Podcast: Steve Brill on Healthcare and the Media in America
When we heard that Steve Brill had written an in-depth, 26,000 word investigation about the high cost of health care in America, we were a little jealous. After all, longform journalism is our bread and butter at ProPublica. As we read through the piece and realized the magnitude of what he had done, we knew we had to bring him in for a brown bag lunch conversation with our staff.
Brill, who is a journalist and entrepreneur, candidly answered questions about how he got started on the piece, why you don't actually have to know anything about the subject you're covering at the start, whether he'll turn it into a book, why his wife thought it was a bad idea to publish it with The New Republic and how it ended up at Time magazine.
We also picked his brain about changes affecting the Wall Street Journal, the Boston Globe and Time Inc., whether ad revenue will be enough for news organizations to make it, and what qualities he looks for when he hires reporters.
Enjoy the conversation.
Mike Webb: On March 7th, journalist and entrepreneur Steve Brill visited ProPublica for a brown bag lunch talk. We wanted to ask him questions about his thoughtful deep dive investigation of health care spending and the billing practices of hospitals. The piece, titled "Bitter Pill: Why Medical Bills Are Killing Us," was long even by ProPublica standards. But it was the kind of ambitious journalism that we like, and we wanted to quiz him about it.
As the founder of Press+, American Lawyer, and Court TV among others, we wanted to pick his brain about the state of the media. The following is an edited version of that conversation. Please pardon the sound, it was a brown bag lunch after all.
We began by asking him, what was the impact of his Bitter Pill investigation?
Steve Brill: Well, first of all, just to come back, I had a thought on the way down in terms of Time Magazine and the viability of this kind of journalism. There may be some lessons lurking here, which is, I gave a talk to the marketing department at Time on Monday. This arose out of a request that I got from Nancy Gibbs and Rick Stengel, if they could quote something that I said on the Time website about the reaction to the piece, if they could quote that in a meeting they were going to have with the marketing people.
Such is the sanctity of the separation of church and state at Time Inc., that they asked my permission to quote something that was public on their website, which I thought was kind of odd.
I said, "What are you kidding? You can quote it to anyone, it's there." I said, "But I'll come talk to them about what you guys did, and the commitment." They said, "You would? We never had a reporter do that." I said, "Sure, why not? It's not like I'm going to get contaminated by these people. They are business people and they are actually important to your enterprise." After I gave that talk I was coming down the elevator and a woman who is involved in marketing subscriptions to their website and their iPad subscriptions said they had sold five or six times as many iPad subscriptions as they had ever in any month in that week. I was also told that the newsstand sales had sold out, which was supposedly pretty rare for Time, which is no surprise.
So if you take the fee that they paid me to write the article, which is actually substantial, but, basically, it filled the entire editorial section of their magazine in one fell swoop, that was actually a pretty decent business model for them. I'll just preface what I'm saying with that.
My general outlook on life is I still think there's a way to make good journalism pay. I love the success that you guys have had, but I always have this sort of fear that if journalism depends on the kindness of strangers at large that's a real problem. You guys have donors who have been really terrific about your independence and everything else. I don't have any question about that. But I do have a question about the degree to which you can create and extend that model into Lancaster, Pennsylvania or Bakersfield, California, which worries me a lot.
I think that we all have an obligation, in some way or another, to figure out how to make this work. In the course of doing this article and thinking about this article, I made my first terrible mistake thinking about that more than I thought about the article.
Mark Schoofs: What do you hope is going to come out of that article?
Brill: What any journalist hopes comes out of something which has - a lot of it has happened - which is it affects the debate, even changes the debate. What I don't want to have come out of it, from a personal standpoint, is I've gotten people saying, "You should testify in Congress," and stuff like that. Well, that's not my job. I'm not on any side of anything. I just wrote a story and a lot of people have read it and responded to it. That's great. That's what all of us here want to do. You don't want to end up leading a cause or anything, but you want to contribute to the debate.
I've always been a big believer that policy debates don't really matter unless people like the people in this room are filling in the facts around those policy debates. I've always thought that, as an editor, I would habitually, not that there was that much occasion for it, but I never wanted anyone working for me to go to a press conference at the White House. You don't get anything out of that.
I always like the kind of reporting that takes whatever someone says policy is and sees how and whether it's working on the ground. Just like the sequester, I assume some of the good reporting that's coming out of it is someone seeing...is anything slower at any airport? Or is any food not getting inspected? What's the consequence of that?
This is just an example of that sort of writ very large, which is I just always was baffled by the debates over health care which always started with the premise that everything costs a zillion dollars and it's super expensive. If you have cancer, it's a million dollars. If you slip and fall and you go to the emergency room, it's $25,000. The debate was over who should pay for it instead of, "How come it's $25,000?"
I'm still waiting to see, and my colleagues at Time actually I don't think did this, either. In something like the giant Lockheed planes, the debate is should we spend, what is it, $400 billion? It's some ridiculous number.
Why does each of those planes cost that much money? Take it apart, tire by tire, piece by piece. Who's making all the money there? Why do we just accept that? What percent of that is profit for Lockheed Martin? Who died and said they have to get a seven percent carry on all their hours, and all their parts, and all their labor? Why?
We should advocate changing it, but if people knew that was the rule, there might be some debate of it. The piece is really not any great act of genius. It's just an act of patience, just taking bills line by line and using them to figure things out. You sent me some of your bills, which I didn't use.
Don't worry, he's not in the piece, but in looking at them, it helped inform me, for example, as to whether Medicare is really unfair to doctors, even in Manhattan.
Your doctor's reimbursement from an insurance company in the middle of Manhattan is basically one percent, or two percent, more than what the doctor would've gotten if you were a Medicare patient, so it's hard to say your doctor's losing money on, which also is evidenced by the fact that 94 percent of all the doctors in the country take Medicare.
If they were all losing money on it, there is the 13th Amendment. They do not have to accept patients with Medicare. No one says they have to.
It was really just very basic grunt work reporting.
Paul Steiger: Was there anything about this that departed, in any significant way, from what you'd expect?
Brill: Everything, actually. My assumption I don't want to say "assumption," because that implies I'd actually given it a lot of thought, but my assumption was that our care was a lot better and a lot more meticulous, that everybody along the supply chain did well, including the hospital workers. If you'd just spent some time doing a piece about how the teachers' unions are screwing up public education in New York and making it more expensive. We spend more money per student on a conventional public school in Harlem than the most heavily funded of the charter schools spends per student on a school in Harlem.
If you come out of that mindset, I just assume there had to be a lot of other factors at work and not the factors that I saw. Who knew that your average nonprofit hospital in Oklahoma City, or in Stamford, Connecticut, is the most profitable business in town, with the highest paid administrators and the highest paid marketing director?
The marketing director of the typical local hospital is making more money than the CEO of most of the companies in town. Who knew? What do they have to market anyway if they're the only hospital in town, "Get sick"?
That's in large part because I knew nothing about the subject, literally nothing about the subject. If I have one virtue, it's that I'm not intimidated to dive into things that I know nothing about. I'm never afraid to ask really stupid questions at the beginning. When I'm interviewing people and they use acronyms, I always stop them and say, "What does that mean?" even though it's an acronym that's branded onto their forehead because they use it every day. I used to teach my reporters that.
I remember when Connie Bruck started on her great Mike Milken piece that then became a book, she knew nothing about what a junk bond was. She literally couldn't have told you in the simplest terms what a junk bond was, and I said, "Well, who cares? You're smart. You'll figure it out. Just ask people what a junk bond is."
I didn't know any of this stuff, let alone the CPT codes and all that garbage. I'd never even been sick that much.
Richard Tofel: Steve, one of the organizations, at least, for me, that came off worst in this is Memorial Sloan Kettering, one of those best respected hospitals in this town, one of the biggest charities in this town. Have you had any reaction from them?
Brill: Yeah. They were really glad I included MD Anderson, which came off a lot worse.
I don't think Sloan Kettering comes off bad or good. And, again, we have to put this in the context of these people do wake up every morning and work in a place that cures the sick, OK? It's not like they're all doing this against the backdrop of producing the most violent video game. Their work has a good cause behind it.
And in their case, you know, maybe I've just mellowed a lot with age, whenever you have basic, unaccountable power, people just sort of lapse into these abuses without ever necessarily understanding that they have or without there ever being some sort of critical moment where they say, "OK, let's be bad." It just happens.
And if you're running a hospital and some consultant says, "Well, the peer group report is that you should be making four and a half million dollars a year," it sounds pretty good, and besides all our peers make it so why is that a bad thing? Or, "Everyone's doing this. You should."
I mean I found that when I started, as you know, writing about law firms which were completely unaccountable, making tons of money, and when I started writing about them my wife was an associate at a law firm and she had to go through the side door of the eating club when we recruited her. So I don't think they woke up in the morning to be bad people. It just sort of happened.
And this whole industry, healthcare, has been allowed to just sort of drift into this state, albeit with, now in the last 10 years, with the heaviest lobbying that you can imagine to defined all this stuff.
Schoofs: I thought that was particularly interesting that they spend more than the energy companies, if I recall it correctly.
Brill: Three times more. I mean the oil and gas companies are homeless people compared to them.
Much, much more, and they have a political advantage that an oil and gas company doesn't have, which is when it comes to hospitals certainly, not the drug companies, but the hospitals they're the most popular institution in town. I mean the one thing that will come of this if people read the article is they're not going to go to the charity dinners anymore, because the charity dinners are basically, they're PR stunts, except for Sloan Kettering which actually...well, not so much the dinner, but they raise a lot of money.
But most hospitals, the philanthropy, whether it's gifts or the annual charity dinner, whatever else they do, it's half percent to one percent of what their revenue is. They make more money on gauze pads than they make on charity dinners.
But the constituencies of any town are pretty strong. That's the hospital where your kids were born, and most of the time nothing bad happened. It's the hospital where you can go if you get sick. It provides all these jobs in the community, good steady jobs for people at all levels. If you're insured you don't really have any beef with the bills.
One of the great ways that they're able to maintain political support that the whole industry is that you get a bill for $200,000 and it says your share of it is $1800 you say, "Oh, my god, that's the greatest thing in the world. Is this a great country or what?" The insurance company paid $60,000 of the $200,000, the hospital discounted the rest because the $200,000 was fiction to start with, and everybody's happy.
Schoofs: So let me ask you a question about that. In the solution parts, which I think is almost always the hardest part for a journalist to write...
Brill: Oh, certainly the weakest part of the article.
Schoofs: ...you talked a lot in the article about how Medicare actually does a good job. You had some criticisms, but you were saying it has a lower overhead than the privates that have been within the scheme of American healthcare fairly good at getting a decent price. And then in the sort of solutions part based on that I was thinking, "OK, he's probably going to say something like Medicare for all or at least the option to buy into Medicare even if you're lower than 65", and that didn't come up. So just...
Brill: Well, I sort of hinted at it, and I actually did something that I actually have not done, at least that I can remember anything I've written before, which is I made a strategic decision not so much to pull my punch at the end, because I'm not sure that's right, but I didn't want the reporting to get distracted or overshadowed by coming out for some great solution. And there are actually a lot of reasons, not the least of which is a lot of really smart people for 30 years have been debating this stuff, and again, I was just sort of jumping in, and I really didn't feel very surefooted about it. I actually feel much better about it now that I've been able to read all the critiques of the article.
But the critiques basically go one of two ways. On the, let's call it the right, the critique is well, if everyone had skin in the game, lots of skin in the game, if you banned health insurance except for catastrophic illness, you would lower the cost because there would have to be transparency and there would have to be competition. I think that's ridiculous.
And I was on this week with George Stephanopoulos the week before last, and George Will said that. He said people had to pay their own, all these prices would come down. And I said, "Well, actually, George, we've been trying that experiment with 40 or 50 million Americans who don't have insurance, and it hasn't really worked out that way.:"
So the one side of it, which I think is just patently undoable because in the most extreme case when you get wheeled into an emergency room it's not like you're going to say, "All right, can you take me to four or five emergency rooms around here? I just want to sort of check out what the prices are."
"And not just the prices, but I want to check out who says I have to have three CAT scans, who says I have to have two, and I want to read up on whether the guy who says I have to have three is right before I agree to three of them." But even in cases on elective care, you can't do that with healthcare, let alone negotiate whether you want this drug or that drug. I mean your doctor has said, "This will cure the pain in your back," and what are you going to say? "Well, let me look that up and see?" I mean you can, but it's just not realistic. I mean you could, but the average person probably couldn't.
And then on the other side it's let's just have single payer for everybody. I think if you had an option that said everybody can buy Medicare, and we're going to charge you something less than Aetna's going to charge you because we pay so much less, that to me, sounds like two weeks into now hearing all the policy people coming back at me, that to me sounds like a pretty logical idea.
It also sounds like the most impractical idea in the world because you'd be nuking all the insurance companies, and there are millions of people employed by insurance companies. It's a big sector of the economy, but it also is two hundred billion of the overspend. We alone have a private insurance sector like that.
So that does seem right, and even if I had thought it when I was finishing the article I probably wouldn't have tried to push it in the article because then the article would have been dismissed. Now I'm getting, to the extent I'm getting attacked it's Mother Jones on one side and people on the other side, which is sort of a good place to be, I think.
Steiger: So even though this was kind of a small sized book, do you have any thought about going the next step and making some prescriptions and turning it into a book?
Brill: I'm actually now thinking about it. The reaction to this thing has been by multiples heavier than anything I've written. Again, this affects everybody. It's a really interesting policy question. It's a really interesting consumer reports question. The stuff not in the book, including for example how to deal with your insurance company and how to rebuild, will be more important as people go into these insurance exchanges. I'm also interested in and just looked at it lightly and don't know much about how we evolved into this mess. What made us take a turn that no other developed country took? How did we get there? How does it work in other countries?
So I think there's a lot that's not in that article. I had one section which was the only section I cut out about how inefficient the insurance companies are. It was a section that had one patient who showed up in an emergency room in New Jersey and who's doctor had changed his rates the week before from $250 for a half hour session to $9,600 because he realized that if he was an out of network doctor in an emergency room, the insurance company had to pay him because he was giving emergency care and had to pay him according to his usual charges.
So a bunch of doctors started doing this and Aetna had paid this guy like $600,000 over the last two months for this stuff. They paid him and then they sued him to get it back. So my first question for Aetna was, "I understand if I send you something for $54, you question it and say it should be $42. How did this guy get paid like that?"
And there's like dozens of doctors like this in New Jersey, in Texas, in California and elsewhere with insurance companies who are now trying to get their money back. And they said, "We have so many claims, it's hard to catch them."
I said, "Can't you just put something in your computer where like a bell would go off if you had to write a check for more than $1,000 to a doctor for one half hour session?"
"That would be very difficult."
You can't believe it. Medicare has all this stuff like that and the insurance companies don't and the reason is they really don't have to.
Steiger: Because they're making so much money hand over fist anyway.
Brill: Their profit margins are actually pretty low, but it's a nothing business. A monkey could do that business. It's just pushing paper. Their profit margins are the lowest of any people in the sector, but it's just administrative work.
Kim Barker: I guess in looking at it and the whole idea that most hospitals make this pretty comfortable profit, I'm wondering why hospitals in New York at least seem to be dying, a lot of these community hospitals. Have you looked at that at all?
Brill: You said "community hospitals" because the larger hospitals lock up doctors, either they buy their practices or they make deals with them, "If you want to practice in our hospital, you can't send patients to other hospitals." The smaller hospitals lose market share. It is an anomaly, what I'm saying. All these hospitals are so profitable and you see Saint Vincent goes out of business and that's why. And also there is a pretty dramatic overcapacity of hospital beds in this country which sort of defies the image and the reality. You see all these construction cranes at hospitals all over the place, but that's why.
Barker: One question. Did you get any feedback or blowback for casting Medicare as kind of the panacea like, "This is something good?"
Brill: Sort of rhetorically from more conservative readers, but not any factual dispute of how efficient they are. One of the ironies there is Medicare, for all of the Republican calls to farm out Medicare to the private sector, Medicare is farmed out to the private sector. There are 500 government employees working for Medicare and I think it was 7,500 or 7,000 private contractors. They're just more efficient because they work under very specific productivity standards set by the people who oversee them and competitive bidding and everything else.
Stephen Engelberg: Just for all the folks in this room whom I suspect at some point or another are going to be diving into something they don't know, I'm interested in hearing you talk a little bit about how when you begin at the beginning of an investigation like this, what techniques do you use to educate yourself and read in? Because clearly if you started from zero, you certainly got pretty far in this one.
Brill: An expected answer, you just sort of start with the easy stuff. You read basic clips about things and then you dive in a little deeper. I must have sort taught myself the insurance industry. I had printed out the massive annual reports from Aetna, and Cigna and places like that and then read the analysts' presentations and listened to some of them. Same thing for the drug industry. There's lots of stuff. I did what anyone would do which is you pick people who you're sort of friendly with or you know and you say, "Who knows this stuff?" There was one doctor friend of one. One person was on the board at one of the big hospitals. I took a glimpse and said, "Just teach me about this. I don't know anything about it. How would you go about doing this?"
Their first reaction was, "You're never going to get any bills." My first rule of reporting is that if 10 or 20 people know something, you can know it. When we started doing the Am Law 100 where we get the profits of all the law firms and law firms are all private, I remember we just decided to do it. One of the big firms in Chicago had 170 partners and Jill Abramson and Ellen Pollock were working on that firm.
They came to me and said, "We've called 40 partners and they've all hung up on us." And I said, "How many partners are there?" She said, "170." I said, "It sounds like you've got 130 phone calls to make."
And sure enough on call number 71, you got someone. So here, my curse was the bills. I was like, "How hard can this be?" Yeah it's got all these issues and privacy, but there are 200 million Americans who have bills. I've got to be able to get a dozen of them to look at.
I sent emails out to some friends and then found out by looking online there were these advocates who try to get people's bills negotiated, so it became easier but you just sort of start in the process. And the key thing is with anything like this I've ever done, retroactively if you look back at it and you know, "If I knew it was going to be this hard, I never would have done it."
But if you're just sort of wonderfully ignorant about how hard it's going to be, you just keep digging down to it. I'd been thinking about doing an article like this for a long time and was approached in June or July by Frank Foer and Chris Hughes who had just bought "The New Republic."
They said, "We want to make a statement about how we're a different kind of Washington publication and we're going to do long form journalism. Do you think you could write something that would have the impact of 'The Rubber Room?'" Which was the piece I did in "The New Yorker" about the state of public education in the country.
And I said, "Actually I've been thinking about this thing." And they said, "That'd be great. We'd make it the cover of our launch issue in January. We'll spend a gazillion dollars to promote so you'll get maximum impact. We'll make a big deal of it. You'd really be helping us get this important new magazine off the ground."
And I said, "OK." And I went home that night and talked to my wife who among other things has been my business partner and the general counsel on all the stuff I've done. I told her that and she said, "Boy, are you shmuck. How could you do that?"
And I said, "This guy, nice guy! And they're going to this new magazine and it's going be a different kind of long form journalism, not the typical Washington publication." She says, "Nobody reads it and you're going to waste your time and you're going to end up having to email it to all your friends because nobody is going to see it. You're just stupid. You should give it to David Remnick, or The Times or somebody. Why are you doing this?"
I said, "No. I really want to support this. This is important. This guy is going to hire more journalists. This is going to be great." She said, "That's the stupidest thing I've ever heard. You're just stupid."
Schoofs: I have to say that your wife sounds like the only person I've ever met who's as blunt as you are.
Brill: No. She's a lot worse. Anyway, my kids all chimed in as they heard about it too. They're in their twenties and they said, "Are you kidding? Why would you do that?"
"This guy really wants to contribute to journalism. I'm in the business of trying to make this happen. I'm on the other side of my life, so I really want to do this."
Then as I went through the summer and I started getting all this stuff, like all these bills and seeing what was going and I'd tell my wife about it, she only had one reaction. She said, "That's all wasted. Who cares? No one is going to read it."
And I said, "No!" And she was just saying, "No one is going to read this. You're just wasting your time." So I finally got Chris Hughes and Frank Foer on the phone in late September, early October and said, "Listen. This is going to big stuff. Tell me again how you're going to promote this and what you're going to do with this."
"It's going to be the cover of our launch issue. Blah, blah, blah..." I told my wife that and she said, "That's ridiculous." And then at the same time, I went to some dinner party with a bunch of my friends. I remember Ken Auletta and somebody else. I told them I what I was working on and they said, "Who are you writing it for?"
And I said, "'The New Republic.'" And they said, "What? Why are you doing that?" And I went through my whole speech, "Different kind of magazine, launch of a serious long form journalism. Blah, blah, blah..." They said, "You're crazy."
But Frank and Chris Hughes, much more Chris Hughes than Frank, said, "We're going to spend hundreds of thousands of dollars promoting this whole PR campaign around this. Blah, blah, blah..." And this is how stupid I was that I listened to them.
So cut to the second week in January. They love the article. It's about to close. They send me some cover artwork to look at which was awful, but I sort of ignored that. Everything was fine. We'd gone through the fact checking and everything.
About five o'clock the day before it was supposed to close, I got a call from Chris Hughes who says, "I've got great news for the magazine, but it complicates the publication of your article." I said, "What's that?" He said, "We've gotten an exclusive interview with the President of the United States in the Oval Office."
Steiger: Oh my god.
Brill: And he said "Oval Office" about six times, so much so that the sixth time he said it, I said, "You know the President works in the Oval Office. That's actually where he'd most likely do an interview." And I said, "So what? What does that have to do with the article?" And he said, "We obviously have to put that on the cover." And I said, "Well, why?" He said, "It's an exclusive interview with the President of the United States in the Oval Office."
And I said, "Let me tell you something. I've done two of those in my life and I was really excited about them and I actually have experience interviewing people and they were the worst two things I've ever done in my life. They're sitting there and there are eight people on the staff there. There's a stenographer typing everything he says even though you have a tape recorder. It doesn't matter."
I said, "Nothing is going to come of it. What will happen is he'll say one of two things that will make it into the news cycle for two or three days. 90 percent of the time they'll leave out the fact that he said it to The New Republic."
I said, "But unless you get him finally to admit that he was born in Kenya, you've got nothing."
He says, "Well, it's the president of the United States in the Oval Office. I own this magazine. I'm the editor in chief and I have a right to choose the..."
I said, "Well, you do." Of course, the conversation is, he says, "And we've had the interview request pending for six months and they finally agreed to it."
And so, I said, "Oh, when you assured me this was the cover of the magazine, what you meant was it's the cover of the magazine unless you get an interview with the president of the United States in the Oval Office, which of course you're going to get because your PR flack is Anita Dunn, who used to be his communications director. Obviously you're going to get that interview. That's a no brainer."
He said, "Well, it's the president of the United States in the Oval Office."
Long story short, I toyed with sending it to you guys, actually, but I decided first I would go to a couple of other publications. I really don't want to name them but among them was Time and then the usual suspects you would suspect.
Within 12 hours, which means two hours of reading and 10 hours of contemplation since it was a long article one way or another, they all said, "Yeah, we'll publish it."
The others wanted to publish half of it in print and the other half online. Some combinations or do it as a series. Time said that, Rick Stengel and Nancy Gibbs, said "we'll do the whole thing, we just want to make a statement about this. We'll do the whole thing. We'll dedicate our whole issue to it," and that's how it came to be. The New Republic decided not to run it, which is certainly their prerogative.
Schoofs: There is the news business...
Brill: Yeah. Well, let's leave Dick out of this.
Schoofs: I was really, truly wondering what you think the prospects are for Time magazine, for the Wall Street Journal, both of which have just been spun off well, the Wall Street Journal has been spun off into a corporation that will only be dealing with the news part of Fox, and that Time is about to, so we hear, be spun off.
Brill: With these two guys in the room, I'm going to opine on the business prospects of the Wall Street Journal?
Schoofs: Yes, actually. [laughter] And...
Tofel: Repressing your usual shyness.
Schoofs: Tell us what...
Brill: Listen. I think, somehow, some way...this is going to be a really unsatisfactory answer. I continue to believe that somehow, some way, that people who supply important, valuable information are going to get paid for it. We may be seeing the start of that. Our company, we're sending big dollar checks to Billings, Montana, which has put a meter on their website, just the way the Times has. Will it be the profit margins that you saw when every newspaper in every town had a monopoly and the Oldsmobile dealer had to advertise in the newspaper? Well, no. Not the least of which is because there's no longer an Oldsmobile dealer.
I think doing good journalism can pay. Time Magazine, a weekly news magazine, has a special problem, which is their original role, which was to summarize the news and to tell you...
If the president had dinner with 12 Republican senators at the Jefferson Hotel, the traditional role of Time Magazine would be to tell you what they had for dinner and what they talked about because the Times and the Washington Post would have the news story the next day that they met and then the background story would be in the weekly newspaper.
Now the Times and the Washington Post are going to have the story of what they had for dinner and who said what to whom and what happened because everything else is the news story that they had dinner. If you got up this morning and picked up the newspaper to find out that they were having dinner, you were way behind. You could have known that at 8:00 last night.
Tofel: Steve, let's take two other cases. We learned this week that two of the nation's largest magazine companies don't want to own Fortune Magazine, which is a terrific magazine and writes about stuff that is important to a lot of people. The Boston Globe is for sale and there's every reason to think that the enterprise value of the Boston Globe is, net of its pension obligations, less than zero and it will be sold for less than zero.
If the nation's great magazine companies don't want to own Fortune and the leading newspaper in one of America's most important cities is worth less than nothing, doesn't that give you some pause?
Brill: Sure, it gives me a ton of pause but it tells me a couple things. If you put some of the people in this room in charge of Fortune Magazine they can make it work. The Globe is a different kind of challenge because regional, big metropolitan newspapers are being picked to death by more local websites. I'm sure there's a website that does or will cover Framingham better than the Globe covers Framingham. I'm sure that that's a different kind of issue, but leave aside the titles you're talking about. What I'm saying is something different, which is that I think a family in Lancaster, Pennsylvania will pay two or three or four dollars a month to get coverage of their kids' high school sports team in the local newspaper, as well as coverage of what's going on at the planning board and at city hall. I just believe that and I think that the people who are supplying all that for free are just going to continue to go out of business because you can't.
What the web has proven, beyond all doubt, in terms of digital content and is now starting to prove in terms of video content is that you can't make it on ad revenue because the basic someone writing in criticizing my article said that I should have taken Economics 101. I actually did take Economics 101, no further.
Steiger: It was Econ 10.
Brill: Whatever it was. Econ 10, basically, if you have an unlimited supply of something that keeps growing, call that page views, be they digital or video, the CPMs just keep going down. If you don't start to get paid by the people who are using the stuff as opposed to the advertisers, you don't have a business model. I think the Journal's going to find that out with all the video they're doing, which I have trouble imagining a lot of people are watching. But I have even more trouble imagining that the CPMs aren't going to come down.
The Journal doesn't have to worry about that as much because people pay for the Journal online. People pay for FT and people pay for the Billings Gazette.
Steiger: Not long ago, advertising revenue, as you're suggesting, was multiples of circulation revenue. This is a big nut. You once told me a story about your previous enterprise, the retinal scan enterprise, where you went to Cincinnati. Would you share with my colleagues...?
Brill: Sure. This sort of taught me a lot about what was going on with ad revenue. When I started this company the registered travel program, which, by the way, the government now does really well we had big plans for advertising. Whenever we'd go into a city, and the example I gave you is Cincinnati but it could have been Denver. It could have been Orlando. Our ad agency, Ogilvy, would come in and they'd have these plans. Not for television because we were trying to reach mostly business travelers. That's who would want something where you use it if you fly a lot.
They'd have a plan to do a strip ad across the bottom of the business section of the Cincinnati Enquirer. And then they'd have another plan to do something, a banner ad across the front page of the business section of the Cincinnati Enquirer's website.
Then they had these things I'd never heard of, something called Kayak, which is a sophisticated travel site. And then they were going to do the Weather Channel for people in Cincinnati, their website, because people interested in the weather in Cincinnati would be there and if you're interested in the weather in Cincinnati it must be because you're flying to Cincinnati.
Long story short, by the time we got good at this, we were able to buy advertising from the air travel sites, Orbitz and Expedia, where the ad would only pop up if you were buying an airplane ticket to and from Cincinnati, which is, by definition, the audience we were trying to reach. So why would you ever care about having an ad on the business section of the Cincinnati Enquirer...?
By the way, the newspaper Cincinnati Enquirer, the print thing, was $16,000. The website was $1,600. Orbitz was $200. We got better response through Orbitz. Once you know that, you know that the general interest newspaper's notion the Times sells travel advertising directed at the page where Sharkey writes an air travel column.
Unclear: Joe Sharkey.
Brill: Whatever your product is, it can be so much more targeted than just putting it next to Joe Sharkey's column. You're spending all that money for all that New York Times circulation when you have no reason to do that.
Pretty much any general interest newspaper, most of their advertising, unless it's branding advertising. Tiffany's has a lot of ads on the home page of the Times across the top. That probably makes some sense, but the reason it makes sense is it's not accountable. The person at Tiffany's has told themself, "Well, it's great to be on the front page of The New York Times." He has no idea how much product he's selling. Tiffany's really isn't asking him, because the CEO of Tiffany's feels great that they're on the home page of The New York Times.
Take Johnny Walker Scotch, they put a full page ad in Vanity Fair. The guy gets to go to dinner with Graydon Carter a couple of times. Maybe even gets invited to the Oscar party. Probably not.
But he has no idea how much scotch he is selling. Right? That display advertising, no idea. For any other product online, you know how much you're selling. A general interest newspaper is never going to be able to produce the results - cost effectiveness of the results that these super targeted ways of advertising can produce.
Steiger: You're one of the greatest recruiters of journalists ever.
Brill: Well, actually, Norm Pearlstine was. He just hired everyone whoever worked for me.
Steiger: Right. [laughter] I've hired people who have worked for you also, and it's a good rule. But so often, particularly when you were getting started with American Lawyer, you were hiring young people who didn't have much of a track record. What's your process? Is it intuitive? Do you just have a nose...?
Brill: I think it's a lot intuitive, but there are a lot of mistakes. After all, I deserve to do community service. I am the person who brought Nancy Grace to television. [laughter]
So let's take this all with a grain of salt. I have a higher batting average than I might deserve. There's a lot of luck involved, but I remember when, early on, I had recruited Jim Stewart because he was working an antitrust case with my wife. He said that he had always wanted to be a journalist. He had a résumé that said he had been an intern at the local television station and an intern at the local newspaper.
I figured, "Well, what could be better than that?" Five years later, I found out that his parents owned the local television station and the local newspaper. Who knew?
But anyway, at the same time I hired Jim I hired another guy from a Wall Street firm. Six months later, we set out to do, for the first time, our 10 best and 10 worst judges across all of the federal circuits.
It worked out but the guy I hired with Jim, same great résumé, Harvard Law School, same thing. On Wednesday he hands in his pick in the circuit covering Virginia. Is that the fifth or the fourth? He hands in his pick for the worst judge and I start asking questions about it. "What about this? What about this? You didn't prove this? You didn't prove that?"
It's Wednesday. He comes back Monday and had named the guy the best judge.
This was not going to work. There are a lot of judges. The guy couldn't have swung that far. But I also believe that you can train people to do the hard work. We were a good training ground. By the way, I used the Journal to recruit because after you guys started hiring a few people, I didn't have the attitude of what's his name, that horrible guy that used to own The Observer. I'm blanking on his name. You know who I mean.
Brill: Anyway, his attitude...you know, Arthur Carter. His attitude was if you left The Observer...and, by the way, who wouldn't leave The Observer? [laughter]
You don't pay anybody there. Of course you are going to leave the Observer. You don't say, "My idea is to support my children and grandchildren from my Observer salary." His attitude is the day you said you were leaving you were dirt. You were disloyal. My attitude was obviously the place to start a journalism career was a place like The American Lawyer. That was my same attitude with Court TV. You give people an opportunity, and if they get hired away, you use that to hire other people. "Work here for a few years, and if you want to you can go there."
When we started Court TV we had a couple of experienced people, and there was a producer there, a young producer, Cynthia McFadden. She came in one day and she said, "We don't have enough on air people. You just don't know how to count. You don't know what you are doing. We don't have enough on air people. It's supposed to be an all day television network. People can't be on all day. We need more anchors."
I said, "Well, what about you?" She said, "What?" I said, "You look OK and you certainly talk a lot. Why don't you try it?"
So Fred Graham, who was our experienced guy, takes me aside...oh, and then I did the same thing with Terry Moran, ironically, because they now both do Nightline. Fred takes me aside and says, "Steve, you really can't put people on television who don't have television experience." I said, "Fred, by that definition no one could ever be on television."
Steiger: And he started out in print.
Brill: Right. Let's remember, Fred worked for The Times. Part of the recruiting allure after a while was, well, this is a great place to go if you want to be somewhere else. After a while, people didn't necessarily want that much to be somewhere else. But that's just a fact of life.
Webb: That was Steve Brill. To see his landmark story, visit Time.com and look for Bitter Pill. Thanks for listening. For ProPublica, I'm Mike Webb. We'll catch you later.
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