of cable television networks dominates the fields of sports news and entertainment. Likewise, its virtual reality web services – like Club Penguin, for instance – are competing ferociously in the race to develop the next generation of interactive online social media services.

But for each pair of steps that Disney takes forward into the future of media news and entertainment, it takes a step back into the media outlets of the past, reflecting its belief that audiences will continue to desire both types of services. That’s why you might have joined millions of other Americans to watch Kathryn Bigelow accept her Oscar last week, and why the conventional wisdom about the demise of traditional media outlets is proving to be premature.