The first session gathered together several news executives to talk about the extent to which a separation between news and business is still necessary and whether the two elements are mostly in harmony or in conflict. Some said the separation should be more of a line rather than a wall. And, it is a line that can be crossed at times as long as there is a mutual understanding and respect of each other's roles. We heard that long term success is a good goal, but you must also prove yourself in the short term. The executives mostly agreed that each news organization must find a balance between the economic and editorial values but asserted that the differences between the two are not that great.

John Morton, President of Morton Research, Inc. moderated the morning sessions. He began by asking whether news organizations' recent focus on profits within the free market has increased their economic success at the expense of journalistic quality. Are the two goals always compatible?

"How should success be measured in journalistic business enterprises? Journalistic quality is surely one way, the level of profitability is another, and an important one since there can be no quality journalism without profits to support it.

"By the measure of profitability, media businesses generally do very well indeed. The newspaper industry, for example, last year kept an operating profit of 20 cents on every dollar it took in. This is based on the newspaper segments of the public reporting companies. Earlier in this decade, in the middle of the worst advertising recession the newspaper industry has ever faced since World War II, newspapers never earned less than 13 cents on every dollar they took in.

"Some of the profitability in recent years was achieved through some fairly severe cost cutting, including layoffs of staff, trimming of news space, and various other forms of downsizing, all of which raise questions from some constituencies about whether corporate managements had become too focused on profitability at the expense of journalistic quality.

"The other side of this is whether news departments have become too narrowly focused on their wants and needs, and not sufficiently concerned about the marketing and operating strategies on the business side that support journalistic efforts. In short, the eternal conflict between profit and public service -- how should success be measured? Or are the measures of success between ownership interests and news departments so at odds that the fundamental purpose of a journalistic organization, which is to serve the public's need for information, is being threatened?..."
For Mark Willes, Chairman, CEO and President of Times Mirror Company, a journalism company must both earn an profit and deliver quality journalism to readers. These two goals, he said, may be on separate sides of a line but are wholly compatible. He later remarked that at his company, the value system is demonstrated by being sure that the "editorial decision-maker wins every time":

"Since I am at least in part the cause of some of the ruckus, I thought I'd tell you my biases so that you don't have to worry about trying to figure them out.

"My first bias comes from having been ... on the faculty at the Wharton School at the University of Pennsylvania. In that part of my life, I came to have a very deep appreciation for the notion of teaching, for the transmission of understanding and knowledge, and an abiding interest in academic freedom and the ability to pursue one's interests wherever they went.

"I then ... went to work for the Federal Reserve System, ended up as President of the Federal Reserve Bank in Minneapolis. ...As part of that organization, ...you had resident this notion of independence. The Federal Reserve System is set up in such a way that it is not only allowed, but charged with the responsibility, where necessary, to tell everybody, including the President of the United States, to forget about it. So the notion of being independent, of standing up against criticism, of being willing to take whatever policies seemed most appropriate based on the information you had, was a central value to the Federal Reserve System, and frankly, a central value to me.

"Then finally I... went into the private sector at General Mills, and for part of that time was President and Chief Operating Officer, where we tried to sell everything from fish at Red Lobster to Wheaties at the breakfast table.

"Finally, and hopefully not least, I now have my current responsibilities.

"I take you through that because my background is a little more complex than some people would like to believe. I would also suggest the world is a little more complex than many people would like to believe. And in the process of trying to oversimplify things, of saying it has to be either A or B ... we sometimes miss some of the central things that we must think about ... and ultimately resolve if we're to deal with the issues that we face.

"Let me just mention briefly two of those. The newspaper business, the broadcast business, basically spend their lives... reporting what goes on in the world and around the world. It is important, therefore, ...that we also understand the world as it is. Most organizations, ours included, are publicly held, publicly traded corporations. That implies a fiduciary responsibility to our shareholders. We can say we can say we wish it were otherwise, but that is the fact. ...Therefore earning an adequate rate of return is not a "nice to do," it's a "must do."

"A second part of the world that we face is that it's a very competitive world. We're long past the time, if it ever existed, ...when people read us because they must. They read us because they choose to. They read us because they find what we do is sufficiently important and compelling that they're willing and anxious to spend their time reading us, rather than spending their time doing all of the other things they have the option of doing. Therefore, it's not a "nice to do" to find ways to be interesting and compelling to our readers, it is a must do. Otherwise we will cease to exist as an independent enterprise.

"...Therein lies the complexity and the challenge that we face. If we must earn an adequate rate of return, which we must; and if we must find ways to be compelling to readers in order to attract the advertisers that basically pay the bills of at least most newspapers in this country, then it's not, do we have high quality journalism or do we have a successful business? We must find a way to do both...

"Therefore, what we're trying to do is not worry so much about the things we can't change. We can't change the fact that we're publicly traded, we can't change the fact that we have to earn a decent rate of return... What we're spending a lot of time worrying about is how can we balance all of those things.

"...But I think you can do both. I don't think you have to make a tradeoff. I don't think it either is high quality, independent journalism or a very successful business enterprise. In fact I think just the opposite is true. I think the greater the journalism, the more compelling the journalism, the more successful we'll be as a business enterprise. And that's what we're trying to do."

Benjamin Taylor, Publisher of the Boston Globe, asserted that the while there should be a line dividing business and content, the two purposes are related in that a persistent focus on quality will lead to a successful business. He also recognized the important progress that newspapers have made in separating editorial and advertising:

"...I would argue that in fact the wall has not come down in the best newspapers in America, ...in fact if anything, the separation of church and state or the wall that's erected between the business side and the news side has gotten better and not worse.

"You don't have to go back 100 years, at least in this town, to find advertisements on page one [two or three] of the Boston Globe. We were doing that in the '50s and the '60s... Some very wise people made decisions back in the '60s to make those purely news oriented pages -- pages one, two, and three, and I think it's been a part of the great success of the Globe over the last 30 or 40 years that we've been able to keep it that way. You don't have to go back that far to find the guys who sold the ads for some of the classified sections, and after they finished selling the ads were writing the editorial copy. That issue has been cleaned up in most of the good papers around the country so that there really truly is an independence between the people who write editorial copy and real estate or automotive or employment or the areas in classifieds...

"Newspapers have to be a good business. They have to be a good employer. They have to be a good corporate citizen, and they have to be good keepers of the public trust. And the last piece, the keepers of the public trust, is absolutely essential. ...The wall is ultimately about integrity and whether your readers or our readers have a sense that what they're reading is the best effort of journalists to try and get it right. And if we do that right, if we keep putting resources back into the news sides of our operations, and we are allowed to take a bit of a longer term view, that over the long haul newspapers will continue to flourish and be very successful as businesses..."

Kevin Gruneich, Senior Managing Director, Bear, Stearns and Co., handles diversifies newspapers stocks like the New York Times and Times Mirror, magazine stocks like Meredith, printing stocks like Donnelly and information stocks like McGraw Hill for institutional investors. He spoke from a slightly different vantage point:

"One of the questions in the letter that was sent to me regarding the panel was how do you measure success. I'm kind of lucky. ...I can measure my success quantitatively, or on a fairly immediately level. That is that I need to beat the S&P 500. That's an indice of the market. ...That's a higher standard than just making money.

"Back in the '80s ...the conversation was fairly easy because most of these investors owned three, four, five of the diversified newspaper companies... During the early '90s, that changed quite a bit. I go into ... large shops right now, where not many of the diversified newspaper companies are owned, if any. And I'd like to see that changed.

"...The newspapers' editorial independence is integral. It can be ... a major differentiating asset for these media as others marginalize themselves via editorials. Hopefully... three, four, five years from now, we'll be sitting around talking about the great economics of quality journalism."

Diane Baker recently retired as CFO of The New York Times Co. She saw her role there as ensuring that the company had enough money to make the quality product it desired. Creating that product ultimately comes down to finding a sense of balance between economic and non-economic values:

"The New York Times is a company whose operations are much broader than just the New York Times. It includes ... 21 newspapers, eight television stations, a couple of miscellaneous things here and there, a few magazines, from that very, very proud tradition tried to get some idea of a business philosophy. People say there is a difference. There's a lot of philosophy about journalism, there's ethics and integrity about business. Hmm... There's no business ethics, there's no business philosophy, and certainly there's no integrity. When you start with that kind of contrast, particularly in your own company, it allows you to know that there are a number of understandings that you have to achieve just internally before you can ever convince the outside world that the company, the New York Times company ...as a communications company, is not just worth investing in, but is worth considering as an ongoing enterprise.

"...Leonid Kuchma who is the first democratically elected President of the Ukraine, gathered the first Duma together -- his newly democratically elected, and he looked out upon them and he said, "Comrades ... today we are on the brink of a chasm with the past. And we're going to take a great step forward." (Laughter)

"I thought of that enterprise, of that same sort of spirit coming to the New York Times out of a sort of profoundly commercial background... The discussions internally at the New York Times company convinced me both of the sanctity of the wall, the constant shifting definition of the wall between business and journalism, and the advantage that when you're arguing with people that already have Pulitzer's for writing editorials, you know it's a very high quality dialogue, even if it's heated and involves charges of being a demon and a few other things.

"The whole role of where newspapers are going to go forward, which is a theme Mr. Willes started off with, is a very important one. To preserve the incredible role of the free press in the United States with the profusion of outlets ... that are not high quality, with the amount of people that are getting their information from the Internet, which is not screened, not edited, and frankly has sometimes a very low quotient of truth, [our] role is to be not a quick read, not a simple read, not necessarily politically correct, but in fact, forcing people to deal with complex issues...

"...It's like asking someone to take medicine when they could get it in an easier, simpler form. And being part of the business side of that, becomes an intriguing intellectual exercise because in effect, whether or not the journalists think that you're interested in doing it or not, making sure that the enterprise survives to fight another day, whether people what to read their newspaper on a video, see it on a video screen or read it on the kitchen counter or chew it as gum, I don't really care. I just want to make sure we have enough money that by the time we get there we can afford to do that... when you start talking about the executive side of a newspaper or the financial side of a newspaper, ...survival becomes somehow a more pressing issue."

Stewart Garner, the Chief Executive Officer and President of Thomson Newspapers, a chain of just under 10 medium and small sized newspapers in the United States, and papers in Canada including the Globe and Mail, had to at the last minute cancel. He sent a letter in which he wrote that newspapers are first and foremost a business which all departments must be a part of. Bill Kovach read excerpts:

"We face many issues in the market. People have less time these days. The choice of media is growing all the time. Readers' definitions of news are broader than those of journalists as seen from recent ASNE/NAA research which placed grocery ads ahead of local government and political reporting in interest levels.

"As the research report said, 'At the present time, relevance is not a strength of newspapers.' In the face of these issues what do we have? Many journalists don't see a need to connect with readers or don't want to connect. Some appear to have a bigger desire to save the world than report issues which really touch people. There is a traditional arrogance in some newsrooms that journalists always know best. Training often seems to me to be an academic exercise conducted in ivory towers.

"It is my utter conviction that newspapers are a business and, since their production is a team process, no department can be immune from the fact. They are expensive to equip and run. The only way to ensure their future is to make a healthy profit. For us that means an overall 20% profit margin... We just have to be a business in our approach i.e., market sensitive. No one is immune from this. To do anything else is to be like ostriches and stick our heads in the sand."

Bill Kovach: "That in my mind raises a fundamental question to you as executives of organizations. It is very easy to state your values in economic terms -- 20 percent's an easy thing to say. That's clear. How do you express your non-economic values to your board members, to your newsroom managers, and to Kevin here?"

Diane Baker: "One of the things that I think the best newspapers achieve over time is that their best leaders become editors. Editors, in my view, have a wealth of material that they choose from to create a product every day, whether it's a news broadcast or a newspaper...

"The financial executives at a diversified communications company also have a wealth of opportunities. They can invest, they can make higher dividends for shareholders, they can pay for PR flack to boost the role of the newspaper. They can build a new printing plant. They can hire more reporters on the city desk. They can provide more scholarships to get minority journalists in a position where they may be able to report on their communities. Those opportunities are balanced every day. What you can seek is the concept of balance. It does not mean ... that there are no absolutes. The wall definition is really one where you're trying to balance integrity, you're trying to balance all the things that you're trying to achieve. To me the idea of the non-economic values being a little soft, they are soft. But they have to be seen in the context of the other opportunities that a company has. And if a company disregards that sense of balance, they will end up with either a newspaper bankrupt of value or quality -- which means you'll lose your readers, which ultimately means you'll be gone. Or you will have a tremendously great newspaper that cannot pay its journalists, that can't put the color in the paper that people want and so on. So it's that balance that to me makes the articulation of non-financial values easier. Because you know that if you don't have them, you don't survive."

Ben Taylor: "I am an optimist about newspapers and I think that one of the things that's incumbent on us is to remember where we are, what our role is in the communities in which we publish, whether it's in Los Angeles or in Boston or in New York or in the nation. The fact is that I believe newspapers are still very much the straw that stirs the drink, to quote Reggie Jackson. We are the bulletin boards for the communities, we are the conscience of the communities that we serve...

"...Television is fragmenting tremendously right now, I think the networks are below 50 percent in terms of their reach. ...It's true that [newspaper] circulation has not been growing overall, but it's been remaining fairly constant. ...We are extraordinarily important in leading accurately a reflection of how we look at ourselves as a society. No doubt there's a lot of challenges out there and a lot of competition from electronic media, from radio, from television, from the Internet, but as things fragment, in a way I think newspapers could become more important going into the next century, rather than less.

Mark Willes: "It seems to me ... the answer we're trying to provide consists of several pieces. The first is what you do day in and day out in terms of honoring what I prefer to call the line rather than the wall between the business side and the editorial side.

"I hate walls because they get in the way of conversation, creativity and innovation. I absolutely respect the line between the business side and the editorial side. It seems to me that the first way you demonstrate your commitment to high quality independent journalism is to make it absolutely clear that when there's a different point of view the editorial decision-maker wins every time. That's what we do in our organization. There's never a matter, and there's never occasion, there's never a circumstance where editorial judgments are made by anybody other than the editors. It seems to me that that is absolutely the most important thing that we do and will continue to do to make clear what our value system is.

"There are a lot of other things you can do. One of the first things I did when I got to Times Mirror was take down a lot of art work that we had around the place and put up a display of our Pulitzer Prize winners. A very small thing, but in my judgment a very important thing, to say what we stand for. We stand for high quality journalism. We have converted our annual meeting basically into a celebration of what really great people in our organization do, including the journalists. We give Journalist of the Year awards for all kinds of outstanding journalism, and we make that a part of everything we do. We don't hold a board meeting now when we don't have somebody talking about journalism. We don't have an annual meeting where we don't talk about journalism. We don't have a management meeting where we don't talk about journalism. So literally in everything we can find a way to do, we try to reinforce the fundamental journalistic values for which we stand."

John Morton: "I believe you set circulation goals for the LA Times at something on the order of 400,000 or 500,000 subscribers. How [do you] tie that back to the newsroom?"

Mark Willes: "It turns out to be one of the things that both the business side and the editorial side can get pretty enthusiastic about. I mean I've never met a journalist who didn't want to be read by more people rather than fewer people. So if we can increase our circulation by 50 percent, virtually everybody in our newsroom thinks that's a pretty nice thing to do.

"What it means for us, and this of course is where it gets tricky, is that our penetration in our base market is 28 percent. Compare that, for example, with penetration of our paper on Long Island, Newsday, where its penetration in its market is 64 percent. I mean there's a big gap between 28 percent and 64 percent. What it says is there are an alarming number of readers in our base market who don't find us sufficiently compelling that they want to take us and read us day in and day out.

"As we talk to them, we find that they basically say two things. One, they say well, I'm too busy... We have, for example, 500,000 women who read us on Sunday and don't read us during the week. The primary reason they give for that is that they're just too busy.

"...What [they're] really making a statement about is priorities. If we were sufficiently compelling, if we were sufficiently relevant, my guess is they'd find a way to make time. And the fact is they don't.

"Our penetration in the Hispanic market, which is now 40 percent of the population in our market area and the most rapidly growing segment in our market area, that is only 19 percent. So whether you look at women or Hispanics,.. that means we have to change what we do. We have to put things in the paper that they find more compelling and more interesting so that they make the decision to choose to read us. That, of course, is the ongoing debate we're having right now. How do we change what we put in the paper? How do we change the topics that we cover, how do we change the issues that we cover, perhaps even how do we change the way we write about those topics and those issues so that we have substantially more interest on the part of potential readers."

John Morton: "Kevin, you and your colleagues reward publicly owned companies with your evaluations of their economic performance. Do you ever take into account other things besides just the economic performance?"

Kevin Gruneich: "Oh, absolutely. I think that companies that don't invest in resources for the future, including editorial resources, are soon found out, and marked down."

John Morton: "I will remark, a company unnamed here just recently had a, not from you, but a very laudatory report. This being a company that is not known for spending more than the absolute minimum necessary to put out a newspaper. So, do you think your point of view is fairly broad within the Wall Street community?"

Kevin Gruneich: "I do. Obviously I'm speaking for thousands of people so I'm making a generalization ... but I do think that it is widely held, and I think that you look at local broadcast markets and you look at the stations that have the best programming and the best news ratings, and it may not be what you and I determine is the best or the highest quality of programming, but if they're number one in that market, especially in news programming, they tend to be also the highest... margin stations in those markets."

John Morton: "Are you asserting, then, that Wall Street is willing to take a long term view towards impact on profitability? And if that's the case, why did McClatchey's stock drop 25 percent once they made a long term investment in Minneapolis?"

Kevin Gruneich: "Well, I think John, you refer to the acquisition of Coles Media and that absolutely was a long term decision, but it's a long term decision that you don't have to agree with. And Wall Street didn't agree with that decision. I would guess that the other panel members here didn't agree with the decision or we would have seen their companies bid higher."

Diane Baker: "I find it interesting that when journalists say long term, they're using the word long term in a qualitative sense to suggest somehow that it's the right thing, that it's a good thing, that it is beyond the short term, and those are really left to the business types who are only worried about short term issues.

"The reality is, long term also may be a euphemism for something that never pays out a return. Something that you pay too much for or a building that you design wrong, whether you look at it short term or long term, it is a long term turkey or a short term turkey. I think that you need to be careful and I know, having spent a lot of my time communicating with Wall Street, that you don't use cliches. That you don't fall into saying well, that newspaper, they're really doing the right thing. They're investing in the editorial product and that's going to give them a long term benefit.

"I think one thing Wall Street tends to do is say fine. If you can demonstrate it. If you can get the circulation. If you can show that advertisers will follow you.

"One might argue that [Wall Street's] timeframe is too short, given that it's about a nanno second long. ...But over time, high quality institutions that have invested in the long term and have had that pay back to them in terms of a broader voice in the community, a broader voice in government, which tends to compel and bring readers to them, tend to survive. ...There's a convergence, in my view, of what Wall Street seeks and what a quality communications company can achieve. Now that's in the ideal world. As I say in the short term, there can be a lot of disagreement."

John Morton: "Mark, when you first came to Times Mirror,.. you saw a need to do some very short term decisions in terms of cost cutting and so forth. How do you look at the future from that perspective?"

Mark Willes: "First of all, we did a lot of things quickly because we were bleeding and we needed to stop the bleeding and get going again.

"I mentioned in my opening comments, it's dangerous to try to oversimplify things. And short run versus long run is one of those things that we tend to oversimplify. The fact is that Wall Street or anybody else will believe in the long run if they believe in it. The trouble is the most likely successful long run companies are those that are also successful in the short run. ...The fact is, you have to do it all: you have to be successful in the short run and you have to be successful in the long run and you have to have a successful business and you have to have successful journalism. The key therefore, is to figure out how to do all of those things together."

"...I think at the end of the day when we can get past the words and get past the concerns, we're going to find we're all in violent agreement. Because the fact is the primary lever for a newspaper is high quality journalism. The question is how do you go about doing high quality journalism in such a way that you also have a successful business enterprise?

"Diane is also right. There are certain circumstances where even high quality journalism isn't enough. That was the painful circumstance we faced in New York City with our New York edition of Newsday. You had so many newspapers in that market beating each other up that it was not possible for me -- rightly or wrongly -- to see how we were ever going to make any money with that edition of the newspaper. ...It wasn't a management failure, it wasn't an editorial failure, it was a market circumstance."

Benjamin Taylor: "I would just add that the Boston Globe became part of the New York times Company in 1993, and at the time the stock of the Times Company was roughly 25. That was the price that was set at the time of the merger. ...But some of the analysts at least were not all that optimistic... Stock's now trading around ... seventy-three... So over a five year period, if you do the math, it ain't bad from a business standpoint. From a shareholder perspective, I think it's been a pretty darn successful marriage. I believe journalistically it's been a positive thing, as well.

"There is a short term/long term issue and that we all ought to be thinking about, and what's required perhaps is that the people who have some control and influence over the major newspapers in terms of ownership and so forth... Be willing to take a long term view... I have no idea how the McClatchey decision to buy Minneapolis is going to work out, but if it has any relevance to the Times and the Globe's decision, perhaps five years from now it will start to look pretty good."

John Morton: "Let's assume a scenario, say next year, in which God forbid, newsprint goes up 40 percent again all of a sudden. What would be your reaction to it in terms of investing in the kinds of things that you're doing now in order to improve the products and their appeal to your customers?"

Mark Willes: "It is, of course,the ultimate test. If you really believe fundamentally in what you're doing, you will invest in it, no matter what the other circumstances are. I think a lot of people are kind of waiting to see if we have the courage of our convictions. ...But it's important to distinguish what's causing the bleeding and why. And the fact is, a lot of the things that were causing the bleeding at Times Mirror had to do with the fact that we were in businesses that we shouldn't have been in, that we had a basic cost structure that was too high given the nature of the business we're in, and so on. We fixed most of those things. Therefore, if newsprint goes up and our profits go down temporarily, that's going to be an unfortunate ... and fortunately temporary circumstance. We will continue to invest in our newspapers.

"In fact, it will be the classic example where in fact you will have a divergence in the short run for the sake of the long run vitality of the enterprise. Will our stock price go down when that happens? Yes, it will. Will it go back up again once we come out of it? Yes, it will. We're perfectly prepared to stay the course because we believe so deeply and passionately in the future of this business that we intend to get more and more vital, stronger and stronger, and the only way you can do that is to continue to invest in the business."

Benjamin Taylor: "I agree very much with what Mark said. The stay the course, which is a cliche perhaps, but it's what I wrote down as I was thinking how I would answer this question. That's a thing that's proved successful for the successful newspapers over time when either recessions hit or big changes in what we consider to be the givens like newsprint going way up as it did in '95 and '96.

"You certainly try to cut your costs and your expenses where you can without hurting the quality of the newspaper. Then when times get better again, you're hopefully in a position that you can take advantage of the better times and start to do more with the newspaper. Sometimes the good newspapers during recessionary periods or toward the ends of recessionary periods have taken some risks and put some money back into the newspapers."

Diane Baker: "To me there's this idea somehow that you can suspend reality and say okay, I have three sources of costs. I have my journalists who interestingly enough, usually aren't interested in pay cuts. ...There is newsprint which is controlled by a cartel-like group of manufacturers that basically will inch it up whether they look at demand or not...

"The price goes up, and it's sort of foolhardy for a business enterprise, which includes both the financial side as well as the editorial side, to say well, we think this is only going to be a one year stint, so what we're going to do is we're going to endanger the ability for this entire enterprise to survive by taking one portion of it, let's say ...the amount of news hole or the amount of reporters we have and they're going to be sacred, and we're going to cut everything else. ... But at the same time we also wanted to make sure that the next thing we did was not cut out what we viewed was the best asset we have,which were the assets that drove to work every day, that took the elevator up to their office.

"Frankly, to save those people, we'd alter the product, because at the end of the day when newsprint comes back, I'm going to still turn to that asset, that person, that mind, and say okay, we need to bring back more readers because we may have lost them because we shrunk the sections. We need to bring back some of the advertisers because, you know, we stopped doing some of the articles they might have been as interested in because we really wanted to focus in on our core mission."

"...The decisions are painful. ...A wall seems to ignore the balance concept. Balance is really what successful enterprises can do."

Question: "[Professor Carey] said that perhaps the first amendment doesn't protect the public or isn't about the public at all anymore. That what it does is protect private interests. The interests of newspapers to sell audiences to advertisers. How would you respond to that?"

Ben Taylor: "I would respectfully disagree, I guess. The first amendment protects a lot of things, but fundamentally it protects free speech, and it protects us, it protects our reporters, it protects our editors, in all sorts of ways... But fundamentally, I think that the first amendment ...is still a pretty healthy part of the American society in which we live, and I would hate to see it hurt in any way.

Question: "There's been some discussion about the cyclical nature of newspapers, but there are also some structural issues with the newspaper industry. It seems that if you look at the long term, Diane and others, that clearly the newspaper industry has a lot of negatives. The percentage of households getting newspapers is down from 1.3 to roughly .5 over several decades, the percentage of advertising accounted for by newspapers is way down, the number of newspapers is way down... How do you keep up quality journalism if the whole pie shrinks?"

Mark Willes: First of all, I'm not sure I agree with the premise of the question. The trends are exactly as you say, but it's not clear that they are inevitable...

"...I think newspapers have declined because we haven't run them the way you need to run them to be increasingly compelling and interesting to our readers... [But,] at least some of this decline in circulation and numbers of newspapers was a consequence of the industry becoming more economically efficient. There are a lot of marginal newspapers that have gone out of business, leaving behind much more profitable business. I know this sounds very cold hearted, but as a mater of fact this has happened, and that has contributed to the circulation and performance and the numbers of newspapers still left.

Bill Kovach: "...A lot of the decline in readership is not readers who abandon newspaper, but vice versa. Some of the largest drops in newspaper readership have occurred when news organizations decided it was not economic to deliver newspapers to the southern half of the state. The Atlanta newspaper where I used to work,cut off 50,000 readers overnight by cutting off the southern part of the state. That's happened a number of times. So all the decline in readership is not people abandoning newspapers, and that holds out hope for quality news organizations that can find ways to pick up that readership that's laying out there waiting for them now."

Question: "My name is Joe Halinan, and I'm a Nieman Fellow here this year. Kevin Gruneich, you made two statements. One, I think, that you try to get your investors investments that will beat the various indexes of the market. And the second is that premium quality translates to premium valuation.

"After you made those statements I jogged over here to the Law School library and pulled the Moody's Common Stock Guide for 1997 because I wanted to compare the performance of the New York Times Company to the Dow Jones Industrial Average. What I found was over the last ten years the Dow Jones Industrial Average has roughly tripled, going from about 2500 to 7500. During that same period the stock of the Times went from I think a high of 48 to a high of 53.5/53-5/8 which is an increase over ten years of 5-5/8ths or about 12 percent.

"When you have an investment that yields 12 percent over ten years versus one that would ...triple over ten years, how do you convince investors to invest in a stock like the New York Times company? And does that in fact undercut your assertion that premium quality translates into premium valuation?"

Kevin Gruneich: "I think that you're using an old stockbroker's trick. That is you're choosing the period of time you want to make a measurement...

"You choose a very interesting period of time for the New York Times Company because I think during the mid '90s you had a situation in which many new managers came in, including Diane, and made the company a little bit more businesslike, for lack of a better term. ...The New York Times Company I don't think got to their pre-'87 crash level until something like June of 1997.

"...I'm not talking just quality journalism. I'm talking about the quality management of a company. That's what's happened, I think, at the New York Times Company over the last few years."

Diane Baker: "I spent a lot of my time talking to 22 year old portfolio analysts who had just recently picked up newspapers. They think they know that newspapers are versus cyberspace, and their portfolio philosophy is the extent of, let's say, three to five months.

"One of the reasons why the New York Times, other than being a great franchise, is seen as such a great return is in their brief moment of paying attention to the portfolio, it did well. It's done well from '95 to '98. Oh, my God, what a record.

"Keep in mind that long term is a definition of from where you come. And on Wall Street, long term is very short. Long term is a quarter. Short term is a minute. If you're dealing with that kind of mentality, the kind of investments that have been made by Times Mirror, by the New York Times, by the Philadelphia Inquirer and others in plants that return things over 40 years and so on, they are real leaps of courage because Wall Street certainly isn't going to give you any credit for something that doesn't give them a return in a period of time measured by their customers which are pension funds, individuals...

"The way you might want to act with your own money is how the market acts dealing with companies that can't make decisions for three months or six months. That basic difference between how you might want to act with your money or how an institution wants to manage your money and how executives have to manage a business for the long term, that's a problem that isn't just the newspaper industry. That' every public company out there."

Question: "Then how do you manage the New York Times? Do you manage it for the quarter, do you manage it for the year?"

Diane Baker: "We communicate really well."

Mark Wilkes: "...High quality journalism is a necessary but not a sufficient condition for a successful newspaper organization. High quality business management and leadership is a necessary but not a sufficient condition for a successful newspaper company.

"...The dilemma that comes in is that you have to do both. You can't do one or the other, you have to figure out a way to do both if you're going to be successful -- short term or long run.

Question: "My question has two parts. The first is, do you consider newspapers a forum for competing visions of the way society can work and not people who are taking one side or another in and among those competitive visions? And in relationship to that, I'd like to refer specifically to last Sunday's Top 100 section in the Boston Globe which was a 48 page advertorial about corporations in Massachusetts. As far as I was concerned, there was very, very little that was newsworthy in that 48 pages section. It was a good opportunity to sell a lot of advertising, but do sections of that kind weight the dialogue..."

Benjamin Taylor: "...The first part of your question as I understand it is asking, is it the role of newspapers to accurately reflect various competing interests in terms of ideas, ... in terms of all the various range of issues that are out there in our complex society. The answer is, in my view, absolutely yes. I think our newspaper does that every single day.

"I think it does it on page one ... in the editorial pages where the voice of the paper tries to speak for what it considers to be the most important issues, ...on the OpEd pages with our columnists. ...Our business pages ... reflect the positives, the negatives, the various views, who's going up, who's coming down, who's practicing business well in our community, where the successes are, where the negatives are.

"The Globe 100 ... is something we've been doing now for ten years. It's not really part of our regular business coverage, it's a separate and distinct special section of the paper. ...It certainly wasn't advertorial. Advertorial is a word which is a kind of journalism which I think is very dangerous in American newspapers because it tends to blur the distinctions between what is advertising and what is editorial. ..

"What we do should be either advertising or news. Advertising has to be clearly labeled, and clearly defined, and if an advertiser chooses to buy a page and then put what appears to be editorial content on that page about his or her company, it has to be labeled properly. That's what an advertorial is. And there are examples of that in every newspaper, but the key for newspapers, in my view, is to label advertorial properly. If you do that, hopefully you won't confuse the reader and you will be able to show or print material that is either advertising or editorial.

Mark Willes: "...It's important when you look at a newspaper, I think, to distinguish the paper from the specific content of the paper.

"We have in our paper people who try very hard to be unbiased, and the fact is their biases show right through in what they write. Our challenge, therefore, is to make sure that we have a profusion of biases in the paper so that to the maximum extent possible, we can reflect the richness and diversity of the community we're trying to report on and connect to. ...We have the profusion of views in the newspaper so that people who will take the time to read can have access to a wide variety of the dialogue..."

James Carey: "Certainly no one has any disagreement about the fiduciary relationship to shareholders... In fact every business has to do this. ...But why do we have a First Amendment which grants to the press special rights and special privileges, if in fact what its constraints are are really the constraints of all corporate life...

"...How does the contemporary press hook up to the political system? Do newspapers have to make a profit in order to discharge a public trust, or do they need a public trust in order to make a profit? Is the connection between political and economic democracy purely advantageous as indeed Mr. Murdoch believes, and indeed I believe Mr. Garner believes...

"Why don't you have a language of politics to go with the language of economics seen as you claim the first amendment as a political protection?"

Voice: Well, speaking jut for us, and I wouldn't pretend to speak for anybody else, we believe very strongly that our success as a business enterprise depends on our ability to day in and day out to earn the public trust of the readers that we serve, and that it flows very much in that direction. And therefore, and I'm not a first amendment lawyer so I don't pretend to understand the intricacies of that, but what I do know is that the first amendment is critical to our ability to tell any and every truth that we discover, and we think that is central to the compact that we have with our readers."

Question: "At the outset John mentioned that 20 cents of every dollar goes to the profit pocket in the newspaper business, and I think there was a letter from the gentleman from Thomson that said that 20 percent profit margin is what they aim for.

"...How do the publishers and then how does Wall Street look at a point where this is no longer the case? Where 20 percent 25 percent, 30 percent is too much, and the public interest is going to suffer because you are going to have to start squeezing some costs if you're going to provide the quality journalism which I firmly believe does drive a business into a better position."

Diane Baker: "Somehow there's this belief that if all we have to do is accept lower profit margins and the Street just have lower stock prices, that there is no cost to journalists by that, and that the enterprise will be as successful at lower profit margins. The thing is, that's just not true.

"In order to build a printing plant, to put the color in the paper, or to provide the coverage, or to hire more reporters, the enterprise has to make some money, and if it doesn't make enough for the bigger decisions they want to make, it has to go borrow it. If the stock price is very low and its prospects are felt to be somewhat dim, it costs a lot to borrow that money or earn it from the market, which means that there's less of it to go around, which means that newspaper can't hire as many reporters. ...When you cover the Olympics, you're going to put together a budget that says okay, I know all my readers want to read about the Olympics, it's a news item, I'm going to figure out how much it costs to get how many reporters there and so on. In putting that budget together you also make an assessment of how newsworthy the item is and so on..."

Mark Willes: "Can I come at it in a slightly different way and see if this helps. First of all, I would hope that not everybody would go out of the room thinking that newspapers actually earn 20 percent. Twenty percent typically has to do with what's called an operating margin. I'd love to earn 20 percent return on capital. I don't. I'd love to earn 20 percent return on sales. I don't. Very few people I know do. So when you take all of the expenses out it's nowhere near 20 percent. It's much more in single digits.

"Second of all, we need to understand who Wall Street is. Wall Street is your 401K, it's you retirement plan, it's your parents' retirement plan, it's our employees' pension plans and so on. So Wall Street, at the end of the day, is us. It's very interesting at the end of the day when we look at our retirement plan -- you and all your friends and everybody else, they're very unemotional about that. They say what return do I get from holding the New York Times or Times Mirror compared to what return do I get if I hold something else because I want to protect my retirement. It's that competition for capital that we have to be responsive to, just as it is the competition for readers on the other side, and there is the exquisite dilemma that makes this such an exciting business."

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