News Media: The Case for Convergence

Do you enjoy the feel of a crisp paper magazine cover in your hands? Do you exult in the smell of fresh newsprint as the ink rubs off on your fingertips?

Although fans of fine food are still mourning the recent demise of the 68 year old magazine Gourmet, readers of classic business periodicals are celebrating the surprising re-emergence of two iconic publications. Just last week, Bloomberg LP announced the purchase of the 80 year old title Business Week, and the 120 year old Wall Street Journal announced that it surpassed the USA Today as the newspaper with the largest circulation in the United States.

Before you begin oiling up your printing presses, though, you might wish to peruse these announcements more closely. Apparently, although re-emergent, these media properties are indeed undergoing processes of Darwinian evolution as the media industry continues to adapt to a rapidly changing society.

Damsels in Distress?

To be sure, neither of these historic publications can be considered success stories. McGraw Hill had been shopping Business Week around for months because of a 30% decline in advertising sales revenue, and finally decided to sell it to Bloomberg for a startlingly low $2 to $5 million. And although the Wall Street Journal was purchased by Fox Corporation for a whopping $5 billion in 2007, many pundits speculated that Fox’s Chairman Rupert Murdoch overpaid for the property as soon as the transaction was announced.

Yet Bloomberg obviously valued the Business Week franchise, or else it never would have purchased it at all. And general business readers must similarly value the Wall Street Journal, or else it never would have surpassed the USA Today in circulation. So, if these august publications are members of a dying breed of old media titans, why were they able to achieve such success last week?

To answer this question, we must first understand why Bloomberg was attracted to Business Week in the first place, and how the Wall Street Journal managed to surpass the USA Today. Such information, in fact, tells us quite a bit about the future prospects of our mainstream business media.

Why? And How?

Apparently, Bloomberg did not acquire Business Week in order to obtain the time-tested expertise of an experienced news organization. Truth be told, Bloomberg already was (and still is) an experienced news organization. In fact, over the years, it has earned an extremely strong reputation for old fashioned, nose to the grindstone news reporting work.

What Bloomberg coveted, though, was the brand name and reputation of an old fashioned news organization. After first establishing itself by renting computer terminals to Wall Street traders and other financial market professionals, it decided to develop a news reporting function in order to fill those terminals with proprietary content. Bloomberg then attempted to attract the general public by developing a radio station, a television network, and other consumer outlets, but it lacked a recognizable brand name and thus struggled against established competitors like Business Week and CNBC.

Likewise, contrary to common wisdom, the Wall Street Journal did not surpass the circulation of the USA Today by selling more conventional newspapers. In fact, its conventional paper circulation levels remain significantly below those of the USA Today. Instead, the Wall Street Journal expanded its online, web-based subscription business and then included its online readership in its circulation data.

In other words, the dramatic re-emergence of Business Week and the Wall Street Journal cannot be attributed to any renewed popularity in old media business practices. Instead, they must be attributed to new media firms and distribution functions that came to the aid of existing mainstream brands.

A Case For Convergence

Ten years ago, in what is now generally regarded as one of the most foolhardy corporate mergers in American business history, the venerable Time Warner merged with the emergent AOL. Initially touted as a strategically brilliant convergence of old and new media, Time Warner stockholders later looked on in horror as AOL’s user base fled the firm in favor of superior internet technologies, and AOL’s investment value simply melted away.

At the time, many pundits proclaimed that the case for convergence between old and new media was disproven, and that old media properties would simply evolve or die off like dinosaurs. As venerable news properties like the New York Times and Washington Post sunk into deep losses, those predictions appeared prescient indeed.

Nevertheless, if the Bloomberg and Fox Corporation resuscitations of Business Week and the Wall Street Journal prove to be harbingers of the future, we may soon discover that mainstream media publications – particularly in industry segments that appeal to mature readers, like business news – have some life remaining in them after all. In other words, the case for convergence may not be dead just yet.