Is Bloomberg Government the Next Washington Media Death Star?
After conquering Wall Street, the global news giant founded by New York City’s billionaire mayor is betting that Washington is the next hot media market
One wintry day in early 2009, David Bradley, who owns the DC-based Atlantic Media Company, had lunch at the Four Seasons Hotel in New York with Norman Pearlstine, the former editor of Time who was developing new businesses for the financial-news giant Bloomberg. A few weeks earlier, Bradley’s chief media rival in Washington, Congressional Quarterly, had been put up for sale, and Bradley wondered whether he should buy it.
Bradley’s own company publishes the Atlantic as well as a suite of Beltway-focused publications that command an annual subscription price in the thousands of dollars, chief among them the weekly policy magazine National Journal. Bradley’s operation competed with CQ—as Congressional Quarterly is usually called—for news, readers, and ad dollars. There were plenty of reasons he might want to buy it. CQ’s most prized asset, from a potential buyer’s perspective, was a set of databases that track the step-by-step movements of legislation in Congress and that sell for tens of thousands of dollars a year per subscription.
There were other serious suitors, but Pearlstine was the only one Bradley visited personally. He wanted to know if Bloomberg was planning to make a bid. “If you are,” Bradley said, “I want to get out of your way.”
It might have seemed that Bradley was beating a hasty and preemptive retreat, and there would be some wisdom in that strategy. He may be a powerful media figure in Washington and the creator of two research companies that have made him a millionaire hundreds of times over, but his fortune pales compared with that of Michael Bloomberg, billionaire founder of the news organization named for him and now New York City mayor.
The prospect of a bidding war was inhibiting—more so was the idea that if Bloomberg was now getting into the legislative-tracking business, then by acquiring CQ, Bradley would be at war with the company in the Washington media market.
Bloomberg, one of the world’s largest media organizations, already had a massive footprint—its Washington newsroom rivaled the Washington Post’s—and its specialty was data. Subscribers to the company’s terminal, an electronic desktop display, pay tens of thousands of dollars a year for up-to-the-second stock quotes, bond prices, and financial news. The terminal made Bloomberg into a media titan—Bradley’s National Journal Group is a boutique by comparison. Still, Bradley had asked Pearlstine the right question. Indeed, Bloomberg was interested in CQ, having decided only days before the company went up for sale that reporting on detailed information about government was a segment of journalism in which Bloomberg could compete.
While on the surface politics seems to be the main business of Washington—the darling of the new-media landscape is the fast and furious Politico—Bloomberg has a different vision: that the real money in Washington journalism is in covering the mechanics of government itself.
Both Bradley and Bloomberg ended up passing on CQ—it was sold in 2009 to the British-owned Economist Group, which owns the newspaper Roll Call, another Washington fixture, for a reported price of just over $100 million. Bradley’s team decided CQ wouldn’t mesh well with National Journal, and while Bloomberg had participated in the earliest stages of the bidding, it dropped out when it felt the price had gotten too high. The experience, though, left Bloomberg executives with a question: Why can’t we do this better ourselves?
The resulting effort two years later—one in which Bloomberg has reportedly invested the equivalent of the CQ sale price—is being referred to in newsrooms around town as the Death Star. It’s very big. It’s very quiet. And no one knows its ultimate purpose—except to destroy everything in its path.
Bloomberg calls it BGov, for Bloomberg Government. Since launching in January 2010, it has become the most disruptive force in Washington media since the emergence of Politico, a once improbable-sounding news venture that, when it started in 2007, drew scoffs from the media elite such as National Journal and CQ. But within three years, Politico had stolen much of their thunder, along with their advertising, and forced the established players to reexamine the premises of their business.
Politico had proved something the barons of the Beltway had overlooked: The minutiae of politics and government, which they’d long purveyed to a professional audience, are interesting to a lot of people who don’t live here. Bloomberg also took note of Politico’s success. And it’s taking this idea a step further.
With BGov, Bloomberg is betting that the mechanics of Washington, particularly the way government regulation affects businesses, are important to people. Key to this assumption is that readers will pay handsomely for news that clears the fog, explaining how the decisions of Congress and the administration affect a company’s future and exploring the dark recesses of government and the executive branch.
“A lot of companies out there are flying blind about what goes on in Washington,” says Mike Riley, BGov’s managing editor, the top job in the newsroom.
BGov’s launch underscores a strange quirk of the modern media landscape: Even while mass-market journalism struggles, particularly daily newspapers, expensive business-oriented publications aimed at the nation’s elite—such as the Wall Street Journal, the Economist, and the Financial Times—are faring better. It turns out that in the information economy, access to better information is an arbitrage opportunity.
Months before BGov opened its doors, Bloomberg performed its characteristically exhaustive due diligence, testing the business model with potential subscribers.
In the spring of 2009, a pair of company executives interviewed more than 100 Washington lobbyists, government-affairs staff at trade associations, congressional staffers, and businesspeople. Everything they heard affirmed BGov’s thesis that the rest of the country, especially the business community, doesn’t understand Washington and doesn’t particularly trust it. The health-care debate was heading toward the vitriolic town-hall meetings of August. The Obama administration had inherited the bailout of banks and financial institutions, and the government had taken a controlling interest in General Motors. Polarizing debates loomed in Congress, and each of them had uncertain implications for American businesses—environmental regulations such as cap and trade; immigration reform; tax cuts; and employee health benefits.
There was a sense of “almost panic” among business owners about the direction Washington was heading, says Don Baptiste, head of strategy and product development for Bloomberg. The anxiety created an opening. By January 2010, BGov had hired its first employees. Anonymous sources spread word to media-gossip sites that the new company was going to war with the Beltway rags—National Journal, CQ, Roll Call, and Politico.
BGov executives did a “market assessment” before plunging into Washington, to determine how much readers were spending every year on information—not just traditional publications but specialty news services such as BNA and trade publications focused on narrow policy areas. The total was $1.3 billion. But even that sum won’t satisfy BGov’s owners. So in addition to Washington-based subscribers, BGov’s sales force is targeting businesses beyond the Beltway, including small and medium-size companies it thinks are looking for more news than what they read in their association newsletters.
The current price for an annual subscription to BGov, exclusively an online publication, is $5,700 per user. That gets readers original news and reporting from BGov’s reporters covering technology, health care, energy, government contracting, and other beats of interest to business. The articles are written in the utilitarian style Bloomberg developed for Wall Street brokers and traders, the audience that built the company into a news powerhouse.
But BGov subscribers, of whom there are currently fewer than 2,000 individuals, get something potentially more valuable than news. BGov’s “killer app”—the feature that sets it so far apart from its competition that prospective customers will feel compelled to buy it—is a database that lets users track how much money US government agencies spend on contracts, something no other media organization in Washington offers. Users can break down the spending by agency, company, amount, or congressional district; they can track the money over time; and with a single mouse click, they can call up news associated with the companies and the type of work they do. They can also see which contractors are giving money to elected officials.
All that information is extraordinarily hard to gather, largely because the government doesn’t store it in one place. But when it’s collected, and explained by journalists, the data has the potential to give businesses an inside track on winning government deals. It shows where spending trends are heading and thus where the next business opportunity lies. For years, current and prospective contractors have been buying these figures from a handful of analysis firms. Last February, Bloomberg bought one of them.
Eagle Eye Publishers, a small business in Fairfax, specialized in compiling government-wide procurement figures into rank-ordered lists of the top spenders of federal money as well as the companies winning contracts. Eagle Eye used to sell those lists to Government Executive, another David Bradley–owned publication. Now Eagle Eye’s founder, Paul Murphy, sits in the BGov newsroom, helping its reporters crank out original stories and analysis.
Buying Eagle Eye was a natural extension of Bloomberg’s main source of revenue, the electronic terminal, which is ubiquitous in the financial sector. The implications aren’t lost on Washington’s top editors. “I think Bloomberg is going to come in and eat everyone’s lunch on data,” says Jim VandeHei, executive editor and cofounder of Politico.
But to do that, BGov will have to get its house in order. Several editorial staffers have complained that the newsroom is poorly organized and that Bloomberg hasn’t done enough to publicize its new operation in Washington or to promote the online publication among its existing subscribers.
According to multiple internal documents, BGov’s recent traffic has been anemic. Few people appear to be reading the site, and only a handful of stories generate double-digit page views. Some reporters complain that their stories aren’t being widely read because they stay locked behind a “pay wall,” making it difficult to generate leads and cultivate sources and leading some staffers to doubt whether BGov has the momentum to get off the ground. These reporters say stories are rarely, if ever, shared with Bloomberg’s wider audience of business readers and that even exclusive news stories aren’t published on the company’s public Web site, which anyone can access.
There’s a creeping and uneasy feeling among some employees that their bosses don’t understand the potential of the resources they have. Employees also question whether Bloomberg executives in New York understand how to pitch BGov to a business audience, whether in Washington or elsewhere. This type of anxiety is to be expected with any start-up, but BGov runs the risk that its substantial buzz will quickly give way to doubt.
Still, the opportunities for BGov—or any new publication—to succeed are considerable. “The marketplace is fluid and is changing dramatically,” says Justin Smith, president of Atlantic Media Company, who oversaw a relaunch of National Journal’s magazine, Web site, and daily publications to focus them more on daily news and analysis. “But this is a town full of numerous markets, not just one.”
Yet BGov’s commitment has been outsize compared with National Journal’s rebranding in fall 2010 as a more Web-focused operation or with Politico’s new pay service, Politico Pro, which launched in February. Bloomberg is treating the minutiae of government as journalism’s next frontier, reportedly investing $100 million to hire staff, acquire resources such as Eagle Eye, and mount a national sales strategy. Company executives won’t confirm that number, but they don’t dispute it.
So far, BGov has kept a low public profile. Editors don’t trumpet new hires in press releases. Employees are forbidden to talk about company business with outside reporters. Even BGov’s top editors and executives won’t sit for an interview without a company spokesperson in the room, and all meetings are conducted in glass offices so passersby can see.
But the silence is at odds with the sound of other journalists bolting from their newsrooms to BGov’s. They’re drawn by higher salaries (double what they were making, according to some accounts), generous health-care benefits, the prospect of year-end bonuses totaling half an annual salary, and the potential to be in on the ground floor of the next big media start-up. By the end of this year, BGov intends to hire more than 150 new reporters, editors, and subject-matter experts in its coverage areas. In an unusual setup, the experts, many of whom hold PhDs, serve as in-house analysts for the journalists. Ordinarily, a reporter might spend hours trying to track down the perfect source for an article. At BGov, they’re already in the office. And when they’re not helping with news, the analysts write what editors call “white papers,” detailed descriptions of how government policy is being implemented.
BGov’s hiring goal of 150 staffers is a big number by any measure, but especially at a time when the model of charging money for news has been written off in many quarters. At the beginning of this year, the newsroom staff already stood at 115. And many of the reporters and editors have come from one company—CQ. Some were lured away; others are refugees of a CQ layoff in September 2009, in which 44 employees lost their jobs.
Mike Riley, BGov’s managing editor, is a CQ veteran who lost his job as editor and senior vice president there when the company merged with Roll Call. Fortunately for Riley, his experience running a high-priced subscription business was in demand when he got the boot. After leaving CQ, he began talking with Bloomberg about its new Washington operation; Riley’s consulting work with Bloomberg was unpaid. The top editors at Politico also hired him to consult on how they might start a subscription business. According to Riley, he didn’t share information about either company with the other. A subscription to Politico Pro, which ended up launching more than a year behind BGov, starts around $2,500 a year for one coverage area and $1,000 for each additional area.
In Riley’s 13 months at the helm at BGov, he has overseen a raid of CQ’s editorial staff. At one point in late 2010, as the newsroom was being established, one informed estimate put the proportion of ex-CQ staffers at 70 percent. BGov didn’t stop with the newsroom. It has poached CQ salespeople and even employees from the IT department.
CQ was easy prey. The layoffs had bred an air of mistrust in the ranks, current and former employees say, and BGov exploited those weaknesses. BGov has attracted talent from other companies, but the number of hires from CQ leaves little doubt that BGov sees it as the main competitor in Washington.
BGov’s top brass resist the suggestion that they’re vying with any publication for coverage or readers. “I can say with a straight face I don’t think we have competition in this market,” Riley says. But employees are another matter. “The only competition here,” Riley says, “is for talent.”
Mike Mills, who was editorial director of Roll Call Group before it merged with CQ and now oversees the combined newsrooms of both organizations, says there’s been anxiety in his newsroom over the defections to BGov. “No doubt about it.” He adds, “We’ve lost a lot of talented people, but the people we’ve hired to replace them are terrific.”
BGov’s emergence has coincided with the fallout from CQ’s layoffs as well as a round of buyouts at National Journal, in which 48 employees left the company. The commotion has set off a game of musical chairs in Washington newsrooms. After National Journal’s buyouts, a congressional correspondent and an editor took comparable jobs at CQ Roll Call, as the merged enterprise is now called; the top congressional reporter and its economics correspondent bolted for Politico. (The latter has since left.) One of National Journal’s most junior staffers departed for Politico Pro, and a more senior writer went to BGov.
But a Politico reporter also left to join National Journal, as did seasoned journalists from Fox News, the Wall Street Journal, Newsweek,AP, and the Atlantic. National Journal ultimately hired 47 new journalists, including a number of recent college graduates for lower-level reporting positions.
Politico Pro has been on raids of its own. Editors there aim to hire about 40 new reporters to cover health care, technology, and energy, and they say that at some point they’ll add more beats. The new online-only publication will graft Politico’s micro-coverage of politics onto the world of policy, says editor Tim Grieve, and so far it’s been seeking many journalists from the trade press. Five reporters came from the news service Environment & Energy Publishing, drawn by what one source describes as extravagant salary increases—double in some cases, more in others. In a brazen maneuver, Politico Pro tried to poach Environment & Energy’s sales staff en masse, contacting each person individually by phone or e-mail. The owners of Energy & Environment spoke to the courted employees, and ultimately none accepted Politico Pro’s offer.
It’s not unusual for journalists to change jobs in Washington, but this spate of hiring is being fueled by new positions that didn’t exist a year ago. In all, at least 150 reporters, editors, and analysts have been hired for new or vacant positions in the past year. “I can’t remember seeing this much movement in this short a time,” says Jim Brady, former executive editor of Washingtonpost.com and onetime general manager of TBD.com, the local-news site started by the owners of Politico.
Add to all this professional momentum a surge of new digital ventures homing in on Washington, including Tina Brown’s Daily Beast, which has merged with Newsweek and is attracting star reporters; a new daily on Capitol Hill from the Huffington Post, which is being acquired by AOL; and new cable shows that are turning daily political debate into prime-time entertainment. The news business has rarely been so obsessed with Washington.
This frenzy of interest has been building for decades as federal power has consolidated and the government’s influence over business has intensified. The trend began in the Kennedy and Johnson administrations and was accelerated by Richard Nixon, perhaps most famously in 1970 when he created the Environmental Protection Agency. As the federal budget grew, businesses outside Washington realized they needed more eyes and ears there. Trade associations set up shop. Law and lobbying firms expanded. And all that new money moving through Washington grew the city itself—its arts, its restaurants, its real estate. Today the hometown business of government has never been bigger or more central to the fate of US industry. Washington media are the latest beneficiaries of this 50-year expansion.
The presence of BGov has riveted the attention of Washington’s elite media owners on a business they long presumed was theirs alone to rule. “Bloomberg can spend a lot of money, and they are,” says Mills, the CQ Roll Call editorial director. “It would not be an overstatement to call this a battle of the giants.”
Mills has seen this battle before, and he’s taking a lesson from recent history. “When Politico came, the effect was to grow the market,” he says. The media establishment, Mills included, overlooked the fact that there was room in Washington for another publication, even if it seemed that coverage of politics and government had reached its saturation point. “We took too long to take Politico seriously,” Mills says. “We’re not making that mistake with Bloomberg.”
This article first appeared in the March 2011 issue of The Washingtonian.
Subscribe to Washingtonian
Follow Washingtonian on Twitter