November 25, 2013 c.2013 New York Times News Service
Champagne flowed last Monday night as Hong Kong’s business elite gathered with top Bloomberg LP executives at a dinner for 100 guests at a cultural center in a former British colonial military complex.
Daniel L. Doctoroff, the company’s chief executive and the steward of the business empire behind the wealth of Mayor Michael R. Bloomberg of New York, had flown in to toast a corporate milestone: In 20 years, sales of Bloomberg’s financial data terminals in Hong Kong had ballooned into a business bringing in more than half a billion dollars a year.
But behind the celebration were some troubling developments. The growth of Bloomberg’s terminal sales worldwide had softened over the last several years, and had dropped significantly in the last year in mainland China, a vast untapped market. Bloomberg News’ tough reporting last year about China had prompted officials to cancel subscriptions for the lucrative terminals, frustrating the company’s Beijing sales staff.
And, just blocks from last week’s celebratory dinner, at the Hong Kong bureau of Bloomberg News, anxious journalists were still dealing with the implications of a decision by top editors weeks earlier not to publish a hard-hitting article about a Chinese tycoon. Bloomberg employees had asserted in published reports that Matthew Winkler, the editor-in-chief, had justified killing the piece, citing concerns that Bloomberg journalists would be expelled from China in retaliation.
Later that night, just hours after Doctoroff raised his glass, the company confirmed that one of the writers of the article was no longer an employee.
As Michael Bloomberg prepares to leave office and resume a more direct role in the company he founded, he rejoins an operation whose core business, after two decades of heady growth, has slowed, and whose news division has more than doubled since he left. Interviews with current and former employees show that the business and news operations exist in uneasy tension, and occasionally collide.
Bloomberg suddenly faces newsroom layoffs, a shift in emphasis back to financial news and skepticism from the business side that investigative journalism might not be worth the potential problems it could create for terminal sales.
Winkler and other senior editors denied that the article from China was killed, saying it was still active but not ready for publication. The episode, however, brought more unwanted attention after embarrassing revelations this spring that some reporters had used a function on the terminals to monitor some customer activity, angering some of Bloomberg’s biggest clients.
Against this backdrop, some top executives have begun to question the role of the company’s news operation. Executives on the business side insist that short bursts of market-moving news, not prize-winning investigative journalism, are what Bloomberg’s paying customers want. Editors are increasingly asked to send only brief, bullet-point news reports to terminals — easily digestible facts for traders and hedge fund managers.
“To the bankers that run the place, you have a redheaded stepchild that is a rounding error in the scheme of things that is managing to create a lot of trouble,” one news employee said.
This person, like the more than two dozen current and former business and news executives interviewed for this article, agreed to discuss the company’s operations but insisted on anonymity, citing strict nondisclosure agreements.
In an interview last week, Doctoroff said the backlash this spring over reporters’ monitoring of clients “did prompt self-reflection,” and one senior executive said the mayor’s return would be a “reset” moment for the company.
Last Monday, Bloomberg began to lay off roughly 40 people, about 2 percent of its news staff. Coverage of culture and sports would be scaled back, and the investigative unit had losses as well. The signal accompanying the announcement was clear: “We must have the courage to say no to certain areas of coverage in order to have enough firepower in areas we want to own,” Winkler wrote to the staff.
Bloomberg said it would add around 100 newsroom positions next year, many in a division called First Word, which produces a Twitter-like burst of news of market-moving importance. (A spokesman said that even with the recent cuts, the number of employees at Bloomberg News by the end of 2013 would be up from last year.)
Doctoroff said the terminals’ users are a “very narrow audience” for news articles. (One of the most popular articles Friday was “Day JFK Died We Traded Through Tears as NYSE Shut.”) But, he added, the company’s journalism serves a vital role in bringing credibility to Bloomberg, and added value to the terminals, which make up about 85 percent of the company’s revenue.
“Our audience wants to change the world and they want to invest better in the world,” said Laurie Hays, a senior executive editor at Bloomberg News. “These long stories inform them in their decision-making.”
Indeed, Bloomberg, which has 2,400 journalists in 150 bureaus in 73 countries, has won a coveted George Polk Award for four consecutive years.
But much of its good journalism ends up in a vortex on the terminal, which provides an endless stream of financial headlines, a popular chat service and data-crunching functions. News is a popular function, but by one executive’s estimate, only about 25 to 30 percent of the company’s 315,000 terminal subscribers read articles.
NEW BREED OF NEWSROOM
In 1990, Bloomberg hired Winkler away from The Wall Street Journal to create a different kind of newsroom, one that would work seamlessly with the business side. “Most news organizations never connect reporters and commerce. At Bloomberg, they’re as close to seamless as it can get,” Bloomberg said in his 1997 autobiography, “Bloomberg by Bloomberg,” written with Winkler’s help.
The two units coexisted harmoniously enough in the early years when the news service was too small to anger clients or attract much scrutiny. But conflicts inevitably arose. In 2002, the company officially apologized to the government of Singapore and erased from its system a column that had accused the country’s leaders of nepotism. Winkler came under fire for a memo he wrote to employees in which he explained that the decision was influenced in part by concerns that customers in Singapore “might lose the Bloomberg service if we refused to accept the government’s judgment.”
(Several other Western news outlets encountered similar problems in writing about Singapore, and paid fines, including The International Herald Tribune, stemming from a 1994 case, when it was partly owned by The New York Times Co.)
The episode blew over and Winkler made clear his mission to build a first-rate news organization that would someday win a Pulitzer Prize, even if it meant irritating customers or risking terminal sales. In a recent training session with new employees, a reporter asked Winkler what he considered a great story. “Call me Ishmael,” Winkler replied.
But as Winkler tried to pursue his “Moby-Dick,” Thomas F. Secunda, who founded the company with Bloomberg in 1982 and oversees financial products and services, signaled that Bloomberg’s foremost mission was to deliver market-moving news and headlines to subscribers.
“We shouldn’t be doing any news other than what makes money for our readers,” Secunda has frequently said, according to one longtime employee. He once put it more bluntly: “You dance with the woman who brought you to the party.” (A spokesman said Secunda thought market-moving news was the most important but not the only journalism the company should be producing.)
Journalists make up about 15 percent of the company’s total 15,580 employees, and, according to Burton-Taylor International Consulting, bring in just 4 percent of the company’s total revenue.
A DILEMMA IN CHINA
Nowhere have the potential conflicts inherent in the Bloomberg model been starker than in China. Bloomberg does not break out revenue per country, but Burton-Taylor, which tracks the financial information business, estimates the company made only $70 million in China last year. Overall, financial data industry revenue in China has increased about 45 percent each year since 2008, compared with 5 percent growth globally in the same period.
This summer, in the wake of revelations about reporters monitoring customers, Doctoroff held a series of informal lunches with senior staff members to discuss the implications. At one lunch in July, according to a former senior executive in attendance, Doctoroff offered a hypothetical dilemma: If Bloomberg were about to run an important article about China and knew for certain it would draw a retaliatory hacking attack, should the article still run? Many senior news people said reflexively that it should, but others were not so sure.
“If you have a $9 billion company that is about to be crippled by a news division that loses $100 million a year, shouldn’t you take a breath and think about the implications of what you are doing?” the former senior executive said.
Communist Party leaders in China, the world’s second-largest economy, expend great efforts in trying to control foreign news media, and Bloomberg is no exception. Many Western news organizations have confronted censorship problems in China. (The Times had its website blocked in China after publishing an investigative article last year about Chinese wealth.)
The tough choices facing Bloomberg in China came to light in early 2011 when it reported on an online movement in China to stage peaceful “Jasmine Revolution”-style protests modeled after the uprisings in the Middle East. Angry Chinese officials told top editors in Hong Kong that Bloomberg’s information distribution license permitted it to publish only financial news in China, not political news, according to employees with knowledge of the discussions.
Editors ordered the article in question deleted from the website, even though the site is global and not China-specific, these employees said. Word spread among Bloomberg journalists in China. “A lot of people were angry they would just cave in like that without much discussion,” one employee said, adding that the editors “didn’t want to get Bloomberg kicked out” of China. A Bloomberg spokesman declined to comment on this matter.
After the outcry, editors reposted the article to the Bloomberg website, but as of Sunday, it could not be found using the site’s search engine. (It shows up in a Google search.)
Managers also created a function called Code 204, which can be appended to some articles to keep them off terminals in mainland China.
The next year, Bloomberg decided to publish a report about the fortunes amassed by family members of Xi Jinping, then the incoming party chief. The article was a major installment in its “Revolution to Riches” series, which won a Polk Award for foreign reporting (along with David Barboza of The Times). But Bloomberg paid a price: The purchase of terminals in China all but ceased, Bloomberg News’ website was blocked and no residency visas were subsequently granted to its reporters.
“It’s looking increasingly like as a media company, you have a choice in China: You either do news or you do business, but it’s hard to do both,” said James L. McGregor, a former chief of Dow Jones & Co. in China.
Early this year, top editors in New York approved reporting for an investigative project examining Wang Jianlin, China’s wealthiest man, and his financial ties to the families of party leaders.
But last month, after senior editors in New York expressed concerns about the article, Winkler told reporters and editors in Hong Kong that it would not be published because Bloomberg needed to maintain journalistic access to China, and insisted officials there would not tolerate coverage on the assets of the country’s leaders, according to employees, whose accounts were reported in The Times and The Financial Times.
Winkler declined to comment on internal discussions. He and other senior editors have said the article was put on the back burner only because it was not ready for publication.
Doctoroff, in the phone interview, said he asked Clark Hoyt, the independent senior editor and a former public editor at The Times, to review the tycoon article. “Clark’s view was consistent” with Winkler’s and other editors,” Doctoroff said, which was “that the story just was not, didn’t hang together.”
But the employees cited by The Times and The Financial Times said the article had been reviewed by a lawyer in early October and was nearing publication, and no editor had raised major objections. Emails sent in September to the reporters by top editors in New York said the article was “terrific,” “a real revelation” and “almost there.”
For many years it seemed as if Bloomberg had cracked the code on the troubled journalism business. As advertisers retrenched from traditional news outlets and newspapers nationwide faced extensive layoffs, Bloomberg, fueled by the sales of terminal subscriptions, went on a hiring spree, adding 600 news employees over the last five years. Top journalists were lured from competitors, and the journalism awards kept coming.
Bloomberg is, according to industry analysts, still wildly successful compared with its biggest competitor, Thomson Reuters, which recently said it planned to cut 3,000 jobs, but growth that once seemed unstoppable has slowed, the result of a broader retrenchment of the financial industry.
The total number of terminal subscriptions increased by 23,000 in 2010 and 14,000 in 2011, but only by 1,000 in 2012 and 3,000 so far this year, according to several employees’ estimates.
Still, the company said overall revenue was on track to rise to $8.3 billion, up from $7.9 billion in 2012 and $3 billion in 2001 when Bloomberg was still at the company. (A spokesman said the company’s nonterminal “enterprise” business, which builds technical systems for financial clients, has been growing 16 percent a year and will bring in an estimated $1 billion in 2013.)
“We’d love it to be better, but we can only deal with the market we find,” Doctoroff said. “The reality is that many of our large customers are still dealing with the aftereffects of the financial crisis.”
Another executive rejected the implication that the company faced financial problems. “Saying that we are in trouble is a little like saying Saudi Arabia is in trouble because the price of crude went down two bucks a barrel,” he said.
Signs of a slowdown are apparent, however. The company has delayed its Plan B bonus plan. In the Washington headquarters, a screen in the main hallway had long been dedicated to showing a real-time count of terminal sales. As sales slowed, the screen went dark without notice, and was later turned to Bloomberg Television, according to several employees.
Though Bloomberg stepped away from the company while in office, his spirit has loomed large over the Manhattan skyscraper that bears his name.
Exotic fish tanks line the sleek white corridors and elevators stop only on certain floors, forcing employees to use the stairs. Last year, as Bloomberg fought for public health laws in New York City, his company cut down on junk food offered to employees and added free snacks like organic peanut butter and naturally flavored aguas frescas in biodegradable cups that read “First. Bloomberg.”
People close to Bloomberg said he would most likely write a column for Bloomberg View, the company’s opinion publication. He will also probably spend more time in London and work on his philanthropy and his favored causes like gun control.
His return comes after a series of broader organizational changes and high-level appointments at Bloomberg News — once controlled unequivocally by its bow-tied editor, Winkler. In an effort to streamline the newsroom, four senior editors now report directly to Winkler, down from 21. Doctoroff said Bloomberg had not been “unaware” of the changes at his company, just unable to participate in the daily decision-making.
“It’s a different company,” Doctoroff said.