Makeover
CNBC Fell from Grace When the Bubble Burst.
How Does It Look Now?
BY
RAY
BRADY
CNBC, the financial news channel owned by General Electric,
is at a crossroads. Its journalistic reputation suffered during
the stock market bubble when some Wall Streeters called it "Tout
TV" for its complicity in hyping stocks. On the business
side, CNBC's ratings zoomed with the market, then dropped when
the bubble burst. In 2002 its ratings fell 44 percent. The markets
have been verging upward recently, but so far this year, CNBC's
viewership is down 5 percent. The network has shifted gears in
an effort to become more journalistically tough, to break stories,
and to win back viewers. CJR asked Ray Brady, a veteran financial
reporter and the former chief business correspondent for CBS News,
to take a fresh look. Here's his CNBC progress report.
P
romptly at 7 a.m., the studio darkens,
the red light flashes on the studio camera, and anchorman Mark
Haines, natty in coat and tie, starts reading from the TelePrompter:
"Just five days after Dick Grasso resigned, there's a new
man at the helm of the New York Stock Exchange." Then, from
the corner of Wall and Broad Streets, Rebecca Quick reports on
the reaction to the change.
Back in the studio, more economic news: gold prices, oil prices,
overnight results from the world's stock exchanges. Then two cameras
zoom in on Joe Kernen and David Faber, talking about today's earnings
reports from banks, brokerage houses, and other companies. Each
time a stock is mentioned, up goes a graphic showing the stock's
price performance.
Welcome to Squawk Box, the show that first shot CNBC to prominence
in the competitive world of financial journalism. For three hours,
Squawk gives professional and neophyte investors a summary of
what's been happening while they slept and what it means for later
in the day. At 8:16, up pops Maria Bartiromo from the floor of
the New York Stock Exchange: "Stocks are higher in the premarket,"
followed by a rundown of what sources told her this morning.
Critics claim that CNBC's on-screen personalities led the charge
into the speculative stocks of the 1990s, stocks that eventually
imploded. There are professional questions, as well, about the
network's cheerleading coverage of Wall Streeters who were extolling
stocks that those same analysts were privately calling "crap."
The Merrill Lynch analyst Henry Blodget, for one example, had
been a frequent guest on CNBC. His Internet stocks all came crashing
down, and eventually it was learned that he'd been recommending
stocks on-air that he privately called "junk." (But
Blodget came full circle: Mark Haines led Squawk one recent morning
with the news that Blodget had been banned for life from Wall
Street.) Alan Abelson, the respected financial columnist of Barron's,
comes down hard on the channel. "CNBC," he says bluntly,
"was a product of the stock-market mania. They contributed
to it, and they ate off it."
That history, along with the recent decline in ratings, puts
a special responsibility on CNBC's brand of journalism: its stock
analysis must be judicious, and its reporting sharp enough to
satisfy the demanding Wall Street professional, yet not over the
head of the random viewer. To attract both groups, CNBC has been
expanding its Washington coverage, hiring, among others, the former
CBS News correspondent Gloria Borger to co-anchor its evening
business/politics show, Capital Report. CNBC also has been changing
its internal news structure, starting with the hiring of Judy
Dobrzynski, a former Sunday business editor of The New York Times,
as managing editor. Under Dobrzynski, some correspondents have
been assigned specific industry beats such as health care and
sports business. Sharon Epperson, for example, covers personal
finance, with Mike Huckman specializing in pharmaceuticals. Result:
When Huckman got a heads-up that the Food and Drug Administration
might be getting ready to approve an important new psoriasis drug
for Genentech, he began shooting background material, just in
case. Then, when the news broke, he was ready with a well-rounded
piece.
The aim is to break news, says Dobrzynski. Nobody who was in
the newsroom on the day in mid-2000 when David Faber broke the
story of the WorldCom fraud can forget what happened: CNBC's ratings
spiked. That one story, repeated during the day, drew nearly 350,000
viewers.
Still, in its desire to boost ratings, CNBC must be careful not
to show any semblance of its former bull-market self, when it
was the Pied Piper of the market. Since spring 2002, for example,
CNBC has aired charts during interviews showing whether an interviewee,
his firm, or his family own any of the stocks being discussed.
(Since mid-2002, full disclosure has become mandatory under SEC
and stock-exchange regulations.) Still, the charts could go further.
For example, if an analyst owns a stock under discussion, what
price did he or she pay? That could make a difference in the recommendation.
In its drive to make viewers forget its past, CNBC, meanwhile,
may be going too far. Razzle-dazzle has given way to a sameness
in daytime shows like Morning Call, Power Lunch, and Closing Bell.
Each must carry the usual economic figures of the day, updating
hour by hour, which makes for repetition.
Meanwhile, the network's anchors are confrontational at times
with an interviewee when it doesn't make any sense to be, and
at other times they let a key point slip by. When anchor Michelle
Caruso-Cabrera asked Scott McNealy, CEO of Sun Microsystems, why
his stock was falling, McNealy snapped: "I don't pay attention
to the stock price!" But didn't he think he owed it to his
stockholders to know what was happening to their money? No such
question was asked. On slow days, moreover, anchors often fill
time with "happy talk," joking about baseball, golf,
movies. One exception: Business Center, with Ron Insana and Sue
Herera, keeps the chatter to a minimum.
Sometimes, though, even veteran CNBC people can be journalistically
tone deaf. Interviewing Sanford Weill, the chairman of Citigroup,
in July, Maria Bartiromo announced that she owned 1,000 shares
of the company. She had touched the third rail of financial journalism:
never report on a company whose stock you own. The New York Times
was quick to pounce on CNBC with a critical story. (CNBC says
it has "stringent policies" on employees' stocks but
did not consider Bartiromo's $46,000 investment a significant
holding.)
CNBC's prime time schedule is a grab bag of The News with Brian
Williams, Kudlow and Cramer, and Capital Report. Williams will
graduate to the NBC Nightly News when Tom Brokaw retires after
the 2004 election. His show has an advantage the network evening
news shows can't match: for one hour, it can cover the news but
also quiz experts on the stories viewers have just seen.
Kudlow and Cramer, meanwhile, is another story. Lawrence Kudlow
is so unabashedly tilted to the right that when Democrats criticized
President Bush's handling of the Iraq war, he compared them to
America Firsters, who campaigned to keep the U.S. out of the war
with Nazi Germany. A bit harsh. Jim Cramer, meanwhile, comes off
as a brash and boorish money manager playing the role of a financial
journalist. But on Capital Report, The Wall Street Journal's Washington
bureau chief, Alan Murray, and Gloria Borger quietly and expertly
cover the crossroads of politics and economics.
The network is experimenting with random, hourlong documentaries
on economic issues. The most recent, which aired in September,
was The Big Lie: Inside the Rise and Fraud at WorldCom, about
the fall of WorldCom in what prosecutors have called the greatest
accounting fraud in history. It boasted good writing and reporting,
but was, in effect, a postmortem that might have been more at
home on The History Channel. CNBC's audience already knew the
outcome. Financial viewers could have used that story before it
made headlines and the stock collapsed.
On weekends, when markets are closed and business offices dark,
CNBC has to scratch. Hence: hours and hours of financial advice
on pretaped questions from the ubiquitous investment adviser Suze
Orman ("Suze, should I put my money in my 401-k or pay off
my car loan?"). The rest of the airtime is mostly filled
with a mind-numbing array of infomercials, some selling skin-care
products ("Did you know Vanessa Williams has been suffering
from acne since girlhood?"), or promoting the Pilates system
for body sculpting ("My butt is actually two inches higher.").
Pamela Thomas-Graham, the network's president and CEO, defends
leasing CNBC's airtime for what is essentially cheesy programming.
"Infomercials are a very good margin for us," she says.
"I don't think they diminish us." Tom Wolzien, senior
media analyst for the investment firm Sanford C. Bernstein, takes
a different view. "CNBC," he says, "has the highest-income
viewers in the country, the most superrich niche that anyone has
ever had. You'd think when they have available airtime they'd
know how to use it."
For all its ratings problems, CNBC retains the confidence of
the notoriously tough-minded managers at parent General Electric.
That confidence is rooted in money. The Morgan Stanley investment
house estimates that CNBC racks up the highest ad revenues of
any cable news channel, $507.8 million in 2002. Its advertising
sales people carry reams of studies showing that CNBC has a viewership
with a median net asset value of roughly $1 million. For that
reason, CNBC gets top dollar for its commercial time.
With such profit figures, Thomas-Graham can dismiss the network's
dismal Nielsen ratings as irrelevant. Besides generating advertising
revenue, CNBC plays another role for its parent — by having
two cable news channels, CNBC and MSNBC, and its broadcast network,
and using NBC correspondents on all of them, the company is able
to spread the cost of TV crews and its high-paid stars like Tom
Brokaw, Brian Williams, and Tim Russert across all of its televised
holdings.
Nonetheless, ratings matter, and so does reputation. Even its
critics agree that CNBC is gradually living down its bad old days
as a cheerleader for the markets. What's needed is ever more conscientious
journalism — take-no-prisoners reporting that blows the whistle
before the news is out. A more vigorous application of Financial
Journalism 101 might even bring back those ratings.
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