Monday, April 13, 2009

Retailing and Media

If you're reading this today, take a few moments and put some money in Gannett's pocket. Buy a copy of USA Today and go to the Money section. (If it's not April 13, here's the link. But this story is easier to comprehend on Pages 1 and 3 of Money than it will be online, I wager.)

The story is about how rumors of retailers' impending demise affects whether that demise occurs. Is there a smoking gun? No. What this story makes clear is the complex way in which information plays with reality. Substitute "newspapers" for "retailers," of course, and it's the same story; but that's a point of this blog.

The story and its sidebar makes the same point that Jon Stewart took Jim Cramer to the woodshed about -- is what you're saying about Firm X based simply on an analysis of its business, debt, competition and management, or is it affected by how you yourself will make money by cratering or hyping certain companies? In other words, is anyone who trades in stocks for any substantial part of their income able to be an independent analyst, or is he or she always positing the comments with an eye on following up himself with "Buy" and "Sell"?

As the article notes, one analyst has been predicting the closure of Sears and Kmart basically every year since 2002. But as the article notes: "Moody's downgraded Sears to Ba2 on March 23, but even that lower rating implies just a 2.5% chance it would default on its loans in a year. And even in the challenging fiscal year ended in January, the company generated free cash flow, which factors in the costs to upgrade facilities, of nearly $500 million." I guess, though, every year he says it, he has an increasing chance of getting it right sometimes.

But are all these pundits just stock manipulators? I suspect that they're just as much quote hounds, addicted to seeing their own genius in public. If I were working for the Dacron Republican-Democrat, I might call the professor of retailing at Dacron State College and ask him what he thinks about Sears. But he might be on sabbatical. Or he might say, I really haven't studied that. Or he might give some totally nonunderstandable quote. Or he might say something that sounds really good, except that he is just making it up and has never studied Sears at all. And I just wasted a half-hour. Better, for my story, to call someone who has a reputation and who I know will give me three pithy sentences or 20 terse seconds with a strong, clearly expressed opinion. As the story says, "Journalists seeking to balance often-glowing comments from companies or the consultants who work for them often turn to some of the more dependable retail contrarians, who can now point to data like the soaring unemployment rate or store liquidations they predicted as evidence of expertise."

But everyone's got a dog in this fight, except, probably for the professor at Dacron State College. (And even he may be looking for a grant, or may be using his press clips to support his bid for tenure; and the P.R. department at the college certainly has its dog.)

The problem, again, comes from the nature of "the story" -- someone says yes, we have to find someone saying no so that we can show we're not pushovers or are going to have egg on our face when Brown Trask & Thompson closes tomorrow after all. But here's the problem with "the story." Let's say Circuit City was still in business, and came out with a rosy press release. Who best would be able to say, ah, they're full of it? Probably Best Buy, which doubtless knew everything Circuit City was doing. ("Despite Circuit City's statements, our share of the business has risen at twice the rate of theirs and customer surveys...") As USA Today notes, a company like Best Buy will say no such thing, for a host of legal and competitive reasons. A credit-rating agency can speak to the financial situation, but not to the zeitgeist. Realtors are not going to tell you who has or has not paid the rent. Interviews with customers are anecdotal. Who then do we turn to to put Circuit City's shout-out into perspective? Someone who says, my job is to study the retail industry and to tell you what these companies are trying to hide. Ah, get that reportorial blood flowing! The real truth!

But why is he going to tell you that? What's his game? Whoops, don't really care, got my quote and now I can turn in my story. If Brown Trask recovers, I got it right by quoting them. If Brown Trask closes next week, I'm covered as well. But is my source covering what happens to Brown Trask's business -- or is his only real interest what happens to Brown Trask's stock, which is a very different matter?

Nearly anyone who covers Pennsylvania politics has to turn to G. Terry Madonna. He is the source -- because of the polls he runs, the conversations he has, his immersion in the topic. I've never dealt with Terry personally, but I've been editing stories quoting him for more than a decade. Is he a quote hound? Absolutely. Does he call back any reporter, anytime, with comments that can be easily inserted into a story? Absolutely. Does he make his living off politics? Certainly. But there seems to be nearly universal acknowledgment that his analyses are not biased toward one party or the other, or that he benefits from either side's winning. His dog in the fight is simply that there will be a dogfight anyway and he wants to tell you about the dogs so that he can get more money to study them, because he really loves the dogfight. (I typed in "Terry Madonna biased" in Google; the first story says he is a Democratic minion, the second accuses him of being anti-Obama.)

Such grease makes the wheels of journalism run. USA Today is pointing out that we sometimes are not sufficiently skeptical about who our sources are and what their long-term aims are -- which is a lesson for newspapers reporting on the malaise of newspapers as well. That person saying "print is dead" may in fact be a totally unbiased source who has studied the matter and has conclusive proof. Or it may be someone selling his services to help publishers maximize Web profits. Or it may just be someone who has fallen in love with seeing his own name in print when he shouts. Maybe it would be better to just say "Circuit City said its sales..." and let it go at that and not try to find "the other side." Because for every side we find, there's always another we don't.

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