Farzad

Photo by Patrick Harbron

Those were the searing words of my editor, as I handed him the HBS recommendation form and a stamped envelope. This was my mentor, mind you — the mensch who launched me into feature writing after taking me in as a Wall Street Power- Point mule. He shielded me from layoffs. He got me on TV. He introduced me to his editors and mentors and reintroduced me to subject-verb agreement.

And I was going to repay all of this by, in his words, “going to the dark side?” You know, that two-year sojourn for bankers and consultants cruising to nine-figured hegemony.

But I wasn’t going to HBS to rebrand as Gordon Gekko or Lumbergh from Office Space. No, mon frère, I wanted to emerge as a more Rolodexed, numbers-savvy, overall better business journalist. Plus, I’d be riding out a nasty media-sector slump.

Three years after my graduation from HBS, the business of journalism has never been so strategically and existentially confused. It’s a mystery wrapped within a paradox wrapped within thousands of billable consultant hours, something M. Night Shyamalan should tackle in his next film. More people are e-mailing and reading articles than ever before, bringing record traffic to the Web sites of newspapers and magazines. And yet, as print ads flee online for pennies on the dollar — and newsprint prices jump while circulation and newsstand sales slump — these enterprises have never seen their financial prospects dim so rapidly. The very business of journalism is dying.

Should you care? Well, did you care about Watergate or Vietnam or Enron, just a few of the countless national episodes vivisected by a vigilant press? Should you care that a credit crisis is roiling markets the world over as business reporters move en masse into PR and investor relations? Meanwhile, only 25 full-time journalists are embedded in Iraq, compared with 500 in Vietnam in the 1970s. Is the decline of the Fourth Estate no more lamentable than that of the Sony Walkman?

Things are feeling downright funereal. Newsweek purged 111 staffers from its masthead, while rival U.S. News & World Report will downshift from publishing weekly to biweekly. Knight Ridder, the Wall Street darling that owned the Philadelphia Inquirer and Detroit Free Press, is no more, having been swallowed and largely written off by a peer whose own fortunes then nose-dived. Tribune, the parent of the pink slip–coated LA Times, is so hard up that it’s slashing $500,000 a year in office-supply spending. With its shares near a decade low, the New York Times Company now has just 1.33 percent the market capitalization of Google.

“Like most print journalists,” wrote Miami Herald columnist Leonard Pitts Jr., “I’m sentimental about newspapers. But I’m also sentimental about eating.”

For all you Baker Scholars keeping score at home: That’s where this case begs to be cracked. For robust journalism to have any hope of surviving, it must find a new, workable business model. . .and fast. No self-respecting, worthwhile reporters will do their job for free. No tycoon, no matter how loaded, civic-minded, and/or self-medicated, will bankroll meaningful newsgathering — and all its bureaus, labor relations, and, yes, office supplies — just for giggles. And without investments in meaningful newsgathering, there will be no journalism.

So what, pray tell, is that great new model?

Ink-stained wretches shill the notion that journalism can only succeed as a “business” if something or somebody else subsidizes it. They note the example of Bloomberg L.P., the financial data provider that has amassed an army of reporters on the beaucoup bucks made renting out its ubiquitous terminals. Or how News Corp.’s film and TV numbers conveniently hide the rounding error that is the Wall Street Journal.

One commentator even proposed that the nation’s wealthiest universities set aside 3 percent of their endowments to buy the New York Times.

Good luck with that. Industry fundamentals are corroding so rapidly that they will eat through even the noblest of cross-financing oblige. Newspapers, for one, are seeing the wholesale kneecapping of each ad driver, from classifieds to inserts to department store and car dealer whole-pagers.

Consider what craigslist alone has done to the staple help-wanted ad. At the Washington Post, a 10-day placement that runs both in print and online costs $500; a 30-day run on craigslist costs $25. The Philadelphia Inquirer has duly seen classified employment revenue fall to $35 million last year from almost four times as much in 2000. And we didn’t even mention the siphons that are eBay, Google, and Monster.com.

Last year, reporters at the Los Angeles Times, Baltimore Sun, and other Tribune titles hoped that billionaire real-estate mogul Sam Zell would rescue them from bean-counting hell. One debt-saddled buyout later, Zell is taking a machete to payrolls, pages, and pencils and staplers. Rupert Murdoch is asserting his personal imprimatur on his newly acquired Wall Street Journal, disabusing his minions of the notion that he would be a hands-off sponsor. Not even family ownership has buffered the rarified New York Times from layoffs. Too often, restructuring begets thinner issues larded with generic newswire copy — hardly the recipe to bring back readership and ads.

Fine, if all that won’t save us, then going wholeheartedly digital surely will, right? After all, advertisers are mass-migrating to the Internet.

But it is also delusional to think that online advertising can bankroll the costly newsgathering architecture specifically built around expensive print ads. Following the money, we again look at the storied Washington Post. According to the American Journalism Review, the Post’s total 2006 revenue of $676 million is on track to fall 29 percent by 2010 and 37 percent five years after that. Online gains wouldn’t even begin to compensate for print losses until 2015, and it could take well past the year 2020 just for the Post’s total revenue to round trip to where it is now. All manner of publications are on a similar trajectory.

And going “all-in online” has peculiar cultural drawbacks. I’ve never worked at a magazine or newspaper where print writers gleefully did stories for their Web site. Why bust your tail to do a story for an ephemeral link, the thinking goes, when a print byline still carries all the glory, and prized sources would rather see their names on paper?

Many writers and editors also don’t buy the cost accounting, or lack thereof, in grand proclamations of online profitability. Do publications’ Web sites honestly factor in the cost of print-side staffers’ work? Could these supposedly self-contained businesses be cut loose and thrive on their own? The top editor of the New York Times was surely mulling all this when he characterized his online strategic conundrum as “fake it till you make it.”

Maybe the whole concept of advertising is now vastly overrated. Think about it: How many Web plug-ins do you use to block pop-ups? Don’t you look away, or shift to e-mail, when a news site’s video starts with a 15-second brokerage ad? What did we ever do before we could TiVo past the 18 minutes of hawking that accompanies every 42 minutes of ABC’s Lost? Can journalism really rebuild its business on that shifting, shrinking foundation?

For my money (literally), our original sin was decades of letting everyone view journalism as a free or — at 25 cents to a few bucks — largely free service. Why, in the dawn of Netscape, did major magazines and newspapers rush to post so much of their hard-won content when they survived on newsstand and subscription dollars? Did they really think the dog was going to give back that bone? “The quid pro quo of payment for services rendered newsgathering has been severed,” explains Craig Moffett (MBA ’89), a media analyst with Bernstein Research. “A high-cost business model like journalism can’t compete with ‘free.’ ”

Blogospheric musing might well thrive in the interim, but only as long as it can crib from a shrinking pool of professional newsgathering. The true reckoning arrives when readers will have no choice but to pay — and pay more — for the precious little quality that survives this news depression.

Any honest reporter will tell you as much. After all, at the newsroom watercooler (is it still there?) and in this bottom-line world, we all think we’re MBAs.

— Roben Farzad is a senior writer at BusinessWeek.

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