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"What Does This Mean?"

Earlier today, I was talking to a good friend of mine who was wondering what do with her portfolio and she complained that she was further non-plussed by all the media coverage of stocks. Reading the financial news, I have a lot of sympathy for anyone with the job of actively managing money for a living or for their personal account, so I'll try and help out a little with what type of news piece to read and what not to read. Take a look at these two articles about exactly the same event - the oil price movement - this morning. One is from Marketwatch, while the other is from AP. The reason I pick out these two news organizations is not absolutely random either: Marketwatch is owned by Dow Jones, and the DJ people tend to work very closely with AP journalists. In a lot of bureaus, they actually share the same office, and in most, they share the same building.

Here are the lead and second paragraphs of both articles:

Marketwatch:
Crude erases 2007 losses as data extends rally
Larger-than-expected supply decline sends futures as high as $61.80 a barrel
NEW YORK (MarketWatch) -- Crude-oil futures extended their rally Friday, pushing the front-month contract into the black for the year, in a continued response to data showing a far bigger-than-expected decline in heating fuel during last week's bitterly cold snap, reducing unusually high stockpiles following a mild winter.
Oil also got a boost after some geopolitical flare-ups: Iran defied United Nations demands that it stop enriching uranium, and traders got jitters amid fresh violence in Nigeria's oil-rich Niger Delta region.

AP:
Oil Trading Slow on U.S. Inventory Drop
Oil trading slow as market reacts to surprising drop in U.S. gasoline, heating oil inventories
Oil trading was slow Friday as the market adjusted to a surprising drop in U.S. gasoline and heating oil inventories.
Light, sweet crude for April delivery nudged just 1 cent higher to $60.96 in light electronic trading on the New York Mercantile Exchange, midafternoon in Singapore.

Just for the record, this is bad business journalism in both cases. I hardly need to point out that one can infer completely different scenarios from these two articles about the movement of the oil price. This type of mistake is usually down to a failure of business journalists being educated in the subject they are writing about; namely, business. Both articles miss completely the main paragraph, too, as a result: what I call the "what does this mean?" graph. If you like, it's the "where should I trade?" explanation part of the article. An article is only as useful as a chart if there is no paragraph telling the reader what the news being reported means, and this is in almost every case the giveaway of the difference between business journalism written by someone who really understands what is going on and someone who doesn't quite get it.

A person who can tell you what something means understands the topic they are writing/speaking about, whereas someone who cannot does not. In the case of both these articles, the "what does this mean?" part of the story is side-stepped by inferring whether this is good or bad news into the headline, which is also a classic mistake (to be fair to the Marketwatch piece, there is a sort-of-meaning in the seventh paragraph, but it doesn't relate to the headline very well). A headline does not tell you what something means - it tells you what's going on. (Incidentally, this is not a comment about Dow Jones and Marketwatch, both of which are usually very reliable, although reading business news from the AP is almost always completely misleading, as I have pointed out before).

Now, the same story by Bloomberg:

Oil Is Little Changed After Rising on Fuel Supply, Iran Threat
By Eduard Gismatullin    
Oil traded little changed in New York after rising to the highest price this year after U.S. fuel inventories plunged and analysts said supplies may be disrupted if Iran is sanctioned again for developing nuclear capabilities.
U.S. stockpiles of distillates, including heating oil and diesel, fell 5 million barrels last week, or 3.8 percent, the biggest drop since September 2005, according to the Energy Department. The U.S. and European nations will meet next week to draft a second sanctions resolution against Iran, the second- largest Organization of Petroleum Exporting Countries producer.

Definitely less sensational, but it summarizes the complexity and ambiguity of what's going on really well, without jumping to a conclusion before all the facts have been laid out. Then, succinctly, follows the "what does this mean?" graph:

``The main risk to the oil price is either a boycott of trade, isolating Iran, or a military attack,'' because either would ``influence the production and supply of oil from Iran to the world market,'' said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. Distillate inventories ``will influence the price'' until winter ends in the Northern Hemisphere, she said.         

This gives a meaning to the story - the global supply-chain with specific emphasis on Iran - and a time-line, namely, when winter ends in the Northern Hemisphere. Now that's news you can use.

Financial Journalists, Hedge Fund Managers, Corporate Jets & The Information Game

One of the most regular e-mails I seem to get from readers of this blog goes something like, "I really enjoy reading your blog, and you write really well. Out of interest, what do you do?"

The praise is flattering, but most of all hearing from your readers is one of the principle reasons I enjoy writing this blog; from software developers to consultants to CEO's to journalists, every one has a unique story to tell and a unique perspective to share regardless of whether they agree with what you have to say or not. Debate is what stimulates the ever-elusive search for the hard truth of economic and political reality, and it's one of the main reasons I write, so I'm flattered to hear from so many who are so curious about what I have to say here.

In order to set the record straight then, I'm a financial journalist; that is, I write about markets, business, the global economy and economic shenanigans the world over. Unlike many in financial journalism, however, I didn't come to the task from a journalistic background, but from a financial one; prior to writing professionally, I worked in corporate finance. "Why on earth," many ask (perhaps fairly) "would you leave finance to join an industry seemingly in perpetual decline, monopolized by lay-offs and low-pay?" Answer one: I love it, and writing/researching is what I've always loved doing. At the end of my tenure in corporate finance, I spent most of my time gravitating towards this end of occupational activity than towards raising capital, which is what I was actually employed to do. Answer two: I'm a born contrarian, and I love risk.

It's in thinking about my own career transformation that I realize a fundamental aspect to the general understanding about the industries I have worked in/work in now is continually misunderstood and misconstrued.

Suffice it to say that the premise of this post then centers around a key idea: that the transferable skill sets and goal sets between financial journalism and money management are large. The argument, in my view, has important consequences - and answers - for the debate which has been rearing it's head over the Maria Bartiromo-Citi-corporate-jet-affair; namely, the ethics of financial journalism.

Managing Information

Perhaps due to the monstrous gap in the lifestyle standards between hedge fund managers and financial journalists, it's not often you hear the parallel between the two professions made, but there are in fact more similarities between the job and goal functions than most realize. Specifically, the two jobs focus on one key theme: managing information. As a hedge fund manager, before you begin to manage any money, you have to get your head around the information that's going to make you any money. Central to that process is the ability to be able to see patters and consequences as a result of those patters where others cannot see them. The same is true of financial journalism: if you want to sell popular and meaningful stories, you have to be able to see patterns and consequences before anyone else sees them. This primary ability is central to distinguishing a hedge fund manager from an analyst at a fund, or a financial journalist from a desk researcher. It requires being as truthful to the information at hand as one can possibly and reasonably be, at the same time as being able to judge that the information is consistent with the thesis you set out to research.

Here's a rather simplistic example, but it illustrates the point I'm making well. Let's say you're a hedge fund manager and you have a feeling that there's going to be a major wave of M&A activity in the oil and gas industry over the next year. As a result, you want to lay some large call (buy) contracts on the smaller oil and gas companies, which you think will benefit from the M&A activity, and some equally big put (sell) contracts on the larger oil and gas firms, which you think will be doing the buying and hence punished by the market (when there's a merger or an acquisition, the company that shells out more than the other is usually punished and the one that gets the shells of cash usually rises; although this is slightly different in the recent case of private equity deals, it stands good for this example where most oil and gas companies are publicly traded).

But before you do that, you have to check out whether your thesis is valid, or you could end up losing a pile of money. So first of all, you look at the chart for crude. You look at everyone else's opinion, and talk to all the experts you can find on the subject. Then you look at the oil companies themselves. What are they doing? Are they merging? What are their earnings like for the past year? For the past five years? What does the market think of oil companies right now (that will mostly be reflected in the P/E and P/B ratios, but also in the volumes of traded equities)? Are there any disparities in the valuations of smaller and the larger oil and gas companies? And how about oil exporters? Are they nationalizing oil? Are they reducing or increasing output? What effect does this have on smaller/larger oil and gas companies? Are they the same effects or different effects? What kind of liquidity do these companies have right now?

Now you're a financial journalist who sees the potential for a story on the same subject: wave of M&A activity sweeping the oil and gas industry. The above questions and processes are exactly the same for the research process of your story. You have a thesis, you have a pile of ( mostly disconnected) information and opinion, and you have to whittle it down into something comprehensible and as true as possible that either directly supports or directly challenges your thesis. It's called managing information, and it's what financial journalists and hedge fund managers alike do all day long.

Conflicts of Interest

When you're selling something, doing favors for people gets you a long way. This is not true when it comes to being right and first, and being right and first are the essential characteristics that define good money management and good financial journalism.

Chris Roush, in a post titled "Bartiromo's Plane Ride Raises Questions", seems to sum up pretty well the recent sentiment over CNBC "money honey" Maria Bartiromo's acceptance of trips of Citi's corporate jets at first-class-commuter prices. "Business journalism," he claims "is getting a bad rap after it was disclosed that CNBC anchor Maria Bartiromo took a plane ride on a Citigroup jet from China back to the United States." He goes on:

Bartiromo, according to a CNBC spokesman, took the flight for "source development" reasons, not for any specific story. But based on her long-standing friendship with the now-fired executive, it's clear that she could have had access to him anytime she wanted.

... What bothers me the most is that CNBC and Bartiromo -- who has also raised ethical questions by disclosing on the air that she owns Citi stock -- act is if nothing was wrong with the plane trip.

The problems should be obvious to them. Yes, business journalists are supposed to interview executives and push to talk to them as much as possible.

But the appearance of accepting something -- whether it's a plane trip halfway around the world or a lunch -- calls into question our integrity and motives with consumers of business news. And we're not supposed to be "friends" with the people we write about.

Somewhere along the line, Bartiromo and CNBC seem to have forgotten these basics.

The point that the general criticism, and Roush's post miss is that a financial journalist, just like a hedge fund manager, who is affected by their "friendship" with a Chief Executive to the point where that friendship influences their professional conduct will not be in a job for very long. If there was a major piece of negative news which came out of Citi, but a hedge fund manager who held a large portion of Citi stock chose to stick with his or her trade, knowing full well the stock may come down 5% plus, that hedge find manager would be called to question by lots of angry investors. If the same thing happened twice, the fund manager would find it hard to get a job again managing anyone's but his or her own - and maybe family's - capital.

The same point is true of Maria Bartiromo in the same situation: if her judgment as a result of her "friendships" with Citi execs were unduly affected in a crisis situation to the point where she was influenced enough to try and 'spin' the story, or worse, not to break the story at all, you can bet that it would most likely cost her her career. Even if she consistently tried to spin positive news for Citi, she, like any market participant, would get found out. It's the old law of "reversion to the mean". In other words, conflicts of interest are difficult not to reconcile in professions where being "right" is the key factor to your success.

Conflicts of interest are not the same in nature for financial journalists and money managers as they are, for, say, CEO's. In the latter situation, where a CEO tries to "front run" the market (make money on expected good or bad news buy buying or selling the stock ahead of time) on a pending news announcement, the action, if not prosecuted, would not necessarily affect the career of the CEO: it would merely make or save him/her a few million dollars. The CEO could potentially continue managing the company without repercussions.

It's perhaps a tough concept to grasp for those used to seeing every conflict of interest as inherently black, but in the case of Maria Bartiromo, the conflict of interest may in fact benefit the public, if only because she becomes more privy to the goings-on of Citi than your average punter, which is at the end of the day, what a financial journalist should be and must be in order to be effective. The same is true of a money manager - the more information they are legally privy to, generally the better for the investors in the fund.

The chastisement of Bartiromo is unfortunately motivated by the same emotion which motivates money managers to denounce the trading practices of successful peers: envy. It's with no uncertain peril we put successful and honest people out of their professions and amateurs in their place because of  overly-simplistic reasoning. Because in that instance, we all end up worse off, less-informed, and ultimately, more susceptible to the exact malpractice we were so afraid of in the first place.

UPDATE: Welcome (back) Instapundit readers! Thanks for dropping in. This is a blog principally about the economy, and you'll find that quite a lot of it is about global as well as U.S. markets. Please feel free to take a look around, comment, and of course, come back any time you like.

Blog VC

On my familiar theme of how big blogs are the next VC phenomenon, I received a very interesting e-mail from a prominent Silicon-Valley venture capitalist the other day.

Is there, I asked him, potential to cash-in on the blogosphere's biggest? Here was his reply, in full:

I’ve been monitoring the blog world and related cousins for some time now. And I’m convinced their next stage is underway, trying to monetize them, getting “traction” on cash revenue that leads to firmer support. Innovative business models will be especially key to success. Each wave of startups goes through this stage and out come mostly carcasses. The few survivors will turn into the gorillas and chimpanzees of more narrow market segments. As the new wave mounts to a peak and then crashes, the surfers who make it to the beach will surprise us. So I’m enjoying watching the new adventure unfold, coaching a couple of Web2.0 era startups a third of my time. We’ll see how they all emerge . . .

Flatteringly, he noted in post-script too that this blog "shows me you have a curious mind and a lot of character." I find the confirmation that Silicon-Valley is already looking towards the blogosphere for funding activity revealing.

The way I would probably go about capitalizing on this next surge in tech funding is to get some cash together, begin a fund, and buy out one or two of the big personality-driven blogs on the proviso that the writers remained in the game for at least another 5 - 10 years. Then I'd write a business plan, aiming to link some of them up into a giant blog network, with increasingly interactive features, and spin some of the others off to national newspapers and news orginizations looking to cash-in on the increased reader volumes and web interactivity these blogs would give them. In that way, the spining-off would only compound the value of my blog network. I'd give the bloggers some equity too. I'm just amazed there's no word about this right now anywhere, but one thing is for sure; now is the time to buy.

Today a blogger - even a very big one - would be flattered to part with ownership of their site for maybe $250,000; once one newspaper pays over several million dollars for someone like Michellemalkin.com however, getting a deal for the big blogs will be nearly impossible.

What's In A News Story?

WSJ columnist and author Jeremy Wagstaff, who I mentioned in my post All The News That's Fit To Debate has responded to my criticism of his point that medium in journalism now takes priority over content.

Under the title The Economics of Journalism, Mr. Wagstaff notes flatteringly that I make "a fair point", and that what I wrote was "a good thoughtful post (I'll forgive him getting my name wrong)" but that "sadly", he doesn't agree with my stipulation that "content is what it's all about".

"The economics of journalism is to make money through advertising, and to a lesser extent, through subscription," he continues.

The content -- how many reporters can be hired, how far they can travel -- is largely determined by this. Some publications manage to ignore this with the help of wealthy patrons, but eventually they all fall into the same equation. Newspapers have been economic for so long because they represented a viable logistical operation for delivering content (and advertising). But if the technology of logistics changed, so would be the business model. That is what is happening now. The delivery mechanism has changed so radically that it's also changing the content mechanism. If bloggers on the streets of Bangkok can get pictures and news of a coup before the wires and TV crews, why not make that part of your content?

I apologise here for getting Mr. Wagstaff's name wrong (absent-mindedly, I did indeed refer to him  as "Andrew" in the original post), but the point he is making - and there are many who would agree with him - in my mind does not quite add up. For if the economics of journalism is driven by advertising and (to a lesser extent) subscription, then the ultimate driver must be readership figures. To put it more precisely, there is a positive correlation between an increase in readership numbers and advertising and subscrption revenue to any given publication. So the logical question if you are a news proprietor is: how do we get readership numbers up?

Changing the medium of your publication may indeed be one necessary measure to stay competitive, but only insofar as it affects the content you can deliver. To use the analogy from my first post, it is necessary for newspapers to publish photos, since this directly affects the content of the publication. And Mr. Wagstaff's point about bloggers breaking the Bangkok coup story is much less about the fact that the story was boken over blogs than the fact that the content being provided was at the time fresh and original. Even then, this is not the best example, since the AP broke the story first with commendable coverage.

Contrary to popular opinion, the fundamental business model in journalism is not changing at all. The fact that you can now get news online as opposed to just in print does not change the fact that without quality, original (and I would add investigative) news reporting, there will be few readers, and hence few advertisers and subscribers. This is one of the main reasons for the importance of foreign correspondents: by actually being in a place, they are close to a number of different and apparently insignificant events which when, once the reporter puts a common thread together, begin to form the basis for major news that is very much in the public interest, and which has mostly been missed by the latter.

Bloggers may contribute to the process of news creation but they are only one aspect of it, acting more like a press release in function that a newspaper. News platforms - be they paper freesheets, online websites, or subscription dailies - are not affected by modern blogs as much as people suppose, largely because they have to offer something more than instant pictures of tanks in Thailand to be valuable, and it's precisely this that keeps them in business.

All The News That's Fit To Debate

Another debate between the blogosphere and the main stream media (MSM) seems to be surging up again. These altercations centrally concern the validity of news put out by what the bloggers perceive as biased and sloppy press corps, acting on their own political agendas rather than with a geunine desire to report the facts.

It's a good thing for the press to have critics, just as it's a good thing for everyone to have them - after all, it is through criticism that we principally polish and progress our skills in whatever we do.  But when criticism becomes both argumentative and personal in nature, it often misses the point and ends up confusing an already complex issue rather than clarifying the issues which need to be addressed. It is with this in mind that we should approach this latest squabble.

Yesterday, Michelle Malkin reported that the Associated Press is now covering - five months later - the capture and detaining of press photographer Bilal Hussein by the U.S. military, whose work, she claimed in an August 12 post on her blog, has "raised serious, persistent questions about his relationship with terrorists in Iraq and whether his photos were/are staged in collusion with the enemy." It's quite a long and complex story so I'll boil it down: the allegation is that Hussein was working alongside terrorists in order to grab exclusive photos for Associated Press. Michelle Malkin's response to September 19's AP release on the story was that "it's spin time. The Associated (With Terrorists) Press is now waging a p.r. campaign against what it calls the "so-called blogosphere" over detained photographer Bilal Hussein." She went on; "After five months of stonewalling, the "so-called reporters" at AP finally reported what this blog reported on April 12--that Hussein had indeed been captured by the US military in a Ramadi apartment building where bomb-making materials were found...along with an alleged al Qaeda leader. Hussein reportedly tested positive for traces of explosives." Her big problem with AP was two-fold: why so late, and why the continued insinuous defence of their photographer rather than the acceptance that they got it wrong?

Then there's Brendan Nyhan. Mr. Nyhan was asked by American Prospect to write a column criticising the media. As he notes in yesterday's  homily, the idea struck him as rather odd given the U.S. media's bias towards the left and the fact that "the Prospect is a liberal magazine ... but I assumed they knew who they were hiring.  I was wrong." As he goes on to explain, he "slammed two liberal blogs for using an airline employee's suicide after 9/11 to take a cheap shot at President Bush." The piece he found question with, which appeared on the popular left wing blog Atrios, commented that "The American Airlines ticket agent who checked in Mohammed Atta on 9/11 later committed suicide - unlike the man in charge who, being briefed on the potential threat, told his briefer, "Okay, you’ve covered your ass." Mr. Nyhan's point was that this was the loss of a human life, and that the post was "politicizing a suicide". Regardless, pressure from left wing bloggers and letters of complaint to American Prospect prompted the editor to order the columnist to stick to criticising only right wing blogs, an offer Mr. Nyhan declined along with handing in his resignation.

These are two quite different, but nevertheless prescient examples of the emotions so prevalent in the debate over the blogosphere vs. the media. One concerns the reporting of hard facts, the other is about 'opinion journalism'. Nevertheless, both show a disappointing flavour of personal - rather than objective - attack which only undoes the real goal.

It's worth bearing in mind here first what the real goal in journalism is all about, be it opinion or fact: an honest and upfront package of news-delivery, in a format everyone can understand. On the first count then, Michelle Malkin has good reason to be angry: cooperating with terrorists in order to get an exclusive - and a staged exclusive at that - is at its best, ethically conspicuous. But due to her personalisation of the attack, her partisans are incentivised to go one further; they would have journalists make no ethical judgement calls at all. This is just counter-intuitive. Every profession which serves a crucial role to society, be it banking, medicine, law or journalism, involves at times making judgement calls based on a limited knowledge of the facts and which may turn out to
be for the worst, and by which by fat the bulk of which the professional has to go by is his or her own ethical assesment of the situation and the inherent trade-offs. It's not that Michelle Malkin is wrong to lambast AP for this fiasco (which admittedly they've dug themselves into) - her fine reporting skills do a justice to clarifying the facts in a complex situation, for sure. But by making her attacks so personal, and by bringing the blogosphere vs. media debate into the fray, she undoes much of the constructive work she has set out to achieve by beginning a whole new - and arguably less worthwhile - polemic.

And there's a vague sense of hypocracy in Michelle Malkin's criticism of the main stream media, too, for it was exactly there that she learned all the skills which have equiped her with the means to attack this story on her blog.

Wall Street Columnist and author Jeremy Wagstaff today writes on his blog, loose wire, "Media companies (itself shorthand for mass media) are no longer about content, and all about the medium. For the past 80 years the mass media has been about leveraging the technologies available to deliver standardized content over as large an area/population as possible. Now it’s about using the technologies available to enable as large a population as possible to swap their own content." This is disappointing to hear from a seasoned columnist, indeed. For, to continue with the example above, it is not the fact that Ms Malkin is writing this report on her blog that is the most important thing here, it is the fact that she is a good reporter with a strong sense for when something does not add up, and has the ability to deliver on it. Whether she publishes on her blog, in The New York Times, or in a fanzine is irrelevant - in other words, quite the contrary to what Mr. Wagstaff is saying, it is misleading to get side-tracked into a debate on medium, when content is what it's about.

The medium is changing, but this is nothing new. One hundred years ago most newspapers did not have pictures; now they do. So what? The act of news reporting and delivery is what the economics of journalism is about.

Here, Mr Nyhan's story is particularly disheartening news, for both the main stream press and for the blogosphere. For the media set, it is sad to see a logically valid and justifiable attack affect their strategy to criticise and seek the truth. What Mr. Nyhan was saying was completely defendable, after all: remark about how the flight attendant who let the terrorist responsible for one of the 9/11 attacks onboard committed suicide whereas President Bush did not is, whatever your view, politicising a suicide (i.e. making an inherently political point by using the example of a suicide). Atrios and left wing bloggers' criticism of the piece should have been water off a duck's back to the chiefs at American Prospect, but instead, they chose to withdraw and alter their original, admirable and truth-seeking strategy.

But it's also bad news for the blogosphere, more than anything because it shows one pivotal fault with bloggers: they are often unable to accept forms of criticism constructively or lightly. One of the strengths which news reporters are forced and trained to aquire early on is to accept and digest criticism in a way which can continue to improve their work, largely through having to re-work countless versions of the same piece until their editor is content (which in itself is rare). Those that do not acquire this skill don't stick around for long; it's usually as simple as that. If bloggers intend to become a widely-received outlet for news reporting, criticism and humility are qualities they mjust learn, and this story is a classic example of that. You can't always get it right - not as a trader, not as a doctor, not as a judge, and not as a journalist. Because of the intensely personality-driven nature of blogging, many bloggers become emotional about criticism that would be best received thoughtfully.

It is unclear exactly what the aim of bloggers who denounce the media is, too. Would they have us a society with multiple 'citizen journalists', all running around with their cell phone cameras and writing from their laptops in wireless internet cafes as and when they are on-site? I don't mean this derogatorally; after all, I write a blog, and I sometimes use it to report events which I think are interesting to others. But a world without newspapers, without magazines, without television would derive us of much of the rich cultural and linguistic development we have today and have had for centuries, for all these mediums provide one unified platform for their expression.

Certainly, the world is changing, and technology is bringing with it an empowering force to the individual. But the individual can still monitor, criticise and scrutinise the corporation and live in harmony with it. That's what the media, science, politics, the courts, and the democracy we have fought for are all about. Let that be the case, not the more violent alternative.

Orkla and Mecom

If there’s one British name which nearly every Norwegian is by now familiar with it’s David Montgomery, former editor of The Sun and News of the World, CEO of the Mirror Group and, since 2000 founder and executive chairman of Mecom Group, the AIM-listed media acquisitions and development vehicle. Since Mr. Montgomery agreed to purchase Orkla Media from Norwegian conglomerate and national institution Orkla at the end of June, the self-styled media tycoon has been the catalyst for hundreds of column inches of debate over the ethics of selling national publications to foreign proprietors, the fate of the country’s press, and most recently, whether the deal is going to go through at all.

Norwegians can be forgiven for all the drama. Montgomery’s proposed million Euro acquisition has not been smooth by any account; more mixed still have been the messages both Mecom and Orkla have been sending out over the past month. At first Mecom’s ownership of Orkla Media – whose empire is spread across Norway, Sweden, Denmark, Finland, Lithuania, Poland, Ukraine, and Germany, making it the fifth largest media conglomerate of the Nordic region – seemed like a foregone conclusion. On June 28, Orkla made a simple announcement of the sale in a press release, stating financial details were still under negotiation. “Mecom’s offer for Orkla Media is financially attractive for Orkla shareholders,” said CEO of Orkla Dag Opedal. “Furthermore, the solution is satisfactory with regard to the other goals that were set for the process. Based on an overall assessment, this is therefore the best solution for both Orkla shareholders and Orkla Media.”

Less than a week later, on July 3, Orkla announced that the sale would be for 7 billion Norwegian Kroner (about £614 mln), and that the parent company would be taking a 15% share and one seat on the board of the newly formed Mecom Europe conglomerate, which was to be headquartered in Oslo and run by existing Orkla Media Managing Director Bjoern Wiggen. Orkla Media would be valued at 7.5 billion Norwegian Kroner “after adjustments for cash and other financial capital”. Mr. Montgomery announced his plans to raise the money through a combination of debt and equity, giving the new entity a “leveraged buyout structure”. The deal was supposed to complete and sign last Monday on the evening of July 17, with a press conference planned for the next morning.

It’s at this point the deal began to look uncertain; that press conference never took place. The parties announced that lawyers were still finalising the deal, and that the agreement was “large and complicated, with many elements to be put into place.” Nevertheless, Orkla Media director Stig Finslo was confident; “We will finalise the agreement,” he said. Danish newspaper Berlinske and Norway’s largest financial daily Dagens Naeringsliv reported soon after that Mr. Montgomery was having trouble raising even half the money required for the acquisition, with several previously committed funds having gone weak on the deal. Orkla’s Chairman – and Norway’s richest man – Stein Erik Hagen announced from his holiday break that “we’re still following the timeframe we set up.”

This weekend came confirmation of the problems associated with the deal however as Mr. Opedal caught a plane together with a lawyer and an accountant from the company to meet Mr. Montgomery and try to iron out the problems. On Saturday, Mr. Hagen then made a surprise announcement to Dagens Naeringsliv that Orkla had a back-up plan if the deal with Mecom fell through. “We have a plan B, but I don’t wish to disclose the details,” he said.

In yet another about-turn, the mood yesterday evening after this weekend’s talk was suddenly more upbeat. “(Mecom and Orkla) have worked through the whole weekend on a possible agreement,” Mecom’s spokesman Eric Cameron told the Norwegian news wires just after six London time. “The talks have mainly taken place here and have been productive, but it is too early to say when we will reach a decision. It will take as long as it takes.”

The question is then, what’s going on and even more presciently, is this deal going to happen at all? Certainly, there are members on both sides that desperately want it to go through. For Mr. Opedal, who has been chief executive of Orkla for less than a year, this is just the kind of lucrative international deal he has been looking to make his mark with since he took over from his short-lived predecessor, the more conservative Finn Jebsen. It is widely cited inside Orkla that Mr. Opedal is the company’s next  Jens Heyerdahl, the entrepreneurial and dynamic former Chief Executive who from 1979 until 2001 turned the company around dramatically from a medium-sized mining operation into a full consumer-goods and specialist metals manufacturer. Selling to Mecom would be a savvy move: it would give Opedal a substantial amount of money to pursue his own vision for Orkla while at the same time retaining a minority – but still valuable – share in a profit-hungry European media enterprise.

Orkla media currently operates at a 7 – 8 % profit margin; it is Mr. Montgomery’s hope that he can turn this around to 15% in fairly swift order. The problem for Mr. Opedal if he were to pursue this himself would be in harming the very close relationships with unions which Orkla has enjoyed since it’s days in the mining business. What’s more, this deal flies very well with the traditonal corporate philosophy of the organisation – “ownership is more important than structure” is a frequently cited maxim inside the company’s walls in Skoeyen, Oslo.

For Mr. Montgomery of course is the chance to own one of the largest European media conglomerates in the world, and firm up positions in Germany since his controversially-received acquisitions of Hamburg Morgenpost and Berliner Verlag earlier this year, and at a comparatively low valuation (analysts have put previous valuations on Orkla Media at well over £700 mln). Battling unions is not shy territory for the former Murdoch employee either.

Perhaps most presciently of all, the deal works as mutual back scratch: both Mr. Opedal and Mr. Montgomery are young Chief Executives out to prove that they can make a mark not only in their own industries but on an international playing field. Mr. Montgomery has almost entirely ignored the UK newspaper market since founding Mecom. This accounts too for the apparent strategic discrepancy in Mr. Hagen’s statement made on Saturday and the more affirmative ones consistently made by Mr. Opedal. If both entrepreneurs wish to close this deal, they will have to quickly.

The issue seems to be almost unequivocally one of cash. In March this year, Mecom suspended its stock and announced a rights issue to raise £145 mln at 50p per share. Two months later, it had only managed to get together £70 mln at 48p per share.

The suspension of the stock remained on grounds of plans of a “major acquisition”. The previous acquisitions of the German dailies were majority partnered by American private equity firm Veronis Suhler Stevenson, since Mecom blew most of its cash on the £200 mln acquisition of Dutch LMG from Telegraaf Media Groep. If Mr. Montgomery cannot borrow or raise sufficient cash then, what are the options? This was most likely the issue on the table this weekend.

A potential solution which Mr. Opedal may have offered Mr. Montgomery is for Orkla to loan Mecom the money itself; assuming Mecom can front up half the cash, borrowing 3.5 bln Norwegian Kroner (about £307 mln) at a standard corporate bond rate of 8%, Orkla Media would still yield (albeit slight) annual profitability of £10 mln with current revenues of 8.7 bln Norwegian Kroner (about £763 mln) until Mr. Montgomery can raise the cash to pay off the loan.

If he hit his projections for doubling the profit margin, the company would be in very healthy financial shape, even without paying off the loan. This deal is about personal interest and politics as much as it is the bottom line, which is why perhaps it has been so adamantly presented as the latter. All that remains to be seen is whether the two chief executives at the front of it can pull it off in time. This will prove the first valuable test for both their ambitions.

Time Warner Can Win Big But Exxon Can't

Here is a great observation by Brian Pickrell over at Iowa Voice:

Interesting how the media reports that Time Warner's profits have risen, and don't have a problem with it at all ... Where's Chuck Schumer bitching that they must be gouging the consumer? Where are the proposed taxes on Time Warner? Because after all, Time Warner is a big company, and any profits made by them MUST be because they're taking advantage of the consumer!

My question is, why is it ok for some companies to make a profit and the media reports that as a good thing, yet another company (Exxon) makes a profit and it's pure evil?  Pretty sure I already know the answer to that.

Indeed. It's hypocracy all around when the media come to celebrating their own success stories while in the same breath lambasting those in other industries which are pulling in good earnings. Most journalists miss the hypocracy however, simply because they don't understand the functions of capital markets.

Celebrating gains by oil companies doesn't help sell papers much, either.

Where Media is More Trusted Than Government ...

Editor's Weblog reports on a poll conducted by Globescan, the BBC, Reuters and The Media Center which apparently "reveals that people around the world trust the media more than they trust their governments":

A recent international poll reveals that people around the world trust the media more than they trust their governments ... On average 61% said they trusted the media, compared to 52% who believed their government's explanations ... Trust in journalists was highest in Nigeria (88%, with 34% trusting the government), Indonesia (86% v 71%), India (82% v 66%) and Egypt (74%; government question not asked) ... Only in three countries did governments score higher than the media. In the US, 67% said they trusted the government compared with 59% prepared to put their trust in the media ... In the UK 51% trusted their government (media 47%) and in Germany 48% trusted officials (media 43%) ... The three other countries surveyed were Russia, South Korea and Brazil, where just 30% said they trusted the government version of events.

Upon closer analysis, it's difficult to see why Editor's Weblog are shouting so loudly about this one. Journalists usually love this kind of poll since it gives them perceived credibility where usually they only encounter ethical conspicuity, but look at the data of the poll closely and it reads almost like a satire. For a start, Nigeria, Indonesia, India and Egypt are hardly world centres of compassionate governence; indeed it would probably be hard in all these countries to find anyone more unpopular than the national government, since the populations have suffered decades of restrictions and supressions on issues of basic human rights or extremely corrupt and haphazard governence at the very least. The poll even admits that "the government question" was exempt in the case of Egypt.

Russia, South Korea and Brasil again are extremely dubious polling choices: democratic governments there are either only effective in an official capacity (in the case of Brasil) or relatively recently established (South Korea and Russia). So: in countries where most of the population has suffered or is still suffering the effects of brutal repression and corruption, journalists are more trusted than government ministers? On the other hand, in places where democracy has flourished to the prosperity of many, such as in the U.S.A. and the U.K., the reverse is true.

What does this say about the media?

Speculating on Movies?

So Paramount have sold their Dreamworks Library for $900 million: this doesn't look big news - just another Old Media company hitting the wall in the struggle to battle against technology - until you look at whose buying:

Paramount Pictures on Friday said it had agreed to sell its DreamWorks film library to financier George Soros' investment fund and Dune Capital Management.

Quite what quantitative macro-economic currency speculator Soros wants with Speilberg's film production company I do not know, but something is up.

More Newsblogs

The Guardian is getting even bloggier:

The Guardian has launched an expanded comment section for their Web site, to be known as "comment is free," reports OhMyNews International.

... Simon Waldman, director of digital publishing at the Guardian, told Online Journalism News that "These days of course, everyone else is noodling about with blogs -- often rather desperately -- but our planned comment blog 'Comment Is Free' will take things to a whole new level."

If newspapers want to remain relevant and exciting in the decades to come, it will be essential for us to rewrite the rules on how we engage with our readers and users.

Some people find this abhorrent and will choose to ignore what's happening. And there will be times when they can feel quite smug as those of us going down the engagement route hit some inevitable roadblocks. But in the long term they will find themselves preaching to an ever-smaller congregation.

This reminds me of something I said recently here.

New Media Cashflow

A writer over at Blog Critics raises a good, far too often overlooked point about the world wide web and popular websites:

The net is an expansive, overwhelming world that we tend to take for granted. Many upcoming sites such as the "adult" Asstr, Blogcritics, Desicritics, etc. become sites most of us habitually visit.

Despite the immense popularity that these sites enjoy most of them have yet to make money. The sites are basically run by people who have day jobs and pay for the sites from their own pockets.

The popular consensus seems to be that starting and maintaining a site is an inexpensive activity that just about anyone can do: the reality, however, is that sites - and blogs - are notriously time-consuming cost-consumers with almost no revenue model to reward their proprietors. It is only a matter of time before another large-scale capital injection will be needed to take this platform of news and entertainment media distribution to the next stage.

Industry Dynamics

Wall Street Journal columnist Jeremy Wagstaff writes on his blog Loose Wire:

The A List bloggers I read don’t have any ads at all that I can remember, certainly less than the number I have. That, in most cases, is not their motivation. And their content is often very interesting stuff, and a great place to hear about new gizmos and Web 2.0 thingamijigs first. But that said, there is perhaps some fire inside the smoke. The A List of bloggers hasn’t changed hugely in the past three years, and while it’s fascinating to watch them evolve (or not, in some cases) you can’t help but wonder why, when blogging has grown in popularity, both in readership and authorship, the A List remains such a small club.

This is pretty much what everyone’s wondering, though I expect it has something to do with first movers advantage, and of course, capital. As more organisations willing to invest money into the blogsphere come up - such as Blog Media - the Bloggers A list will have a slightly more liquid turnover rate. this is the case for nearly all new industries: once real cold cash enters the game, the nature of play changes.

Right now the A list bloggers can sit back and relax a little, but not for much longer. They should enjoy it while it lasts.

More From Iraq

Turmoil seems to be subsiding in Iraq:

"Life is coming back to normal in Baghdad and marketplaces and offices are open again after being shut for 4 days. Although there were a few security incidents today people are mostly looking at these as part of the usual daily situation and not related to the latest shrine crisis.

"But, what can we learn from this lesson and how can we make benefit from it in avoiding similar problems in the future."

The blog where this is from, called Iraq The Model, is written by a resident citizen inside Baghdad. In almost every way, it is more concise, informative and dramatic than anything any national journalist has so far written home about. Newspeople should think hard about their industry when they see new media journalism like this.

The Online Tabloid Effect

More insightful news from Editor's Weblog:

The famous financial daily, The Wall Street Journal, may be thining itself from a width of 15 to 12 inches and the globetrotting newspaper designer Mario Garcia may be pushing for a compact, but it doesn't appear that the Dow Jones' flagship will be cut down to tabloid size.

Garcia is currently working on a redesign after having helped the Journal add color to its front page in 2002.

But despite having switched its European and Asian editions to a compact format, it is doubtful the Journal itself will adopt the design that Garcia predicts will soon be standard.

"In five years, you will hit a generation of readers who don't remember life without the Internet," said Garcia. "People who are coming from . . . the screen of the Internet are used to reading within the confines of a smaller place and transfer more quickly to the tabloid.""

This should be required reading for anyone who still claims that newspapers are going to be the dominant medium for news distribution in twenty years time. Once printer developments catch up with the pace of online and software developments too, it is difficult to believe that anyone will make the trip out to purchase a newspaper or magazine when they can stay in and print their own at home.

Garcia's observation that the next generation will think differently is prescient: far too often, businesses tend to think in terms of the habits of today's customer base, and when they do talk about tomorrow's, they do so without thinking of the habits and practices of those customers now.

Long-term business effectiveness depends upon thinking about what everyone who is not your customer is doing instead.

The famous financial daily, The Wall Street Journal, may be thining itself from a width of 15 to 12 inches and the globetrotting newspaper designer Mario Garcia may be pushing for a compact, but it doesn't appear that the Dow Jones' flagship will be cut down to tabloid size.

Garcia is currently working on a redesign after having helped the Journal add color to its front page in 2002.

But despite having switched its European and Asian editions to a compact format, it is doubtful the Journal itself will adopt the design that Garcia predicts will soon be standard.

"In five years, you will hit a generation of readers who don't remember life without the Internet," said Garcia. "People who are coming from . . . the screen of the Internet are used to reading within the confines of a smaller place and transfer more quickly to the tabloid.""

The 'Intelligent' Press

An interesting perspective on the success of The Economist on Editor's Weblog:

""I think we have been left a bit of space," said Emmott (former Chief of the paper for thirteen years). "(Dailies) have had a hard task of how to deal with and preserve a mass market in an age when their market has been eroded by television on the one hand and the internet on the other.

""But I think they have left us some space by continuing to play in the mass, almost entertainment market. Very few have come in our direction of analysis. There's a choice - more entertainment or more information, and the numbers that have taken the more information route are very few.""

I expect the same thing will happen online next, particularly when it comes to weblogs.

In Defense of Newspapers

Wall Street Journal columnist Jeremy Wagstaff offers an interesting defense of newspapers today on his weblog Loose Wire, written from Jakarta:

"People love great writing, and it’s rare to find it on blogs, where by definition writing is fast and, usually and unlike this post, brief ... people love great reading — as in, laying back with a coffee, sitting on a train, by the pool/sea/prison wall, reading something they enjoy. No technology has replaced paper for this, nor is it likely to ... people love good editors. Editors are not there just to put all the stories together. They’re there to decide what may make interesting reading, from commissioning articles to laying them out on the page and deciding a headline ... people love to get their newspaper wet/dirty/crumpled/folded/annotated/left behind/eaten by the dog. A newspaper is a very flexible device, and it’s cheap enough so I don’t mind that I drop it in the bath."

Whilest there is a lot of truth to these arguments, it does not take into account the fact that laptop computers will over time undoubtedly become less delicate, cheaper and more versatile mediums for the type of regular use described above.

Where the argument does hold up is in Wagstaff's claim that news will not just be distributed by being delivered straight to a reader's e-mail inbox:

"When we buy a newspaper we’re paying in part for the editor’s choice of stories on the page. We’re effectively saying to the editor: You have a better idea of what is out there, and I trust you. Tell me. Inform me. Entertain me. (Today’s front page of one of my regular newspapers today had three great stories I would never have found had I just confined myself to my regular newsfeed: on reclassification of U.S. documents, on a failing Hong Kong plan for a cultural centre; on East Timor trying to avoid the pitfalls of an oil bonanza.)"

I have argued here before the importance of the role of editors in the entertainment medium. Quite simply, editors are a different breed to most other professional people in that they are pathological content junkies - as such, their endless lust for the latest news, song, or book results in a recycling of material that most of us would simply find too exhausting to perform ourselves.

Whilest the essential medium will be replaced, the process will not.

Old Media On New Media

The FT this weekend published an interesting oppinion piece denouncing blogging as being a potential "crock of virtual gold - a meretricious equivalent of all those noisy internet start-ups that were going to build a brave “new economy” a few years ago."

The article, written by Geoge Butterworth and entitled "Time For The Last Post", posed the question "Would George Orwell have made a good blogger? Maybe. But it still would have been a waste of his time, as it is for a lot of others..." and suggested that we should "just be a tiny bit sceptical of another information revolution following on so fast from the last one - especially as this time round no one is even pretending to be getting rich ... the problem of the media right now (is) that we barely have time to read a newspaper, let alone traverse the thoughts of a million bloggers?"

The postulation carries an element of truth, but ignores some key considerations. For one, the reason newspaper ciculation is going down is not, as Butterworth suggests, because "we barely have time" to read one, but because most former print newspaper readers are going online to read the news: the former suggestion is classic old-Fleet Street ignorance. Secondly, for sure, there is much out there that is not of a particularly high quality, but there is also a lot out there in the traditional print media that is of low quality (think the "free" advertising-choked local tabloids). In every trend there are inevitably going to be high-profile and low-profile providors: to suggest that there are the latter does not exonerate the possibility that there is not a substantial place for the best in society.

Lastly, Butterworth ignores the trends of "disruptive technologies" - but he can always find a reasonable summary here on yesterday's post. 

Disruptions In The Fourth Estate

When new, low-cost, highly-convenient subversive architectures reach out to encompass the practices of dominant ones and start feeding consumer demand in the same place, it’s usually a clear sign that an industry is being disrupted. Such has been the purpose that technology has served over recent decades – a phenomenal amount of usurping has taken place across vast genres, everywhere from international steel manufacturing to Microsoft’s once ambitious dream to link the world with one standardized multi-purpose lifestyle package. The features all these subversive architectures have in common are resolutely the same: they’re cheaper, they’re more convenient, and they are market-share carnivores on two types of consumer: those who are ambivalent and those who are ignorant.

This is jist of the hypothesis of “disruptive technologies” coined by Dean of Harvard Business school and bestselling author Clayton M. Christensen, who I was fortunate enough to see speak at the Oslo Business Summit last month. To witness live examples of these types disruptions in a market-place is both an exciting and terrifying experience – exciting in that the future suddenly looks so different, and terrifying for the same reason.

Nowhere have such examples been more prescient recently than this week in the field of journalism, when two high-quality, equally highly acclaimed weblogs published well-written, erudite and startlingly professional pieces of investigative journalism.

The first piece to break waves this week was a thorough report on a terrorist training camp inside New York State founded by Sheik Mubarik Ali Shah Gilani, the Islamic cleric Daniel Pearl was attempting to interview when he was kidnapped. Daring, provocative, and written with the type of considerable elegance New York Times staffers would be envious of, The Politics of CP’s “Jamaat ul-Fuqra Training Compound Inside the United States” was an admirable feat of journalism by the highest standards and even brought local insights and testimonies into the investigation, quoting one anonymous witness with catchy, breathtaking prose:

“We see children – small children run around over there when they should be in school. We hear bursts of gunfire all of the time, and we know that there is military like training going on there. Those people are armed and dangerous. We get nothing but menacing looks from the people who go in and out of the camp, and sometime they yell at us to mind our own business when we are just driving by. We don’t even dare to slow down when we drive by. They own this mountain and they know it, and there is nothing we can do about it but move, and we can’t even do that. Who wants to buy property next to that?”

The result was that the exclusive report was ultimately picked up by “World Net Daily”, one of the largest internet news sites around and the findings are being followed up by official investigators.

Flagrant Harbour, a stylishly written, on-the-pulse weblog written from the exotic sub-equatorial mania of Hong Kong this week followed up some excellent research into a local businessman by the name of Jonathan Hakim. Late last year, the author of Fragrant Harbour spotted that Hakim, former scion of the Hong Kong internet industry and founder of Boom.com, was involved with a company offering cheap and quick transplants from a military base in China. Hakim this week contacted the author and had an in depth conversation with him about the nature of his naivety of the dubious ethical dimensions to the enterprise, all of which was well reported with gripping linguistic alacrity in this week’s edition of the weblog.

Disruption

The reaction from The Fourth Estate to this new form of media has been nothing short of hysterical: the responses of professional media pundits have been everywhere from embracing to abusive.

Professor Glen Reynolds however, founder of Instapundit, sees weblogs potentially changing the landscape of journalism; “I think that blogging is the wave of the future, and consequently, I think we’re going to see journalism moving from a profession, back to being an activity,” he writes on his newly formed weblogging organisation, Pajamas Media. “We used to say that a journalist was somebody who wrote a journal, and a correspondent was somebody in a distant city who wrote you letters, and corresponded. Now it means somebody with good hair and a microphone. But I think that the traditional meaning of journalism is what it’s going to be like again … It’s more a case of who’s on the scene and who can report — or journal — what happened, as opposed to somebody who makes a profession out of reporting and opining. So it’s driven by the activity; it’s driven by the nature of events, rather than by your paycheck, if that makes sense.”

The answer is, it’s increasingly starting to make sense to a of people, and it especially makes sense given Professor Christiansen’s model of technological disruption in industries.

In the illustration (click to enlarge), extracted from a seminar given by the professor at the Oslo Business Summit, low-end technological disruption feeds on both markets where there is no current demand and markets where customers are already over-served by too much supply. What is most disturbing for industry professionals about the above model is that ‘sophistication’ has little to do with it once more convenient architectures enter the game.

Now in that light consider the above pieces of journalism: passable for material which might be featured in any national broadsheet, it’s free, and it is more accessible than any of the traditional newspapers, meaning that people who don’t currently read investigative reports in high-end print or online subscription journals are perfectly happy to assume the habit. In other words, the whole package above is just more convenient for readers who are trying to get a sense of what is going on in the world.

So what will news services of the future look like? Perhaps the Korean phenomenon “Oh My News” has the answer. Part news site, part blog, it is the quintessential epitome of hybridised new media: written by citizen journalists, most of whom are college students but a good number of whom are professionals, Oh My News has been the first to break a flurry of major international stories, most recently the Paris riots. The site is manned by a small team of editors, but otherwise costs are kept to an absolute minimum: no expensive deployment of editors, no turnover and hiring costs – and faster transmission of news. Reynolds hopes one day that his pioneering activities will one day translate into hard cash, and by all accounts, this is not too far off. The news industry is changing as fast as it can be reported, and those who are at the forefront of it now stand to make a fortune.

When new, low-cost, highly-convenient subversive architectures reach out to encompass the practices of dominant ones and start feeding consumer demand in the same place, it’s usually a clear sign that an industry is being disrupted. Such has been the purpose that technology has served over recent decades – a phenomenal amount of usurping has taken place across vast genres, everywhere from international steel manufacturing to Microsoft’s once ambitious dream to link the world with one standardized multi-purpose lifestyle package. The features all these subversive architectures have in common are resolutely the same: they’re cheaper, they’re more convenient, and they are market-share carnivores on two types of consumer: those who are ambivalent and those who are ignorant.

This is jist of the hypothesis of “disruptive technologies” coined by Dean of Harvard Business school and bestselling author Clayton M. Christensen, who I was fortunate enough to see speak at the Oslo Business Summit last month. To witness live examples of these types disruptions in a market-place is both an exciting and terrifying experience – exciting in that the future suddenly looks so different, and terrifying for the same reason.

Nowhere have such examples been more prescient recently than this week in the field of journalism, when two high-quality, equally highly acclaimed weblogs published well-written, erudite and startlingly professional pieces of investigative journalism.

The first piece to break waves this week was a thorough report on a terrorist training camp inside New York State founded by Sheik Mubarik Ali Shah Gilani, the Islamic cleric Daniel Pearl was attempting to interview when he was kidnapped. Daring, provocative, and written with the type of considerable elegance New York Times staffers would be envious of, The Politics of CP’s “Jamaat ul-Fuqra Training Compound Inside the United States” was an admirable feat of journalism by the highest standards and even brought local insights and testimonies into the investigation, quoting one anonymous witness with catchy, breathtaking prose:

“We see children – small children run around over there when they should be in school. We hear bursts of gunfire all of the time, and we know that there is military like training going on there. Those people are armed and dangerous. We get nothing but menacing looks from the people who go in and out of the camp, and sometime they yell at us to mind our own business when we are just driving by. We don’t even dare to slow down when we drive by. They own this mountain and they know it, and there is nothing we can do about it but move, and we can’t even do that. Who wants to buy property next to that?”

The result was that the exclusive report was ultimately picked up by “World Net Daily”, one of the largest internet news sites around and the findings are being followed up by official investigators.

Flagrant Harbour, a stylishly written, on-the-pulse weblog written from the exotic sub-equatorial mania of Hong Kong this week followed up some excellent research into a local businessman by the name of Jonathan Hakim. Late last year, the author of Fragrant Harbour spotted that Hakim, former scion of the Hong Kong internet industry and founder of Boom.com, was involved with a company offering cheap and quick transplants from a military base in China. Hakim this week contacted the author and had an in depth conversation with him about the nature of his naivety of the dubious ethical dimensions to the enterprise, all of which was well reported with gripping linguistic alacrity in this week’s edition of the weblog.

Disruption

The reaction from The Fourth Estate to this new form of media has been nothing short of hysterical: the responses of professional media pundits have been everywhere from embracing to abusive.

Professor Glen Reynolds however, founder of Instapundit, sees weblogs potentially changing the landscape of journalism; “I think that blogging is the wave of the future, and consequently, I think we’re going to see journalism moving from a profession, back to being an activity,” he writes on his newly formed weblogging organisation, Pajamas Media. “We used to say that a journalist was somebody who wrote a journal, and a correspondent was somebody in a distant city who wrote you letters, and corresponded. Now it means somebody with good hair and a microphone. But I think that the traditional meaning of journalism is what it’s going to be like again … It’s more a case of who’s on the scene and who can report — or journal — what happened, as opposed to somebody who makes a profession out of reporting and opining. So it’s driven by the activity; it’s driven by the nature of events, rather than by your paycheck, if that makes sense.”

The answer is, it’s increasingly starting to make sense to a of people, and it especially makes sense given Professor Christiansen’s model of technological disruption in industries.

In the illustration (click to enlarge), extracted from a seminar given by the professor at the Oslo Business Summit, low-end technological disruption feeds on both markets where there is no current demand and markets where customers are already over-served by too much supply. What is most disturbing for industry professionals about the above model is that ‘sophistication’ has little to do with it once more convenient architectures enter the game.

Now in that light consider the above pieces of journalism: passable for material which might be featured in any national broadsheet, it’s free, and it is more accessible than any of the traditional newspapers, meaning that people who don’t currently read investigative reports in high-end print or online subscription journals are perfectly happy to assume the habit. In other words, the whole package above is just more convenient for readers who are trying to get a sense of what is going on in the world.

So what will news services of the future look like? Perhaps the Korean phenomenon “Oh My News” has the answer. Part news site, part blog, it is the quintessential epitome of hybridised new media: written by citizen journalists, most of whom are college students but a good number of whom are professionals, Oh My News has been the first to break a flurry of major international stories, most recently the Paris riots. The site is manned by a small team of editors, but otherwise costs are kept to an absolute minimum: no expensive deployment of editors, no turnover and hiring costs – and faster transmission of news. Reynolds hopes one day that his pioneering activities will one day translate into hard cash, and by all accounts, this is not too far off. The news industry is changing as fast as it can be reported, and those who are at the forefront of it now stand to make a fortune.

Superpower Whining

Here is an interesting piece about an editor in China taking advantage of the internet, picked up this morning from the Washington Post by Hugh Hewitt and Instapundit.

Hewitt's claim that "The Party ought to require every member read "An Army of David's" (Reynolds of Instapundit's new book) is just childish however. America - even left wing America - has been on nothing short of a rampage over Beijing since Google decided to self-censor in entering the market: they ought to read this article that appeared on The Global Perspective this week instead and think again.

Constant bickering won't change the Chinese political landscape, but some initial co-operation might well do.

Media Trends of the Future

Ever wondered how the blogging phenomena started (and it was surprisingly long ago, in 1994 by Swarthemore student Justin Hill, but you wouldn't think it - type the word 'blog' into Microsoft Word and it goes unrecognised)?

This excellent piece in the New York Magazine astutely picked up by Tom Peters yesterday on his own webblog is about as detailed a chronicle of the boom as they come. Unusually for the urban tabloid, this is absolutely thorough and precise in research, and it ought to challenge convential thinking about the future of the mass media.

A poignant excerpt:

"Links are the chief way that visitors find new blogs in the first place. Bloggers almost never advertise their sites; they don’t post billboards or run blinking trailers on top of cabs. No, they rely purely on word of mouth. Readers find a link to Gawker or Andrew Sullivan on a friend’s site, and they follow it. A link is, in essence, a vote of confidence that a fan leaves inscribed in cyberspace: Check this site out! It’s cool! What’s more, Internet studies have found that inbound links are an 80 percent–accurate predictor of traffic. The more links point to you, the more readers you have."

Often, a remedy crops up before a problem is presented, and so it is with the increasing trends of online self-publishing. In many ways media is going full circle back to what it was in the days of original newspaper publishing and Joycean self-promotion: word-of-mouth and personalised advertising. My guess is that advertisers will immediately substitute the words "PR" and "Endorsement" for the word "Advertising", but this is still too short sighted.

The phrase "Stay Close To Your Customer" has been around for decades. The challenge that brands and organisations now face is how to take that policy onto a whole new level.

And as for publishers themselves? Quality - not reachability - will be the end verdict.