Reuters Offers Increased News of South-East Europe Via a Third Party At Additional Cost to Its Financial Clients -- Hmm, And They Said Cutbacks Wouldn’t Affect the Editorial Product!

Philip M. Stone October 2, 2005

Reuters is offering its financial clients at additional cost SeeNews, a third party news service covering South-East Europe. Great for SeeNews, a one-year-old start-up run by a former Reuters manager who spotted a lack of internationally reported financial news from the region, but it does pose the question of how come Reuters isn’t filling that news hole as it should itself?

The optional buy is good for those who need to know, for instance, that “Microsoft Signs Three-Year Deal Worth $2.36 million with Montenegro” or “Russian Alma Buys 88.8% in Moldovan Cojusna Winery” and that type of company news is Reuters’ bread and butter, but with current resources the big editorial question is just how deep the coverage goes into the market.

Correspondents from the Reuters Belgrade bureau still travel the southeast Europe region, but the number of financial stories from those really emerging countries such as Macedonia, Moldova, Bosnia, Slovenia or Croatia usually are no more than one or two a day from each. SeeNews, with people in those countries plus Romania, Bulgaria, Albania, Serbia, and Montenegro, now fills in the slack.

It’s a little surprising that this type of third-party additional coverage is necessary in Eastern Europe, an editorial territory that Reuters used to cover like a blanket for its media and financial services. But with its Fast Forward program of the past three years the company actually went into reverse, cutting costs to the bone and east and southeast Europe did not escape the editorial knife.

And perhaps it is a fine new(s) commercial strategy – provide coverage up to a certain point within the general service and if a customer wants more detail then charge accordingly for additional third-party coverage without having the added cost of producing that material yourself. The question, as always, between provider and customer is where the line is drawn.

Eastern Europe has a special place in the heart of many Reuters editorial and marketing veterans for if it can ever be claimed that one news agency ever really “owned” a truly dynamic major international story for months on end, it would be Reuters coverage of the fall of the Berlin wall, the end of communism and the advent of capitalism in eastern Europe.

One would expect an international news agency based in Europe to excel at such a story on its doorstep, throwing in massive additional financial resources, just as one would expect the AP to have the upper hand on major breaking stories from the US such as the recent hurricanes. That doesn’t mean the other international news agencies weren’t there doing a fine job, but the “home” agency usually has the most resources on the ground and has the most complete coverage.

Continuing from its East Europe success, Reuters made a massive financial editorial investment when war broke out later in the Balkans.  But by then things were already financially tighter at Reuters, and so it was in that environment that this writer, then the Reuters European media manager, will not forget the day a senior editorial manager invited him to coffee (that editorial was buying should in itself have been a warning!).

The editor asked a very simple question: “Instead of continuing to win the stories in Yugoslavia by such large margins (according to the Reuters editorial research on average about 75% of stories about the Balkans used by newspapers subscribing to at least one other international agency were from Reuters) what if the margin was only 4-2 or 3-2?

There it was – if editorial were to cut back its spending on that story thus perhaps losing part of its edge over the other international news agencies, would that adversely affect the business? That same question has been lurking ever since. The days of almost free spending were over.

One of the tragedies for editorial  -- and this writer must admit up-front he has tremendous respect for the Reuters editorial product -- is that senior executives never really understood how editorial’s coverage of the fall of communism, and the later Balkans coverage, repaid itself so many times over because of the new business Reuters signed because of that coverage.

Accountants will tell how that is difficult to quantify, but one example, signing media business in Eastern Europe after the fall of communism, is a dynamic example of what was achieved. This writer was charged with coming up with a media marketing and sales plan for Eastern Europe as communism departed. An immediate decision was made that Reuters would charge for its services in an environment where competitors were offering free service -- they wanted not only to get that initial foothold but were also spurred on by their governments back home (was it just verbal or were subsidies involved?)  to promote freedom of the East European press.

In those days delivery could only be via expensive satellite dishes. One European news agency offered its service for free including a free dish installed at no charge, yet another promised free installed dishes at a nominal service rate,  (we were told they would get around import duties and customs delays for the dishes by bringing them in under their country’s diplomatic pouch, giving a whole new meaning to the word “pouch”). And from the US, Reuters had to contend with Al Neuharth’s Freedom Forum that was offering to pay fully for AP subscriptions.

First thing was to have my boss send Neuharth a letter saying if he really believed in the free flow of information in Eastern Europe then let the media itself choose the news agency they wanted (i.e: Reuters) and pay for that subscription rather than limiting his program to just an AP subscription. We got back a very nice polite note from Neuharth that basically told us not to hold our breath waiting for that to happen.

Meanwhile “market research” indicated that the Reuters brand was second to none in the region. The media via their own methods had seen the Reuters coverage of their struggles under communism and the coverage of how it all came tumbling down and now that there was real freedom of the press they wanted Reuters, if for no other reason than to show their readers they had access to such a leading western news source.

The “market research” also provided another gem – a lesson learned to this day -- that the media strongly believed that you get what you pay for! They were not impressed by offers for free service. They believed a free service was worth just about what they would have paid for it

So Reuters drafted a new rate card for East European media at rates about half of what was valid in the rest of Europe for the first three years (there was so little money available before western investment came in that it was a wonder that so much of that media that started after communism survived to thrive to this day.) But the Reuters contract had a clause that was firmly adhered to – that all payments were to be current and made in hard transferable currency that in those days basically meant German marks. Welcome to capitalism!

In those first years after the fall of communism, for an East European business to get Central Bank permission to make hard currency foreign payments took close to an act of God!  And yet, somewhat surprisingly, Central Banks approved the Reuters payments without too many delays, perhaps seeing it as the part of the price for a true freedom of the press in a new democracy. Dozens of hard currency contracts were signed, practically every subscriber kept up with their payments, and by the time the lower rates had expired practically all then subscribed to Reuters at full rates. Eastern Europe had become a major new source of media revenue.

But that’s the trouble with accounts, and being a public company where shareholders seem to care more about what is spent today rather than the revenue that spending provides for years down the road. So in generic terms editorial gets damned for spending all that money “today” while marketing and sales get bonuses “tomorrow” for bringing in that additional revenue that would not have been possible without what editorial had done. And that brings us back full circle to just how much editorial effort is enough in order to get the new or additional business.

The absolute jewel in the Reuters crown is its editorial product.  It is something senior managers for years have paid lip service to but they have never really understood its true financial worth. As financial news products manager for Europe for several years this writer had to struggle with a majority of financial sales people who continually believed subscribers wanted the various financial applications, currency exchanges and the like, and news was just a nuisance add-on. Talk to the financial customer and what they said they wanted more than anything was Reuter’s news.

To this day Reuters still does not charge for editorial’s true worth, leaving millions of whatever currency you choose to name on the table (the current management team says that the cost cuts are mostly behind them and now they want to see real revenue growth – hint: take a look at how your news is sold to financial customers.)

But getting back to SeeNews and Reuters coverage of that east and southeast Europe region, no doubt Reuters says its coverage today is just fine and the new SeeNews service of about 70 stories daily is only for those who want that much more than Reuters own fine general coverage. 

Not going to argue the point, but too often companies forget part of their heritage and those who remind them are often called dinosaurs because they are thought to resist change. Truth is they welcome change; it’s just that they want to ensure it is change for the good, and it doesn’t hurt to be reminded once in a while of what worked in the past to see if those lessons might be applied to the future, too.

Long live the dinosaurs!

Editor’s note: For the purposes of transparency, the writer holds shares in Reuters which is why he doesn’t like seeing that news money left on the table. The manager of the SeeNews service once reported to the writer at Reuters, and ftm has a business relationship with the SeeNews publishers.)

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