Quality! Influence! Profits!
This just in:
Knight Ridder (NYSE: KRI) is up two points today following the release of the Total News Quality scores this morning. The company beat analysts' predictions with a TNQ of 84, six points higher than expected. Knight Ridder representatives say their performance is the result of strategic newsroom investments made three years ago.
Wake up, Prof. Philip Meyer -- you're dreaming.
Meyer imagines a world where what's written above -- now just a fantasy -- could be real news; a world where meaningful metrics of news quality would replace quarterly profits as the indicator of a news organization's long-term health.
A former national correspondent and research director at Knight Ridder, Meyer now holds the Knight Chair in Journalism at the University of North Carolina at Chapel Hill. He recently spoke to a group of top news executive and editors at Poynter's Journalism and Business Values conference. They had come to St. Petersburg to discuss the tension between profits and quality in modern news organizations -- but Meyer found them too complacent.
"You guys are so calm about what's happening," he said, "but the situation is deteriorating so rapidly. I hope you leave here less comfortable than you came in."
Meyer comes to the question of quality with the assumption that the industry is in dire straits. According to University of Chicago research, confidence in the press wanes about 0.8 percent every year. Doesn't sound like much -- but it's been doing that for 40 years. There's more:
Daily readership is down, too, by about 1 percent every year since the '60s. In 1970, around 70 percent of Americans read a newspaper every day; by 2000, it was down to 40 percent. "By my calculations," Meyer said, tongue lightly in cheek, "the last daily reader will disappear in September 2043."
The problem, he said, is that newspapers are being challenged by disruptive technologies -- innovations that set new standards for an entire industry. Think of railroad companies in the early 20th century, suddenly challenged by trucking and air freight. In 2003, TV, the Internet, and burgeoning wireless networks all undermine the stronghold that newspapers once held.
One response to disruptive technology is to re-group around your core business. Newspapers are not really in the newspaper business, Meyer said; nor are they in the news business, or even the information business. Rather, they're in the influence business.
"We produce two kinds of influence," he said. "One is commercial influence, which is for sale. The other is societal influence, which is not for sale."
The influence theory is not Meyer's originally. He nabbed it from a Knight Ridder executive named Hal Jurgensmeyer (you can find a complete explanation here). For Jurgensmeyer, it was just conjecture; Meyer's purpose is to make it into an empirically-tested model.
"One trouble across all aspects of our society," Meyer said, "is that we try to solve problems with numbers, so we focus on variables that are easy to measure" such as quarterly profit and annual growth.
But the preoccupation with easy numbers is not only useless, he said, it's harmful. One quarter's poor results can eviscerate a newsroom. As Gil Thelen, exeutive editor of the Tampa Tribune, later said: "It takes years to build capacity in a newsroom that can be destroyed in six months."
Therefore, Meyer thinks "we need better ways to come up with the prospects for business success for news companies." To that end, he's working with the Knight Foundation, New Directions for News, and UNC to research and codify some better ways.
Meyer's first problem: How do you measure business success if you're an outsider with no access to internal financial data? One proxy, he thinks, is household penetration in the home county -- a figure that all newspapers want to dominate, he says. He is especially interested in what he calls "robustness" -- a paper's ability to sustain the same level of household penetration for five years.
Likewise, Meyer needs a proxy for influence, and he thinks he has one. The Knight Foundation does a survey of social indicators in the 26 Knight communities (see a list here). One of the questions is: "Thinking of the newspaper you're most familiar with, how often do you believe it?" In other words -- how credible is the paper? Does the paper have influence?
When Meyer sets robustness up against credibility, he sees a strong positive correlation -- robustness goes up 0.8 percent for every 1 percent increase in credibility.
There's more. When Meyer compared published advertising rates to credibility, he found that for each 1 percent increase in credibility, the price of a standard advertising unit increases $3.50.
So is that proof of a causal relationship between quality and business success? Not yet. But Meyer's got more to work with, including the results of a mail survey of thousands of people used as sources in newspaper stories. He'll have a manuscript by the end of the year.
He told Editor & Publisher, "I know in my heart credibility has economic value. What I need is to find evidence that will convince people who think of the newspaper business as an economic entity."
It'll be a tough crowd to convince.
Lauren Fine, who advises institutional investors on newspaper stocks (and also serves on Poynter's National Advisory Board), said she doesn't think Wall Street's the problem. Rather, "I think it's an industry in turmoil."
Bill Drewry advises investors from a similar post at Credit Suisse First Boston. Asked about quality, he said: "It's tough for us to calibrate that into our financial models. Most of what I do is quantitative. ... For companies that have many properties, [quality] all sort've melts together."
Would concrete measures of news capacity be useful to Wall Street analysts? "Not really," Fine said. "It'd be interesting to know. But the stories are so different."
So unless Meyer can find a causal link between quality or influence and business performance, and find a way to control for all those unique "stories," quality will continue to be a tough sell. Though common wisdom insists that quality is the key to long-term performance, Wall Street wants figures to back it up.