The New York Times International - 07.08.2019

T HE NEW YORK TIMES INTERNATIONAL EDITION WEDNESDAY, AUGUST 7, 2019 | 7

Business

Imagine New York without jaywalking. Or Los Angeles freeways without speeding, or Moscow without grinding traffic. If self-driving cars are going to move forward, these are among the many possibilities that the people dreaming up the future of cities will have to consider. In New York, the unwritten rule is plain: Cross the street whenever and wherever — just don’t get hit. It’s a practice that separates New Yorkers from tourists, who innocently wait at the corner for the walk symbol. But if pedestrians knew they would never be run over, jaywalking might explode, bringing traffic to a halt. One solution, suggested by an auto- motive industry official, is gates at each corner that would periodically open to allow pedestrians to cross. That prospect seems improbable. But it’s an example of the thinking by those who worry about planning for the future. “With autonomous vehicles, the technical stuff will get worked out. It’s the societal part that’s the most challenging,” said Mark Rosekind, a head of the National Highway Traffic Safety Administration under President Barack Obama and now the chief safety innovation officer for Zoox, an autonomous-vehicle developer. The variables are almost limitless. While New York poses a pedestrian problem, California’s highways raise another. The solution may be to program vehicles based on the local customs. In California, keeping up with the flow of freeway traffic typically means driving 10 to 15 miles an hour over the posted limit, whereas drivers in some parts of the East stay much closer to the legal speed (emphasis on some). Self-driving cars represent “the single-most transformative societal change in decades,” Mr. Rosekind said. “We have to be ready for it.” Unfortunately, we’re not. How society will adjust, or what we can do to mitigate cultural upheavals, is just beginning to be discussed. To- day, there are few answers. Autonomous vehicles are classified in six levels, from zero to five. Fully autonomous, Level 5, vehicles will not be available for 10 years or longer, Mr. Rosekind believes, and only after they’ve been tested for billions, not the current millions, of miles. But a Level 4 autonomous car that can completely drive itself under certain circumstances will come to market in five years or less, experts say. And that makes the formulation of new rules for cities and citizens imperative. Those rules are being contemplated by such organizations as SAE Interna- tional, a transportation standards- setting organization; university transportation departments; and Partners for Automated Vehicle Education, a recently formed industry and academ- ic coalition that is conducting autonomous-vehicle demo days, workshops and other activities. The United States government, while supporting the effort, is not leading the charge. An administration official, who spoke on the condition of anonymity, said local officials should tailor any guidelines. While news media attention has recently focused on the handful of deaths caused by autonomous vehicles, education is needed to convince people that the self-driving cars will be much safer than today’s cars and trucks, which kill more than 30, people every year in the United States, Mr. Rosekind said. “It’s going to be a mosh pit for the next 30 years,” said Gregory Winfree, director of the Texas A&M Transporta- tion Institute and a former assistant secretary of the Transportation De- partment. “The question is how we operate collaboratively when we have a mix of self-driving and manually driven vehicles,” he said. “What will happen when

both approach a yellow light and the A.V. slows down but the driver of the regular vehicle wants to speed up? From Day 1, we have the potential for conflict.” Autonomous vehicles could be de- signed to never exceed the speed limit except in emergencies, resulting in a sharp drop in traffic tickets — and revenue. Or local governments could mandate that such a car’s software be programmed to stay within certain speed limits, or stay off residential streets that are now used as freeway- avoiding shortcuts. Cars could be programmed to drive aggressively as well as conservatively, depending on the owner. But if two “conservative” vehicles meet at an intersection, which one will finally decide to cross the roadway? The problems will be exacerbated when autonomous and manually driven vehicles occupy the same roads; will a driver try to outwit a self-driving vehicle, or will that car always have the advantage? Given that vehicles in the United States are typically kept for close to 12 years, it will be decades before the majority of the 278 million standard vehicles — and their independent and unpredictable drivers — are off Ameri- can roads. Until then, it’s possible that self- driving cars will need their own lanes, to avoid mixing it up with cars driven by humans, whose errors now account for 94 percent of vehicle crashes. Other potential changes include a reduction in the need for parking lots, once autonomous cars can simply park themselves anywhere, or circle around until they’re needed. Architects are work- ing on parking lot designs that can be repurposed into offices. And cities will need to find new sources of revenue if an autonomous vehicle can drive away from a parking meter once it ex- pires, or never park at all. Some of the safety issues are ex- pected to be mitigated by the inclusion of vehicle-to-vehicle, and vehicle-to- infrastructure, communications, technology that will allow one vehicle or traffic light to tell another vehicle where it is and what it is about to do. This technology is beginning to appear in some models, but the federal government will not mandate its use. The administration official said the government would not force the issue. An autonomous vehicle’s behavior will be of concern to manufacturers and insurance companies. “If the au- tomaker is ultimately responsible for an autonomous vehicle’s behavior, then they will want it to act conservatively,” Mr. Winfree said. Within the next several months, SAE International expects to have formu- lated a list of autonomous vehicle standards. They include autonomous testing protocols for drivers, as well as the standardization of the placement of emergency stop buttons, the action that should be taken in case of an emergency, and the type of warning that pedestrians should receive when an autonomous vehicle is approaching. Industry executives expect that in the next few years, the public will begin to see self-driving vehicles oper- ating in limited environments, such as people movers and delivery vehicles. (Lyft is testing self-driving vehicles in Las Vegas and Phoenix, with a human backup ready to take the wheel.) Their hope is that public sentiment toward autonomous cars will become more positive thanks to education efforts, and once people can buy them. At the same time, it’s important that as communities change, possibly phys- ically, they don’t become sterile 1960s “Jetsons”-like environments that favor vehicles. “We need students educated in art and design to get involved in the future so we don’t get antiseptic cities,” said Frank Menchaca, SAE’s chief product officer. “We need things to be aestheti- cally pleasing. We have to bring people along.”

Preparing the public

for self-driving cars

Jaywalking in New York. Such behavior is the kind of thing that needs to be incorporat- ed into planning for autonomous vehicles.

NICOLE BENGIVENO/THE NEW YORK TIMES

Wheels

BY ERIC A. TAUB

“The technical stuff will get worked out. It’s the societal part that’s the most challenging.”

Phil Luciano, a columnist at The Peoria Journal Star, got a story tip recently about Caterpillar, the global heavy equipment company that until recently had its headquarters in Peoria, Ill. The tip seemed promising enough. But as one of only seven full-time report- ers at the paper, he felt stretched too thin to do much about it. “Who’s our Caterpillar reporter?” Mr. Luciano asked about a company that had been based locally for 90 years before relocating to Cook County, which encompasses Chicago. “We don’t have one right now.” In recent years, The Journal Star has been hit with the kind of cutbacks that have become common for newspapers in the United States as they steer a bumpy course toward a digitally focused future. The newsroom had more than 80 newspaper guild employees in the 1990s and now has about a dozen of the union members left. The Journal Star is still the largest paper in downstate Illinois. But after covering more than 23 counties in its hey- day, it now limits itself to three: Peoria, Tazewell and Woodford. “And Woodford’s pretty small,” Mr. Luciano said. The Journal Star, a daily, is represent- ative of the newspaper industry as a whole in two other respects. It is owned by a company controlled by a hedge fund — GateHouse Media, which owns more papers than any other company, according to a University of North Car- olina study. And even in its reduced condition, the paper is profitable. “I know The Journal Star’s in the black,” Mr. Luciano said. “How much in the black do you have to be? That’s what drives us up a wall.” Such is the strange state of an industry that has been part of the American fabric since the days of The New-Eng- land Courant, a newspaper started by James Franklin, older brother of Ben- jamin Franklin. In the centuries that followed, papers were a dominant form of news media, with city customers swarming news- stands mornings and evenings to grab the latest editions, and suburban sub- scribers scooping up their copies from driveways at dawn. Today, the business could hardly be more dismal. Around one in four papers in the United States, most of them weeklies, have been shut down since 2004, the University of North Carolina study found. In that same time span, roughly half of all newspaper jobs have been eliminated as the cumulative weekday circulation of print papers has fallen to 73 million from 122 million. While readers have moved in droves toward consuming the news of the day via screen, be it desktop, laptop or phone, the revenue generated by digital ads has yet to match the money once supplied by print advertising. To stay above water, publishers have cut jobs, which has resulted in understaffed newsrooms, a thinner overall report and reader complaints. The numbers convey the news in stark terms: From 2017 to 2018, newspapers in the United States lost $2.4 billion in combined advertising and circulation revenue, according to the Pew Research Center. If you count the yearly revenue the industry has lost in those two cate- gories since the pre-recession high of 2005, you come up with $35 billion. At the same time, some news organizations centered on a daily paper can still turn a profit, with much of their revenue coming from the legacy product that leaves ink smudges on your hands. The stubborn survival of print newspapers has given some publishers a way to subsidize the transition to a digital- centric revenue model. But print’s per- sistence often takes the form of what a study published by the University of North Carolina researchers called ghost papers — spectral incarnations of once- thick publications able to haul in cash even as they lack the deep reporting that once made them essential to their communities. These phantoms have hung on because print revenue, while in steep decline, still brought in more than $25 billion last year. “Most people ask the question, ‘Will there ever be a day without daily newspapers?’” said Ken Doctor, a news media analyst. “As if the actual printing of a product is the mark of whether you have a paper or not, as opposed to whether there’s actually anything of quality in it.”

HEDGE FUND JOURNALISM The job of top editor has lost some of its old luster in this era of job cuts and hedge fund ownership. A vocation that once had a dash of grit and glamour has become more administrative, with a lot of bean-counting and heartbreak. Neil Chase, the former executive editor of the Bay Area News Group, said that the news organization he oversaw regularly received profit targets from its owner, Digital First News — now known as MediaNews Group, a company controlled by the hedge fund Alden Global Capital. To hit those targets, he had to slash costs.

During Mr. Chase’s tenure, from 2016 to the start of this year, layoffs and attri- tion cut the newsroom to around 165 from an already diminished staff of 240, he said. Mr. Chase and his team tried to pre- serve the company’s core publications, The Mercury News in San Jose and The East Bay Times. And so the group’s weeklies — titles like The Walnut Creek Journal and The Los Gatos Weekly- Times — took a big hit. “We gutted those papers by taking the journalism out of them,” said Mr. Chase, now chief executive of CALmatters, a nonprofit covering California politics. Those weeklies are now among the nation’s ghost papers. A typical issue contains items from stringers tucked in among articles from Bay Area News Group dailies. “They’re still there,” Mr. Chase added, “because they have local ads.” Over the last decade, the finance industry noticed that newspapers were distressed — but potentially valuable — assets that were available at bargain- basement rates, said Penny Abernathy, the University of North Carolina journalism professor who wrote last year’s report, “The Expanding News Desert.” A paper that once fetched a price of 13 times its annual revenue could be had for one-fourth that amount. In the role of publisher, investors discovered that lowering overhead typically reduced costs at a faster rate than it drove down revenues. Many papers shrank. And their profits went up. “Put yourself in the shoes of a hedge fund or private equity firm,” said John Longo, a Rutgers Business School professor. “Newspapers have steady, albeit slightly sinking, cash flow. In that kind of business, you can put some leverage on.” If you ignore that the industry show- ing signs of ill health under its new minders has been deemed so essential to the nation that it was enshrined in the First Amendment, then these practices, straight out of the Wall Street playbook, seem unremarkable. “They used the same notion of how they would manage newspapers as they would widget factories,” Ms. Abernathy said. The hedge-fund-controlled publishers GateHouse Media and MNG are now among the four companies that own the most newspapers in the country. And MNG made efforts to buy the other

newspaper chain among the big three, Gannett — which has agreed to merge with GateHouse Media. Alexia Quadrani, an analyst at J.P. Morgan, hinted at a flaw in the strategy of the industry’s new entrants: “It’s a cash cow, right? But at the end of the day, it is in decline. You ask yourself, What’s your endgame?”

A REBELLION, AND A WAY AHEAD Journalists at one newspaper that suf- fered particularly drastic job cuts — The Denver Post, an MNG publication — made news last year when they rebelled against their bosses by publishing a six- page special opinion section blasting their ownership. In the lead essay, The Post singled out the hedge fund behind MNG, Alden Global Capital. “If Alden isn’t willing to do good journalism here,” it said, “it should sell The Post to owners who will.”

MNG declined to comment for this ar- ticle, but the company has defended itself by noting that it has saved papers like The Boston Herald and The Orange County Register from bankruptcy. GateHouse also did not respond to re- quests for comment. Mike Reed, the chief executive of GateHouse’s control- ling entity, seemed to sum up the company’s viewpoint in an interview last year when he said its strategy came about because newspaper owners grew compla- cent in the days before the internet chal- lenged print. “The industry was fat, dumb and happy,” he said. There may still be a way forward for metropolitan dailies interested in pro- viding communities with deep coverage while also making money, one that means investing print revenues in digital growth while acknowledging that the days of 20 percent profit margins are long gone. The Seattle Times, for one, has recently increased digital readership and print revenues, according to its president, Alan Fisco, thanks to the steward- ship of the Blethen family, which has owned the paper since the 19th century. Referring to the paper’s publisher,

Frank A. Blethen, Mr. Fisco said, “The old expression Frank has used is, ‘We don’t publish newspapers to make money. We make money to publish newspapers.’ ” A similar setup — call it the benevo- lent patron model — has helped turn around the fortunes of The Washington Post, owned by Jeff Bezos, the founder of Amazon, since 2013, as well as The Los Angeles Times and The San Diego Tribune, which were bought last year by the biotech billionaire Patrick Soon-Shi- ong from Tribune Publishing as part of a $500 million deal. Mr. Doctor, the analyst, pointed to the Hearst Corporation, whose papers include The Houston Chronicle and The San Francisco Chronicle, as a solid owner, because it is private and holds other assets with excellent profit margins. Jeffrey M. Johnson, the Hearst Newspapers president, said his group had increased profitability in seven of the previous eight years while maintain- ing aggregate newsroom head count. Hearst papers and The Seattle Times share a common strategy of raising prices on print subscriptions to subsidize investments in digital. Does this strategy have a sell-by date? The outlook for print, after all, is poor. As recently as 1998, the Sunday print circulation of newspapers in the United States totaled more than 60 million. Last year, Pew estimated, that figure was 30.8 million. Only a few newspapers have arrived at the safe harbor of bringing in more absolute revenue from digital than print. The Boston Globe now has more digital-only than weekday print sub- scribers, and Vinay Mehra, The Globe’s president, said digital revenue alone could support the newsroom’s payroll. The Globe, however, serves a densely populated area with a high number of af- fluent residents willing to shell out $25 a month for online access. A paper like The Vindicator, a 150-year-old daily in Youngstown, Ohio, is less of an outlier. It recently announced that it would cease publication on Aug. 31. Mr. Luciano, the columnist in Peoria, said he was concerned about the fate of The Journal Star, not to mention compa- rable dailies in cities like Muncie, Ind., and Allentown, Pa. “I don’t know who is the watchdog when they leave,” he said. “There’s no one.”

The ghost papers

CHLOE CUSHMAN

Hedge funds wring profits from ailing newspapers, but how long can that last?

BY MARC TRACY

“I know The Journal Star’s in the black. How much in the black do you have to be? That’s what drives us up a wall.”

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The New York Times International - 07.08.2019

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