No Business Like News Business

The Wall Street Journal reported last week that executives at Knight Ridder Inc. have laid before potential purchasers a rosy scenario for boosting profits another 20 percent by cutting more journalists and news pages. Here's the talk Tony Ridder should have given his fellow moguls:

Now that I'm 65, I've come to believe that there's more to life than earning more money than you can possibly spend. (My neighbor, Larry Ellison, may disagree.) So I'm going to level with you.

You're familiar with the trends in newspapers -- falling circulation and ad revenue, increasing paper and fuel costs. But you may not be familiar with just how different a business news is from anything else you've run.

If your goal is to make as much money as you possibly can, take a pass on news.

Morgan Stanley estimates that Knight Ridder newspapers spend $350 million a year they don't have to. But the consultants don't understand journalism. That "surplus" spending is what it takes to produce the kind of journalism that has made America strong and rich. It's the reason Knight Ridder has won 84 Pulitzers over the years and Gannett -- which cuts $350 million worth of corners -- has won 45.

Here's what separates news from other businesses you've run. In every business but journalism, the customer is always right. The firm that best satisfies the customer wins the day. But journalism's codes of ethics require news media to disappoint their most important customers -- advertisers. You all know that advertisers provide more than 80 percent of our revenues. You may not know that most retailers want the news tailored to the ad -- to create interest in what's for sale. But news media that take the advertiser's point of view, and not the public's, violate ethical standards. If you uphold those standards, I guarantee that will lose you some advertising dollars.

Not only that, advertisers seek readers with good customer potential. They'll pay more for young people who are establishing homes and buying lots of stuff than for older folks at the end of their buying years.

If you want as many ad dollars as possible, you'll ignore the less affluent and older people in the community. But journalism has an obligation to serve everyone, not just the upscale.

Journalists are also required sometimes to disappoint their other essential customers -- readers. We've pledged in our codes of ethics to tell people what they need to know in order to be effective citizens. Yet on any given day, we could attract a larger audience with stories that merely amuse our readers.

Hell, we'll even disappoint your investors: Often, what readers need to know is hidden by the powerful. Exposing corruption costs much more -- in staff size, expertise and time -- than rewriting press releases and the police blotter.

I don't know if you read any newspapers other than the Wall Street Journal. But last week our San Jose Mercury News provided a terrific example of why journalism isn't a great business. We assigned one of our best-paid reporters, Fredric Tulsky, to do almost nothing else for three years but study the criminal court system in Santa Clara County. Mr. Tulsky tells me his series cost the paper $400,000.

It was the least cost-effective thing we could have done. Yet those stories may free a man improperly convicted and showed flaws in our criminal justice system that affect thousands of local people. Another example. To save money we could close our bureaus in Washington and elsewhere. Why not rely on the Associated Press or the New York Times?

Here's why not. The vaunted New York Times got one of the most important stories of our time wrong. They lost their skepticism and helped sell the Bush administration's casus belli -- that Iraq had weapons of mass destruction.