Bill Barnhart was a business reporter, editor and columnist for Chicago newspapers for more than 30 years until his retirement from the Chicago Tribune in 2008. He holds a master of business administration degree from the University of Chicago and was SABEW’s president in 2001. He is the author of “John Paul Stevens: An Independent Life.”
Amid the dot-com bust on Wall Street more than 10 years ago, CNBC host Tyler Mathisen summarized the negative effect on CNBC ratings. People, he told a SABEW conference at the time, don’t want to tune in to watch themselves bleed.
The demand for business journalism, as a specialty in a diverse profession, always has depended on people searching for opportunities to make money. For that reason, business news presents a different supply-demand curve than the rest of journalism. “If it bleeds, it leads” seldom works for long.
By contrast, a community hit by a tornado won’t turn away from local news coverage, no matter how helpless people feel. Quite the opposite. Even long-suffering Chicago Cubs fans demand the latest information about their inevitably horrible team. Not so the disgruntled 401(k) investor in a bear market, as Mathisen observed and data on CNBC viewership from media tracker Nielsen confirms.
Business and financial disasters, such as the Bernie Madoff story and the collapse of Enron Corp., stimulate schadenfreude (fascination with the discomfort of others), always an effective hook for drawing attention to any news reporting. Occasionally, public anger about shoddy business practices prompts reader interest in critical reporting that leads to reforms by government – an excellent outcome for the business news brand.
But establishing a business reporting beachhead in print, broadcast and digital news formats normally depends on the target audience feeling collectively upbeat. Moreover, the business model of business news always aims first at elites — the 1 percent — to form its audience base.
Using a harsh and slightly exaggerated analogy, Hofstra University journalism professor Robert Papper, who studies the media business, said: “Six people watch golf on TV, but they are all millionaires and they buy lots of stuff. That’s why golf is on television.” In the same way, he said, “CNBC makes money way out of proportion to its audience.”
“Six people watch golf on TV, but they are all millionaires and they buy lots of stuff. That’s why golf is on television.” In the same way, he said, “CNBC makes money way out of proportion to its audience.” -Robert Papper
To complete Papper’s metaphor, when Tiger Woods or the few other big names on the PGA Tour aren’t winning, golf viewership sinks.
This article looks at the demand for business news in general news outlets in the last 50 years. In the jargon of economists, demand for business news is pro-cyclical. It is positively correlated to larger economic trends. For about 20 years after SABEW’s founding in 1963, a confluence of economic factors, unlikely to be seen again, spurred demand for business news in America in the general news media.
These trends included an expansion of economic growth outside major cities, a surge in new business start-ups, post-war demand for homeownership and unprecedented job mobility – all of which created public demand for insights into business and economics. Not until the late 1980s did more frequently cited factors in business news demand – the deregulation of financial markets and the challenges of personal investing – come to dominate the picture.
Along the way, the “CNBC-ization” of business news, as critic Dean Starkman of the Columbia Journalism Review terms rapid-fire chatter about fleeting corporate and economic tidbits, turned a healthy public curiosity about making a better economic life into a prurient fixation on a sideshow.
Lately, as the record number of entries in SABEW’s annual Best in Business context attest, business reporters, once again, are finding an audience for a variety of business and economic stories, often with little or nothing to do with personal investing or Wall Street.
Just as important, the business reporting profession is climbing out of the financial market silo and taking its place as an effective voice for consumers, business operators and workers through good times and bad.
The tail wind
When a handful of business writers established SABEW in 1964, America was in the middle of the longest economic expansion in its history until the 1990s. As tracked by the National Bureau of Economic Research, the boom began in February 1961 and ended in December 1969. Sectors ranging from steel to finance advanced. Even the assassination of President John F. Kennedy in November 1963 did not derail economic optimism.
Although economists lamented an unemployment rate that seemed stuck at 6 percent, superlatives abounded in newspaper headlines about the general outlook. The New York Times, in its year-end 1963 coverage, declared, “Nation Poised for New Surge of Prosperity: Stock Market and Other Indicators Reflect Public, Political and Business Confidence That Records Will Continue to Fall.”
The Times gave a special nod to the emerging computer business, which soon would become vital to the news media’s distribution strategy: “The expansion rate of the data-processing industry appears to be one of the few things that computers have been unable to compute.” Among major corporations, a conglomeration wave, based on the now discredited theory that a diversified corporation was better than a diversified stock portfolio, provided plenty of scoops and drama for the business press.
Fortune magazine had just published its first personality profile cover story, of retired General Motors chairman Alfred Sloan. But Wall Street Journal editor Barney Kilgore remarked, “Financial people are nice and all that, but there aren’t enough of them to make this paper go.” He redesigned The Journal’s front page to appeal to a broader reader base.
In 1964, section 401(k) of the IRS code had not yet been written, offering tax advantages for employee-directed savings plans. The law enabling Individual Retirement Accounts was 10 years away, as was the landmark “Sylvia Porter’s Money Book” by the legendary personal finance columnist. Few Americans owned stock. Corporate and public pension funds, which represent indirect public ownership of securities, eschewed equities in favor of bonds. Modern portfolio theory, which rationalized long-term investing in a diversified mix of stocks and bonds, was virtually unknown outside the ivory tower of academia.
In this void of investment-related stimuli, other influences helped generate a post-war demand for business journalism, especially outside of New York City, where financial markets were and are a major local industry and home town team.
Chris Roush, senior associate dean at the University of North Carolina School of Journalism and Mass Communication, cited three economic trends that stimulated demand for business news 50 years ago: job mobility, homeownership and small business creation.
Each of these trends arose from the fact that the unique Baby Boom bulge in the U.S. population began in 1946. Boomers were entering college, the job market and starting to form households when SABEW’s founders held their first meeting in 1964. The share of the U.S. population in the working-age cohort was accelerating, as opposed to today’s decline.
The post-war Baby Boom phenomenon was evident in countries such as Germany and Japan, as well. But 2011 research by scholars at Maastricht University in the Netherlands, shows that American boomers were far less likely to stick with one employer than their counterparts in other industrialized countries, especially Japan.
“There was a change in our society where people didn’t get a job when they graduated from college and stay with that company for 40 years,” said Roush, the author of the exhaustive study of business journalism’s history, “Profits and Losses: Business Journalism and Its Role in Society.” “It was a time when people changed jobs more often and needed to know more about what was going at different companies.”
As to homeownership, U.S. Census Bureau data show that the 20-year period with the most rapid growth of U.S. homeownership, measured as a percentage of the U.S. population, reached its zenith in the mid-1960s.
Along with their houses, Americans obtained a greater stake – and interest — in the economic life of their community. They also gained a buoyant feeling of asset-based wealth, along with daily pressures on their incomes and family budgets. They wanted information for making consumer choices.
Related factors behind the public’s new curiosity about business were the emergence of the environmental movement after Rachel Carson published “Silent Spring” in 1962 and the consumerism movement championed by Ralph Nader, whose book “Unsafe at Any Speed” was published in 1965.
Based on macro-economic data, on the other hand, you cannot make a case that SABEW’s founders were responding to a surge in demand for business news from a new crop of small business operators. The 1950s and 1960s were decades when big corporations aggregated economic resources in the name of scale and efficiency.
This was the period of the organization man, not the entrepreneur. Business historian Mansel Blackford found that the number of individuals employed at non-farm small businesses declined from 1950 to 1972.
But the powerful influence of budding entrepreneurship on the growth of business news was in the wings. Data gathered by the Kauffman Foundation shows that the annual pace of new business formation in the 1979 – 1994 period was double the rate from 1960 – 1978. Since the 1980s surge, the new business formation rate has held steady through recessions and expansions.
The one-time surge in new business formations, reflecting the emergence of computer technology as well as a social rebound from the age of corporate gigantism, created sustained demand for information about regional economic trends as well as curiosity about the comings and goings of the new generation of entrepreneurs.
The Wall Street factor
In the 50 years since 1964, a significant bull market in stocks didn’t emerge until 1982. By that time, the bullish macroeconomic trends regarding entrepreneurship, homeownership, consumerism and job mobility met a tidal wave of financial market deregulation in the 1970s to spark unprecedented public interest in business and financial news.
The intersection of these forces was not derailed by pretty tough economic times in the 1970s. The decade of 1971-1980 suffered a major recession (1973-1975) after the so-called Arab Oil Embargo, the worst three yearly inflation rates of the post-war era (as high as 13.5 percent in 1980) and all or parts of four bear markets in stocks (totaling 52 months).
It’s no accident that these circumstances prompted a deregulatory binge on Wall Street intended to prevent a wholesale retreat by ordinary Americans from the securities markets. To name some of the personal finance landmarks of the 1970s:
- Wells Fargo Bank in San Francisco and American National Bank in Chicago introduced the stock index fund in 1971, which later provided ordinary investors a convenient way to own a diversified index-based portfolio;
- The Individual Retirement Account came into being in 1974, after Congress, recoiling from mismanagement and malfeasance in many corporate pensions funds, passed the Employee Retirement Income Security Act (ERISA);
- On May 1, 1975 (forever known on Wall Street as May Day), the Securities and Exchange Commission abolished fixed commission rates for ordinary customers at brokerage houses and ushered in the discount broker, led by Charles Schwab;
- In 1978, defined contribution savings plans, generally known as 401(k) plans, were introduced in the workplace, as employers began to seek ways to unload their nettlesome defined-benefit pension obligations and employees came to realize they were on their own;
- In 1980, Congress undertook the elimination of federal limits (Regulation Q) on interest rates that savers could receive on deposits at commercial banks. The move made the previously dull weekly Treasury bill auctions hot news at financial desks throughout the country, because savings rates typically were pegged to T-bill rates.
“It was a deregulation atmosphere that encouraged ordinary Americans to become investors and to realize they could shop for better interest rates,” recalled veteran business editor Myron Kandel. Fixed-income products, such as certificates of deposit, money-market mutual funds and guaranteed investment contracts issued by insurance companies, dominated investor preferences in those years, until the bull market in stocks began in 1982.
As a sidebar to all this ferment, it should be noted that in August 1979 a BusinessWeek cover story declared “the death of equities,” of one the great “buy” signals in stock market history.
In sum, the multi-factor economic optimism in the late 1960s, followed by financial regulatory initiatives and Wall Street marketing campaigns in the 1970s, stimulated broad and deep demand for business and financial news in the 1980s that was never seen before or since.
By comparison, the technology stock bubble in the 1990s, which brought America’s financial press to full throat, not to say frenzy, was a fairly isolated event. Nonetheless, even general interest news outlets felt the temptations of the tech stock bandwagon. In 1999, a technology columnist at the San Jose Mercury News embarrassed the Knight Ridder newspaper after she openly accepted so-called friends-and-family shares from a pre-IPO technology company in Silicon Valley.
Meanwhile, more substantial contributors to business news demand were in decline. The rate of homeownership fell slightly in the 1990s; job mobility has been trending down since the mid-1990s; the number of jobs created by start-up companies has been dropping since 1998.
Supplying the demand
One news executive who sensed the tailwind behind business journalism in the late 1970s was Seymour Topping, managing editor of The New York Times. In 1978, Topping and The Times’ business editor, the late John Lee, introduced a stand-alone daily business section called “Business Day.” Within a few years, other general circulation newspapers followed suit, and the prominence of business news in the mass media menu was established.
At The Times and elsewhere, aggressive business journalists wanting to escape a professional backwater pushed for more resources and better display. Another element for The Times was competition, from The Wall Street Journal and increasingly aggressive suburban newspapers around New York City, Topping said.
But Topping also realized that the time was right in the readership market for a “Business Day” product, as part of launching a four-section daily newspaper and eventually marketing The Times as a national newspaper.
“Conceptually, the creation was my idea,” he recalled. “At that time, the business section was tucked away at the back of the metropolitan section of the paper, with a few pages of coverage of business, largely Wall Street news.”
The end of the Vietnam War provided a rationale for enhanced business coverage, Topping said.
“I found that with the end of the Vietnam War in 1975, a lot of the lifestyles and habits of people had changed,” he said. “People were interested in making money to live better. They were willing to take some risks in this emerging environment to make more money – not only traditional Wall Street types but ordinary people. We made ‘Business Day’ for ordinary people, not only about how to make dollars and cents but about the business of business.”
The Times had a more upmarket strategy as well, Topping added: “We tried to have at least one major story in ‘Business Day’ which The Wall Street Journal did not have, so that business people on Wall Street and elsewhere had to feel that they not only had to read The Wall Street Journal but they had to read The New York Times to be fully aware of what was going on. They did not want to go to a board meeting and be told or asked a question about an extremely interesting story in The New York Times and they hadn’t read it.”
Case Study: “Business Monday”
On the timeline of business journalism in the last 50 years, an event that resonated at least as much as the launch “Business Day” was the 1980 debut of a tabloid, magazine-like section devoted to business every Monday in the Miami Herald, called “Business Monday.” The concept leveraged the fact that Sunday was a slow business news day and therefore could accommodate a less time-sensitive, more a carefully crafted presentation for the Monday edition. It became a model for newspapers around the country.
The role of individual initiative in successful newsroom experiments must be celebrated. The late Larry Birger, one of the Herald’s business editors, made himself a legend in the profession, especially in SABEW, by championing “Business Monday.”
Pete Weitzel, a former Herald managing editor, recalled that Birger got the ear of Alvah Chapman Jr., chief executive of Knight Ridder, owner of the newspaper. After the Herald’s business managers turned thumbs down on “Business Monday,” Birger had a talk with his “sugar daddy,” Weitzel said. The business managers took a second look and decided – correctly –that “Business Monday” could earn its keep.
Bean counters at the Herald apparently were unaware that the economic context of South Florida in the late 1970s and 1980s provided a perfect incubator for a groundbreaking business news product.
South Florida in the 1970s did not seem a likely stage for an important step in the American business press. The area had long been type-cast as the home of idle retirees, swamp merchants, investment scam boiler rooms, Spanish-speaking immigrants, the Cape Canaveral NASA space launch site and fading art deco architecture.
In fact, South Florida in the 1970s and 1980s underwent a business boom, thanks in large measure to the influx of entrepreneurial Cuban refugees who worshipped capitalism and hated Fidel Castro.
“Refugees have been the economic salvation of Dade County,” Jim Hampton Jr., the Herald’s editorial page editor, wrote in May 1980. “They’ve been instrumental in turning an unremarkable Southern tinseltown into an international city of unlimited potential.”
Not only did construction, retailing and tourism-related enterprises expand. So did manufacturing, as blue-chip companies such as International Business Machines Corp., the Pratt & Whitney division of United Technologies Corp., Motorola Inc., and Germany’s Siemens AG opened plants in Palm County, north of Miami. Such growth and diversification enabled Florida to weather two national recessions in the 1980-1982 period better than other regions of the country.
According the economic professor William Stronge of Florida Atlantic University in Boca Raton, Florida’s manufacturing employment grew by 15 percent in the 1980s, while the growth nationally was flat and northern states lost manufacturing jobs. Generally, manufacturing growth has a greater multiplier effect on a region’s economy than other industries. A boost in space and defense spending in Florida as well as Miami’s emergence as a global hub for legal and illegal cash flow from Latin America helped spur growth.
Three particular factors gave South Florida the kind of economic expansion necessary for the Herald’s “Business Monday” to succeed, in terms of stories to tell and an audience wanting to hear them, said history professor Raymond Mohl of Florida Atlantic University:
- U.S. multinational corporations built regional headquarters, especially in Coral Gables south of Miami, for their Latin American operations;
- The federal Edge Act allowed banks from outside Florida to establish or expand international banking operations without regard to state banking regulations;
- In 1979 Miami opened the largest free trade zone in the United States, permitting companies to import and export without worrying about tariffs.
In the late 1970s, “Miami’s business community was growing and changing,” Weitzel recalled. “It was not a recessionary time or a time when one of the period real estate bubbles had burst. The economy was Latinizing. The South Florida community was pretty vibrant. If it hadn’t been, I don’t think there is any way our studies at the time [about whether to launch ‘Business Monday’] would have come out positive. Things were good.” Even the record inflation of the 1970s had an upside in Florida: property values and, thereby, local wealth rose.
The bottom line
The key word in the Florida story, from the standpoint of demand for general media business journalism, is growth. The business model of business journalism derives from what economists call the shoe-leather effect – the cost of search. A well-established regional economy may already have well known information networks, formal and informal, and may not need another voice.
But fledgling entrepreneurs and other risk-takers in a region transforming itself economically, such as South Florida in the late 1970s and1980s, need fresh sources of information.
Research by the U.S. Small Business Administration indicates surprisingly strong rates of growth in entrepreneurship in the 1970s in regions of the country, such as the South, that previously were not significant watering holes for small-business start-ups.
From 1970 to 1980, metropolitan areas in the South Atlantic region, including Miami/Dade County, expanded sole-proprietorships as a share of total employment at nearly the same rate of New England and its famous Route 128 technology corridor around Boston.
Rex Seline, Miami Herald business editor in the early 1990s, recalled an informal market research meeting with the owner of a startup export company that bought U.S.-made engines, retrofitted them as power generators and shipped them to villages in Central America.
By that time, the Herald perceived itself as covering the “financial and transportation hub of the Americas,” Seline recalled. “We wanted to beef up our international business coverage, but we were looking for guidance on what the business readers would want or need.”
Seline asked the exporter, what can The Miami Herald do for you? He replied that he wasn’t depending on the Herald for news about his business niche or even news from Central America. He obtained his most urgent news, shipping schedules, from The Journal of Commerce.
“But he did rely on us for stories about local business conditions – zoning issues, local taxes, street closings that would affect his delivery trucks, real estate prices, gasoline process, employment stats that could affect hiring and compensation decisions, local politics, local business leaders, etc.,” Seline recalled.
Such granular information reliably presented drew entrepreneurs and helped make “Business Monday” a local brand that attracted loyal readers well beyond the business community, he said. “”Business Monday’ always succeeded in going beyond the business audience” he said. “If you were a general reader of the Miami Herald, you were aware of ‘Business Monday.’”
Of course, economic conditions change. In the 1980s, according to Kauffman Foundation research, Florida outranked Texas, Minnesota, Colorado, Oregon and Washington State – states that bragged about their entrepreneurial climates — in the per-capita number of “fastest growing” private companies compiled annually by Inc. magazine. By the 2000s, Florida was behind all of them. Still, “Business Monday” remained a fixture in Miami journalism.
There’s a lesson for business journalists in the “Business Monday” history. You obtain the chance to have a voice in your community by riding a bullish economic trend and meeting information needs of optimistic risk-takers in your audience. If you satisfy them as a reliable source in good times, you’ll keep your voice when the economy matures and stumbles. If you don’t, the audience will go elsewhere.
For example, professor Papper speculates that viewers who clicked away from CNBC during the dot-com bust didn’t stop following news of their investments. They just found other sources – probably ones that spoke more directly to them and, unlike CNBC, hadn’t been cheerleaders for the ruinous tech bubble .
Moreover, no case can be made that the carnival of financial market news from the last two decades significantly improved Americans’ financial health or even their awareness, said Columbia’s Starkman.
Indeed, a report issued in January 2013 by the Corporation for Enterprise Development found that almost half of American households don’t have enough liquid assets to cover basic expenses at the poverty level for more than three months if they lose their primary income. The percentage of liquid asset-poor Americans rose in 2012 from 2011, even though the economy was rebounding from the 2008 recession.
As the recovery from the last recession gains traction, business journalists face a new pro-cyclical opportunity to catch readers in a state of anticipation and curiosity about bettering their lives. Maybe then we can do a more credible job of supplying the demand, rather than mounting another Wall Street sideshow.
In fact, it’s happening, says SABEW Executive Director Warren Watson. The 2013 SABEW Best in Business contest attracted a record number of entries, up 9 percent from 2012. “What’s interesting is the growth of the new categories, in small business and real estate,” he said. “People perceive business news in a broader sense than you might think.”
Moreover, the destruction of the business news silo in general interest publications is well underway, Watson says. Newspapers began dropping stand-alone business sections when the housing bust took hold in 2007, according to the Columbia Journalism Review. But many Best in Business context entries this year were pulled from the main news budgets of newspapers and wire services Bloomberg and Reuters, he said.