Capital: Investment in the Future


It took a half-century after Gutenberg’s invention of the press for the book to take on the form we know today. It took a full century, according to Gutenberg scholar Elizabeth Eisenstein, for the book’s impact on society to be fully realized. I’m astounded that it took 150 years — and the development of postal networks — before someone thought to use the press to print the first newspaper, the Strasbourg Relation, in 1605. “The newspaper, as it turned out, would have a difficult birth,” writes Andrew Pettegree in The Invention of News: How The World Came to Know About Itself. “Many of the first newspapers struggled to make money, and swiftly closed…. [I]t would be well over a hundred years from the foundation of the first newspaper before it became an everyday part of life.” In The Transformation of the World: A Global History of the Nineteenth Century, Jürgen Osterhammel adds: “Not until four centuries after Gutenberg did the printed news media enter the daily lives of more than a tiny educated stratum of society.” The term “journalism” did not even come into use until the year 1833.

In the development of the internet and of news in its age, we are — as I write this — only two decades past the introduction of the commercial browser and web in 1994. In Gutenberg years, this is 1470. I doubt we can yet imagine how society will inform itself. We have been too busy trying to save the news we knew to invent what news will be. As far as the newspaper was from the town crier and the balladeer, so will news of the future likely look unrecognizable to us today. There is much innovation, invention, development, risk, and failure yet to come. I am more concerned about funding that work than keeping afloat the ongoing operations of legacy news organizations, for it’s that investment that will build the future.

I teach my entrepreneurial journalism students that Gutenberg was the first technology entrepreneur. He had to solve a complex matrix of technology challenges. His crucial invention was the handheld mold that enabled him to manufacture fonts with precision and speed at scale. He concocted the right metallurgy — lead, tin, and antimony — so each molded letter would cool quickly and aid that speed and scale. He had to find paper, imported from Italy, of just the right thickness to take impressions on both sides. He experimented with the proper amount of moisture on the paper to help the ink — which he also formulated — set with the rich blackness we can still see on his pages today. While working on what were for him beta products — a grammar book — to perfect his process, he operated with Jobsian secrecy to prevent others from stealing his invention. To bring his idea to reality and to market, Gutenberg needed capital. He had to build all that technology, acquire space in Mainz, heat it, pay workmen, and acquire considerable stocks of paper and metal. He went to one Johann Fust to get funds for what Gutenberg interpreted to be equity and Fust took to be a loan. Just as Gutenberg’s Bibles were to come off the press and just as he was finally to benefit from his cash flow, Fust called the loan. They ended up in a court fight, which Gutenberg lost, along with his primary printing plant and most of his business. After I told this tale in a Kindle Single, Gutenberg the Geek, a waggish geek I know summed up the moral of the story with this cringeworthy question: “Would you rather be first or Fust?”

Media startups face similar issues of investment capital and cash flow; that’s why I teach Gutenberg as a case. Every term with my students, I draw on the whiteboard a simplistic chart with what I call the C.A.R rule: A media business starts with nothing and must build its content until it has enough of a critical mass of value to gather an audience until it has enough of a critical mass of people to attract advertising revenue. Content. Audience. Revenue. Until that point is reached, the media business needs investment — cash and sweat equity — sufficient to subsidize its birth. Opening a bakery, on the other hand, one can start earning cash with the first cronut.

Where will the innovation we require come from? It will spring from many levels: from startups that come from classrooms and garages, from the scattered technological Valleys, and, I hope, from some brave legacy companies and their owners. I refuse to give up on the incumbents, though many of my friends in the industry say I should. The old institutions do have assets: cash flow (though in some cases that’s trickling), brand recognition (though that will be fleeting as younger people move through the population python), a measure of trust (though not nearly as much as journalists would like to think), experience (though that can also mean habits that are hard to break), infrastructure (though that can be an economic albatross around their necks), and a system of ethics and standards (isn’t that what defines journalism in the end?). I suppose another asset is desperation and we know whose child that is. Some have given up. The Graham family, who had nurtured, sustained, supported, and protected the Washington Post from 1933 to 2013, surrendered and sold to Jeff Bezos (who, I pray, will bring his expertise in relationships to the enterprise). The Philadelphia Inquirer, once a magnet for Pulitzer Prizes, went through multiple owners and torture of such a sadistic scale that I cannot see it ever recovering. A number of media conglomerates built on a foundation of news spun off their old news and print divisions to keep those financial cooties away from what had become their core business; that is, separating struggling information businesses from profitable entertainment businesses — Scripps in 2007, Belo in 2008, News Corp. in 2013, Tribune Company in 2014, Time-Warner in 2014, Gannett in 2014. Unlike many of these owners and to his credit, Rupert Murdoch did not saddle his legacy spinoff with debt; his new News Corp. started its life with no debt and $2.6 billion in cash — enough to fund considerable innovation.

I have worked with a number of legacy companies during this period, this age of disruption. I was an executive at Advance Publications for a dozen years beginning the month before the release of the commercial browser in 1994. After leaving to teach, I continued working with them on projects in Michigan and New Jersey that resulted in the disbanding of newspaper companies and the formation of new digital companies. Advance reduced frequency of some of its papers to reduce costs. It truly made the transition to digital first when its papers became byproducts produced by small staffs drawing from the digital work being done at the heart of its new online operations. I’ve advised the Guardian starting after it installed what editor-in-chief Alan Rusbridger acknowledged were its last presses and as it began to reimagine itself as a digital enterprise. The Guardian sold assets to build its endowment to over $1 billion and it continues to innovate and grow audience as an international brand, though it also chooses to invest and forego profit. I was on the board of advisers of at Digital First Media as its CEO, Paton, merged together, rethought, and restructured two large and suffering newspaper companies into one more efficient, more digital corporation — America’s second largest chain — that could finally bring returns for its hedge-fund owners. In 2014, to save money, Digital First shut down its centralized hub of innovation, called Project Thunderdome. None of these tales culminates in what journalists would consider a happy ending: more money for more journalists. Each company lost many jobs along the way. Blame me as an adviser, if you will, for not finding the fairy-tale ending. But in spots, I do see progress.

Across many industries, the old, vertically integrated companies operating inside oligopolies are being challenged and replaced by ecosystems built on three layers: platforms at the base that make it possible for entrepreneurial ventures to start and run with less capital and less risk, and networks that bring those ventures to critical mass for sharing resources. To look at an ecosystem such as New Jersey, the platforms — Google, WordPress, Twitter, Facebook, et al — make it possible for a broad array of entrepreneurial ventures to exist — as local blogs or beat businesses, mostly — and now they are coming together in networks to share content, audience, advertising, technology, training, and other services. Today, in these new ecosystems, the platforms gather the scale and the largest share of profit but as the ecosystem develops, its other members will gain strength. Each of these layers is an opportunity for innovation, growth, and investment.

News’ rebirth requires investment at every level: to get beat businesses off the ground and multiplying to scale (tens of thousands of dollars each); to build new and larger-scale news enterprises (low millions of dollars); to innovate and experiment in and rebuild the legacy news companies that survive (tens of millions of dollars each); and to build the technologies that will facilitate the development of new forms of news (anywhere from from a few thousand dollars in a Kickstarter campaign to hundreds of millions for the next Twitter or Google). Where will this money come from? We don’t have enough friends-and-family money and enough charitable and philanthropic dollars to support all that needs to be done. Private equity and hedge funds will not have the long-term perspective needed for this work and the stock market certainly does not. Venture capital? When I visit VCs in Silicon Valley or Alley and argue that there are opportunities in the future of news and journalism, I am often met with polite, sad smiles. Yes, some say, you have opportunities, but not as worthy as those from technology companies. We don’t invest in content, they say. Venture capital is predicated on earning huge returns building disruptive technological platforms that scale. Journalism — content — doesn’t scale. They’re right. This is one reason why I think we must get out of the business of primarily making content and get into the business of building, adapting, or distributing platforms that enable people to share their own information, adding journalistic value to that process (sometimes with content). This is the relationship strategy. I also believe that in many areas — especially local news — scale will come not from the top-down (à la Patch) but instead from the bottom up with the messy, disorganized proliferation of beat businesses: free-agent-nation, mom-or-pop news bakeries. I do not imagine — and do not want — to think that a single behemoth, a Google or Facebook or (heaven help us) a Comcast or Verizon of news, will suddenly rise up to meet all our journalistic and information needs. Venture capital has indeed funded some media ventures, like BuzzFeed, Business Insider, Vox Media, and Vice. Some of these are transitional companies that cleverly exploit opportunities and vulnerabilities in the present marketplace — search-engine optimization or social optimization, for example — but still largely operate under the old, mass-media economics of volume.

When the new dean at my journalism school, Sarah Bartlett, and I met with a series of technology CEOs and investors in Silicon Valley, I urged them not to give journalism their pity and charity. Instead, we told them we need their innovation and investment and a transfer of skills from the West Coast to the East Coast. We need them to build platforms that enable an informed society. We need them to reinvent advertising (and, I hope, find a role for media in that). We need them to invest their fortunes in the future of news.

Journalist and entrepreneur Steve Waldman, founder of Beliefnet and author of a Federal Communications Commission report on the future of news, has argued for some time that we need a new pool of capital for smaller, less-scalable, and — let’s be honest — less-profitable news ventures. Those who care about the future of news — including foundations — would do well to invest in beat businesses to get them over that C.A.R hump, in larger news enterprises that still won’t be large enough to attract venture capital, in new technology-based companies related to news, and in new ventures even from legacy media companies.

Waldman as well as the Knight Foundation also proposed making it easier for news organizations to get not-for-profit status with the IRS. You have probably noted that I have devoted little to no attention in this essay to not-for-profit news organizations. They play a critical role in our news ecosystem, especially as so many legacy institutions suffer. But I want to caution that not-for-profit news, charity, and philanthropy are not our salvation. Often, students arrive in our entrepreneurial journalism class at CUNY thinking that if their ventures are not-for-profit, they needn’t worry about advertising, revenue, profitability, and all those slightly distasteful pursuits that I teach. But, of course, they still must be profitable; whether they put that profit back into the enterprise or into equity-holders’ pockets is mostly a distinction of tax status and ownership. This is why I insist that our students’ businesses in CUNY’s entrepreneurial journalism program be for-profit, because it is the higher business discipline, the better lesson for them. Most times, I succeed at converting them. Once they leave, it’s up to them whether they want to run a not-for-profit business, but then I point them to role models like the head of WNYC public radio in New York, Laura Walker, who is a brilliant businesswoman and tough business negotiator. She most certainly runs WNYC as a business, and a good one. Not all not-for-profit news enterprises operate like hers, though. I see too many not-for-profit news organizations devoting too little attention to their own sustainability, investing nothing in raising the revenue they need to keep their good work going and betting their futures on the hope that God or foundations will provide. Not-for-profit news organizations need to exist in a news ecosystem to do those things the market will not do, to cover the broccoli news that matters but won’t necessarily attract sizable audience, to patiently dog the stories that need dogging, and to experiment. Organizations such as WNYC, NPR, ProPublica, The Texas Tribune, Chalkbeat, and the Center for Investigative Reporting do that.

There is a role for philanthropy in the development of a future for news. I do not want their charity to interfere in the market and support that which should be sustainable on its own. I do want them to help support the exploration of new journalistic models, technologies, infrastructure, and ventures as well as business models. They can provide patient capital to fund aggressive attempts to explore new relationships, forms, and models for news. What about government support of news? I see danger in government intervention in speech — in journalism — especially in the United States, where it inevitably leads to political pressure and conflict. In Europe and other countries, I have argued that public media already supported by mandatory fees (read: taxes) should become a supporter of the best of market media and an open-source laboratory for innovation in news. Universities, too, should play a role, not only by training tomorrow’s journalists and entrepreneurs and retraining today’s but also by creating laboratories where innovators can build and explore.

At the start of this essay, I said I would not and could not predict the future of news. But I will make a few bets. Given (1) the strategic straits of large, legacy news companies and (2) the negative attitude toward news as a business held by sources of capital — VCs and the market — and (3) the necessity of inefficient human effort in journalism, I will bet that news will no longer be the domain of vertically integrated corporations. Instead, news will come from distributed ecosystems of specialized enterprises of various sizes, business models, and motives. News will be messy and uneven for sometime to come. But there will be a constantly growing demand for news and information. And now that the public has more means of sharing information, there will also be more sources of news. So I will bet that there will more need and opportunities for journalists. If I didn’t believe that, I shouldn’t be teaching in a journalism school.

Beside that rather safe bet, I can only make recommendations. I believe journalism should recast itself not as a mass medium or a content producer but as a service built on a foundation of engaged and collaborative relationships with individuals and communities in the public. Journalists should listen first, helping the people they serve meet their own needs and goals. Journalists should question the assumptions and orthodoxies, the culture and organization that arose from their Gutenberg- and industrial-era means of production and distribution and take advantage of the many new opportunities geeks have given them to meet their mission of informing society in better ways.

From a business perspective, legacy news companies need to finish cutting and build their digital futures now. I believe any news enterprise — small or large, new or old, profit or not-for-profit — will benefit from a relationship strategy based on value over volume for both users and advertisers. I wish that every constituent and layer in the new news ecosystem — news organizations of every description, advertisers and their agencies, universities, foundations, and civil society — would invest in innovation to find new futures for news.

I’ve given you one view: mine. In the beginning of this essay, I asked you to share yours. What futures do you imagine for news? Building the future of journalism requires both urgency and patience. There is no time to waste to recognize the disruption that is upon us, to question old assumptions, to cast off obsolete ways and their costs, to find and exploit new opportunities to better serve our public, and to find new sources of revenue. We also require patience so we have the time to experiment and to fail. We need to support the work of innovators who are not burdened with the assumptions of my generation, who will define news in ways we cannot yet imagine. Their inventions may shock and surprise us — until, like the book and the newspaper, they seem to be such self-evident products of their era. Remember, this is 1470 in Gutenberg years.

Now I return to my friend John Paton, with whom I began this part of the essay. John is controversial because he tries to be. He shakes up people in this industry because they need to be shaken up. Some say he promised too much. Perhaps he did. Or perhaps they put too much hope in him when his time was necessarily limited. Paton did precisely what his hedge-fund investors expected him to do: increase the value of what they saw as troubled assets and we see as treasured institutions of news. He accomplished more as well: bringing a new culture, new expectations, new methods, and even new hope to his newspapers. Then he asked what would come next. But he did not have the patient capital that could get him there. The hedge funds put the company up for sale in 2014. As a colleague of mine observed: Paton was not the Messiah. He was more Moses. He got his newspapers through the desert, making them more digital and sustainable. But he and his owners were not destined to reach the Promised Land. That responsibility and privilege will fall to my students and perhaps to their children: to invent the future of news. That is why I teach, to watch and perhaps help them do that.


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