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December 09, 2008

Continuing the Conversation of the Future of Main Stream Media...
by Reggie Middleton

To continue the discussion started in "A change is gonna' come", this is a perfect example of what I mean by the difference in between blog reporting (the higher quality blogs) and the MSM (mainstream media). As regular followers to the blog know, I have been bearish and all over GGP through late last year and this year. For those that haven't seen any of the GGP work, read "GGP and the type of investigative analysis you will not get from your brokerage house" and contrast and compare it to this article from WSJ.com: Dark Days for Mall Dynasty Built on Debt - The article captions, "General Growth's losses show how the crisis is hitting not just risk-loving Wall Street firms but also family-run companies with histories of conservative growth."

What???!!! This company was leveraged to the hilt, buying properties at the top of the real estate bubble, tripling their size. They had about 20% of their properties with an LTV of 100% or more. C suite officers used nearly unheard of amounts of leverage to purchase multiples of their net worth in company stock, through shady and clandestine arrangements through family trusts. They attacked me, a nice guy, and my blog calling my work unprofessional. Okay, that last part doesn't really fit in, but I'm sensitive...

This is a fairly in depth and well researched article, but not nearly to the level and granularity of the highest echelon of blogs. I feel that the MSM can truly benefit by integrating their content with blogs who have the capability and resources to go where they can't, and thus truly sustain a pay for content model. This article as it is written, may assuage the masses, but the guys who are really willing to pay big premiums for such content will eventually drift away to those sources that can do better, leaving the company to rely on flaky and volatile ad revenue. I don't want to sound to negative, for the article was very well done, for a financial newspaper, but it could have been so much better. I will explain how a little later on. Now, before everybody jumps on me, I know that the article is aimed at two different audiences, but those audiences significantly overlap. In addition, certain factual omission make parts of the authors assertins just plain wrong. For instance:

"Aside from the loans, made to prevent a massive stock selloff by executives, Mr. Bucksbaum and his deputies in recent years loaded the company with debts totaling more than $27 billion. General Growth's stock has plunged more than 97% in the past year, dragging down the Bucksbaum family fortunes with it. The Bucksbaums' 25% ownership stake, worth $3.2 billion just six months ago, is now worth $116 million".

The more accurate depiction is the loans, which were shady, aided and abetted rampant speculation. Loans should not have been made by a conservative and prudent company to executives that over extended themselves in the first place to assist in buying and keeping more than they could handle on the company's dime, particularly when the stock was in free fall and the companies assets were over-encumbered. The article also failed to mention how GGP management derided short sellers of their stock, then lobbied the government to be included on the short ban list a few months ago, and once there proceeded to dump boatloads of their own stock, under the protection of the Federal government. There other tidbits not covered as well, but I'm sure you get the message.

Now, I also want to make clear that I am truly sorry that the Bucksbaum's fortunes have taken such a turn for the negative, particularly when it was built (I don't know for a fact, but it seems so) on the back of a hard working ambitious man, or men. That is what I like to see, entrepreneurism and capitalism at work at its best. I have lost a lot (at least for me) in the past and I know that it is no laughing matter.

Now, what is the solution to this media mess?

I received this email from a MSM professional (that I respect) in response to my "A change is gonna' come" article.

I agree with your assertion that MSM companies should pursue more opportunities to charge for premium content, particularly content written by experts for experts. But that solution neglects a big chunk of the information market, topics of general interest. For example, an investment banker may well find it worthwhile to subscribe to BoomBustBlog. But what if he or she is also curious about the impact of global warming on America's national parks system, what the Mumbai terror attacks mean for US-Pakistan-India relations or insight into the best recipe for pumpkin pie? It wouldn't be practical for everyone to pay an expert-level subscription rate to blogs or publications on every topic they may ever be interested in.

That's where professionally reported and written publications of general interest are valuable. The problem is figuring out a reliable way to corral and deliver general interest information in a way that serves modern readers and generates money. I personally think large newspaper companies should partner with a search engine company such as Google. Such a relationship that would connect newspapers -- which are typically the largest, most thorough and consistent sources of reliable content in any given community -- with Google, which is an expert in consolidating and distributing information to people who want it. GoogleNews is a great service, but it is training people to expect news for free. It works b/c the content providers, newspapers and wire services, still have enough subscribers to stay afloat with the Google-only freeloaders on board. But, eventually, the freeloaders will overwhelm the system and there won't be enough professionally gathered and objectively explained info to go around, which will undermine GoogleNews. If it were up to me, newspapers, TV stations and wire services would partner with Google to provide a premium, search-based source of professional news. Unfortunately, for the time being, publishers and station owners are still too enamored of their own short-term profits to participate in a meaningful long-term deal. And Google is still getting enough quality news for free to prevent it from feeling compelled to enter into an agreement.

But, clearly, something needs to happen if we intend to maintain the infrastructure necessary to provide a commercially-based free press that distributes critical information and acts as a check on the government.

He is right that it wouldn't be practical to pay an "expert level subscription rate to blogs or publications on every topic they may ever be interested in". But, herein lies the solution. The web has enabled instantaneous content delivery and the ability for real time micro payments, real time payment tracking and real time content tracking. So, what if the mainstream media who have the extant traffic and eyeballs (what we, the bloggers want) give us their primary asset in a barter exchange for granular expertise (what we have, our primary - or arguably tertiary, I will get to this in a minute - asset). This can be done on a topic by topic basis, article by article. It can be done on a pay for content basis, as well. For instance, the article above could have easily included as many references to my GGP research as it wanted, in addition to as much or the backup documentation and data that was necessary, up to and including all of it. I would not be willing to give it away for free (at least not anymore, it was free at the time I created it), but I would charge the MSM entity for access to it. More importantly, I would charge them on a contingent basis based upon the readers expected to access the content based upon a trend analysis from their (most likely very specific and granular usage data - even Google Analytics is capable of blowing one's mind). Charging a fee to a few hundred or even a few thousand subscribers through a blog is cumbersome as compared to charging a few million through the MSM. The MSM can purchase the content outright or buy it on contingent payments (for a slight premium) and pass the cost through to the reader via premium content charges. WSJ.com is a prime example of how this can happen since they charge a subscription fee and they advertise (I wonder if they are reading this). See the following example below illustrating how much the GGP content would have cost the WSJ (illustrative basis only), assuming they would contract to run all of my content through the year. Compare the "fee to the blogger for the article" number to the salaried time spend by the reporter to do the research, fact check and edit his own data - much or which would not be anywhere near the depth, quality or granularity of an "expert" blogger, primarily due to the fact that they are experts, or at least allegedly so. I think this blogging model will actually save the MSM money in research costs, while freeing up the (good) reporter to do more creative and investigative work.

Scenario for the world's best red velvet cake recipe article
Larger audience, but likely less price elasticity
MSM Viewers (not impressions, but users)	5,000,000
x Blogger fee per viewer	$0.10
x Days content is run	365
Fee to blogger for the article	$1,369.86
Scenario for finding the next multi-$billion REIT to collapse
Smaller audience, but likely greater price elasticity
MSM Viewers (not impressions, but users)	1,000,000
x Blogger fee per viewer	$1.00
x Days content is run	365
Fee to blogger for the article	$2,739.73

WSJ.com could have created an article on GGP that would have blown every sell side analyst report, opinion, and analysis out of the water for less than $2,800 plus the cost of a month's salary for the reporter. With content at that level, then imagine what could be charged for advertising, and who would be willing to pay their first born child for the ad space. In addition, the generalist writing portion should be better due to the fact that the reporter theoretically should have had more time to spend on it. This premium service could be the exclusive product of the MSM entity, or it could be used to subsidize the free, ad based stuff.

Now, the fee to the blogger would have been for that article, with a non-exclusive contract to run XX (let's assume 12) articles for the year. Multiply 12 articles times say, 25 MSM outlets, and that would be $821,917.81 more than he/she would have had if they didn't syndicate to the MSM. I probably wouldn't turn it down. In addition, it gets your name out to the mass market. Now, additional deals could be cut, such as revenue and profit sharing, equity deals, etc. The key is to use our imagination and creative minds and stop doing something just because everybody else is doing it. Anybody out there in the MSM who would like to take me on via this model, I am all ears!

Reggie Middleton
Reggie Middleton, LLC
Perpetual Interests, LLCTM
http://boombustblog.com/

Who am I?

Well, I fancy myself the personification of the free thinking maverick, the ultimate non-conformist as it applies to investment and analysis. I am definitively outside the box - not your typical or stereotypical Wall Street investor. I work out of my home, not a Manhattan office. I build my own technology and perform my own research - in lieu of buying it or following the crowd. I create and follow my own macro strategies and am by definition, a contrarian to the nth degree.

Since I use my research as a tool for my own investing to actually put food on my table, I can stand behind it as doing what it is supposed too - educate, illustrate and elucidate. I do not sell advice, I am not a reporter hence do not sell stories, and I do not sell research. I am an entrepreneur who exists just outside of mainstream corporate America and Wall Street. This allows me freedom to do things that many can not. For instance, I pride myself on developing some of the highest quality research available, regardless of price. No conflicts of interest, no corporate politics, no special favors. Just the hard truth as I have found it - and believe me, my team and I do find it! I welcome any and all to peruse my blog, use my custom hacked collaborative social tools, read the articles, download the files, and make a critical comparison of the opinion referencing the situation at hand and the time stamp on the blog post to the reality both at the time of the post and the present. Hopefully, you will be as impressed with the Boom Bust as I am and our constituency.

I pay for significant information and data, and am well aware of the value of quality research. I find most currently available research lacking, in both quality and quantity. The reason why I had to create my own research staff was due to my dissatisfaction with what was currently available - to both individuals and institutions.

So here I am, creating my own research for my own investment activity. What really sets my actions apart is that I offer much of what I produce to the public without charge - free to distribute and redistribute, as long as it is left unaltered and full attribution is given to the author and owner. Why would I do such a thing when others easily charge 5 and 6 digits annually for what some may consider a lesser product? It is akin to open source analysis! My ideas and implementations are actually improved and fine tuned when bounced off of the collective intellect of the many, in lieu of that of the few - no matter how smart those few may believe themselves to be.

Very recently, I have started charging for the forensics portion of my work, which has freed up the resources to develop the site to deliver even more research for free, particularly on the global macro and opinion front. This move has allowed me to serve an more diverse constituency, which now includes the institutional consumer (ie., investment turned consumer banks, hedge funds, pensions, etc,) as well as the newbie individual investor who is just getting started - basically the two polar opposites of the investing spectrum. I am proud to announce major banks as paying clients, and brand new investors who take my book recommendations and opinions on true wealth and success to heart.

So, this is how I use my background and knowledge in new media, distributed computing, risk management, insurance, financial engineering, real estate, corporate valuation and financial analysis to pursue, analyze and capitalize on global macroeconomic opportunities. I have included a more in depth bio at the bottom of the page for those who really, really need to know more about me.

Visit his blog Boom Bust Blog.

Copyright © 2007-2009 Reggie Middleton

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