Sunday, August 21, 2005

INTERVIEW --> Dow Jones CEO Peter Kann


Last year I had the good fortune to spend an hour with Peter Kann, the CEO of Dow Jones, which publishes of The Wall Street Journal. I've excerpted the best parts below.

Peter Kann started working for The Wall Street Journal after graduating Harvard University in 1964. After more than 175 articles, and a Pulitzer Prize for his reporting out of Dacca during Bangladesh’s separation from Pakistan in 1972, Mr. Kann was promoted to publisher, and later Chairman and CEO. Ten years after taking the helm, the economic wave that carried the company’s advertising crashed; terrorists flew jetliners into the skyscrapers right outside of their office building; and criminals captured and killed Wall Street Journal reporter Daniel Pearl as he reported in Pakistan.

Q: What was it like riding out 2001?

A: “I think each in a different way was kind of a shock,” Kann says, “The bursting of the dot.com bubble and so on was probably a predictable one. The only thing that was unusual about it perhaps was the timing and the suddenness. We wrote and others did too, that this couldn’t go on indefinitely. To me, that one has had a certain set of financial consequences for our customers and for us, but in the long run the bursting of a bubble is not such a bad thing.

“September 11th, was, and here I point out that I was not here that day, I was actually in Hong Kong so I had plenty of colleagues who were, but I was not, that was obviously an enormous shock. I think there were probably several reactions beyond the shock. One was ‘thank god that none of our employees were killed or injured.’ That was remarkable given how close many of them were to it, across the street. So I think there was some sense of shock and horror and some sense of thank god we didn’t lose colleagues. And then there was a sense of: ‘okay, even in this kind of crisis, what can we productively do?’ And what people could do, other than ensure their families that they were alive, at least alive, was to get out the next day’s newspaper. Or In the case of Newswires, keep newswires or journal online operating.

“So you wound up with hundreds, some of them acting quite independently because communications were shaky, doing their jobs, and all kind of coalescing around a core mission of ‘let’s get the paper out.’ That had less to do with leadership, in a conventional sense of a boss saying ‘do this do this do this’ than it had to do with hundreds of people knowing their jobs very well—reporting, editing, or technology support jobs, or facilities jobs—and doing them under very adverse conditions. I think the result the next day and the days beyond was, a lot of institutional pride in what people accomplished that day.

“The third crisis if you look at it that way, the murder of Danny, that was certainly shocking, it was so totally senseless and barbaric. I’m not sure that one can find any uplift at all in that. It was a terrible tragedy, and not I think, a preventable one. And I don’t know there’s no real conclusion anyone can draw from it, other than there’s real evil in the world and he was a victim of that.

“All of that said, I think the institution, the company, the newspaper have come out of this difficult period certainly with our values intact, with our quality intact, with our confidence looking forward intact. It’s not a period one would want to repeat, but it’s a period we got through, and we’re emerging on the other side of it. We look ahead with a good deal of confidence, and I think there is a greater to look ahead than look back.”

Q: What’s the future of The Wall Street Journal?

A: I have been a consistent advocate of continued investing in the future of the newspaper for readers and also for shareholders ultimately.

“We launched this whole set of changes that we called ‘Today’s Wall Street Journal.’ We did that right in the middle of an ad recession. Some people might have thought that it was a little fool hardy.

“We were making these changes for the long term, for the long-term benefit of readers, and advertisers and shareholders. You don’t try to time that to play to some particular quarterly earnings target. And I think that was the right decision and that’s the way one ought to try to run companies.

“There are certainly short term pressures and you have to be conscious of those, but there are also longer-term opportunities and you have to be willing to invest in those. If you only do one, you’re not doing your job.

“We took a significant risk in doing a paid-subscription online model. It was seen as pretty gutsy and running in the face of the conventional wisdom of the time. It makes no sense that we’re going to charge customers $175 for a certain body of propriety, high-quality information in one form and then give all that and more away in another form just because someone says, ‘gee, that’s a free medium.’

“That was really kind of an old fashioned view; that if we believe what we are producing has real value, and we obviously do, then let’s behave consistently. The content’s what’s key, the fact that you deliver the content in a different form shouldn’t mean that the content thus has to be free.”

Q: Does producing top-quality content hurt your profitability?

A: “I don’t think they actually conflict. Certainly not in our publishing model. If you invest in the best possible journalism you can, and we can define best in various ways, but at the very least, the most accurate, the most reliable, the most authoritative, the most relevant to the interests to of our audience, then the money will come.

“And how do get the best journalism? Primarily by hiring the best people you can and then maintaining the highest standards you can and assuming that the most important asset we really have is trust, trust with the readers. And if that’s the primary focus, and you do that well, you wind up appealing to and attracting a loyal audience of, in our case, high-demographic individuals.

“And it is that audience we’re actually selling to the advertisers. It’s that quality of that audience and that audience’s relation with the paper: Trust really in it, reliance on it, and it’s the quality of the audience and the environment of trust that we’re really selling to the advertisers. And advertising, here as on almost every publication is the primary driver of the financial results, the secondary one would be the subscription revenue.

“But assuming we’ve done the first two things well, provided the quality and integrity of the content, attracted the right kind of audience, sold that effectively to the advertisers, it’s the advertising revenue that can then be reinvested, or at least some portion of it that, in further improving quality or enhancing the publication for the readers.

“It sounds a little simplistic, but that is our publishing philosophy and when you get into down cycles, as we’ve been in, you try to find ways a whole variety of ways in the short term you can save money, and reduce costs, and operate more efficiently.

“But we did not include on that list of things, doing anything that would in any significant way impair the quality of the content. Because that’s not a tradeoff worth making. Other publications may have a slightly different way that they look at this, but I think ours has worked pretty well over a lot of generations.

“In a very short-term sense, I’d say the conflicts are actually less between quality of news and profitability, they tend to be business decisions you choose to make or not make for the shorter term or the longer term.

“For example: In a difficult add environment a lot of publications negotiate their advertising rates. So you say, in effect, “what will the advertiser pay” and we’ll ask what they’re willing to pay. Or another way they do it is, “gee, we don’t really drop our rates, what we do is give advertisers who are willing to buy five pages, we’ll give them five free pages.” Well it amounts to the same thing, right?

“And we’ve not been willing to do those things, just as the news department has a set of integrity values, so does our ad department. The advertising is worth what we say it is worth on a published rate card. That rate card includes certain discounts, if you advertise more, than the per-ad price is going to be less. If you have to run more ads, the price may be less than if you run fewer ads.

“But all that is published information and that’s how our sales people sell. So does that they occasionally lose an account, yes, because some other publication comes along and says, “We’ll do it for half price.”

“Our view is that that’s not fair. We don’t actually want to be whispering to one advertiser, “psstt, despite what the rate card says, we’ll give it to you for 40 percent off. But don’t tell the advertisers.” Because I don’t think it’s very good business integrity

“There are some decisions like that that in a short-term sense are fairly gutsy.

“I don’t think there’s a fundamental rub between editorial quality and profitability and that even includes running tough reportage on companies that are important in a business sense. We’ve done it for 100 years. I think companies understand it, that we do honest journalism, that if you advertise, it doesn’t mean you’re going to get any favoritism.

“For that matter, our directors understand it, a lot of them have run or run big companies they join our board and they understand that the reporters are not going to be intimidated by the fact that the CEO of American Express is on our board and whatever he/she writes about American Express.”

Q: Are good journalists born or made?

A: “There are certain qualities that most people who wind up being good journalists have that are somewhat innate. I’d say curiosity. A journalist needs a genuine curiosity about all kinds of subjects. And he or she has to wake up in the morning wanting to learn more. An ability to reach closure is another one. If someone has no ability to close down on knowledge on a subject, they may wind up being a great academic, but they’re probably not going to be a great journalist. Whether you’re doing daily or weekly journalism, there is a cut-off point. You have got to get it out.

“An ability to think clearly and succinctly is pretty basic. A natural ability to write helps, but someone can be a good natural writer, and if they don’t think clearly, they’re not going to be a very good journalist. On the other hand, if they think clearly, if they can boil down a lot of interesting thoughts and information into a ‘the point of this story is,’ and express that simply and succinctly, then whether or not they are great writers actually is secondary.

“So another way to say that is: If you think of stories as, a little like, take-offs and landings, the editors can do a lot to improve landings, they can tighten up wording, and they can move sentences around and they can make something a little more literate but if the story on take off doesn’t has a clear point to it, then it’s unlikely its going to have a happy landing anyway.”

“This is something I try to say to young reporters who join the paper: Take satisfaction in actually being a conveyor of useful, relevant news and information. I don’t think it is really the reporter’s job to be a crusader, or a prosecutor, or an ideologue, or a debater.

“What a reporter’s job is really about is using his or her best judgment to decide on what is important and what is relatively less important, to talk to as wide a variety of sources as one can, to try to keep probing for the truth as best one can determine it, and then to write in a way that is accurate, relevant, accessible, and fair. There’s a lot of satisfaction in doing that well.


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