Connor Tarter

The surprise media news of the day is that Andrew Rashbass has quit his job as CEO of Reuters Media to become executive chairman of UK business publisher Euromoney.

The news is surprising because Rashbass only joined Thomson Reuters in July 2013: he’s not even going to last two years at the company. But at the same time, it makes sense, from the point of view of a talented and ambitious media executive.

Rashbass joined Thomson Reuters at almost exactly the same time that Justin Smith joined Bloomberg. The hires were identical in many ways: they both found themselves with the same “media CEO” title, which had never existed before, and both men came from established magazine brands: Rashbass from the Economist and Smith from the Atlantic.

I always find companies with multiple CEOs to be a bit weird, but the media CEO job at Reuters and Bloomberg is weird even by those standards, because “media” is not really a well-defined business unit. So maybe it’s not really surprising that it didn’t work out.

There’s a pretty simple reason why it’s hard to be a media CEO at Reuters or Bloomberg, and that’s the newsroom. Both companies need a news operation to be at the heart of their financial-information terminal business, which is where the vast majority of the profits are always going to come from. Then, given that they’re employing thousands of journalists already, they have decided that they should probably try to monetize all that news beyond the core wire product.

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The problem is that the person put in charge of “media” is not really in charge of the newsroom, since the top priority of the newsroom is the terminal business, rather than the media business.

My first newswire job was in 1999, at a now-defunct wire called Bridge News. The bond desk was near the main copy desk, and every so often a bond reporter would stand up with a phone in her hand and loudly shout “COUPON PASS!” in the general direction of the copy desk, which would then rapidly put out a pre-written story about how the Federal Reserve was buying certain Treasury bonds in the open market. Why is this called a coupon pass? That doesn’t matter. What mattered — the only thing that mattered — was that our coupon pass story hit the wires before anybody else’s coupon pass story. If we got it first, we won. If we didn’t get it first, we lost.

If you’re looking at an organization’s journalistic output from the perspective of a media CEO, a coupon-pass story has exactly zero value. The journalists are expensive, and the news is valuable to the wire’s financial-industry clients (if they haven’t already gotten it from a rival wire service first), but no one in the real world is going to want to read that story, and neither is anybody going to want to buy advertising against it.

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So a natural conflict arises. The media CEO wants to create sexy brands and media properties that normal people will flock to. Otherwise, the media business won’t make any money. But the newsroom isn’t producing that kind of output. And the CEO can’t simply refashion the newsroom so that it stops producing coupon pass stories and starts producing sexy media properties, because the true people in charge of what the newsroom does are the terminal people, not the media people. And for all that the media CEO has that grand CEO title, he still hasn’t been put in charge of the terminal people who make all the money.

The result is that the media CEO is, almost by definition, marginal. At Bloomberg, where there’s lots of money, the CEO’s job is to intelligently spend money at the margins, on things like Businessweek or the TV channel or Bloomberg Pursuits magazine or the Bloomberg.com website, so as to increase Bloomberg’s general influence and brand recognition. Ideally, much of that money will come back in the form of advertising dollars, as the Bloomberg brand becomes increasingly valuable and something advertisers want to associate themselves with.

At Reuters, the CEO’s job is tougher, because there’s less money to spend. Rashbass was brought in because he’s an effective cost-cutter, and indeed his first major decision was to cut the ambitious new website that a large team of people (including myself) had spent about 2 years and more than $10 million developing. While the website was really good, it was never going to be a profit center, and so killing it was immediately accretive to Rashbass’s bottom line. Under the ownership of the Thomson family, it’s the bottom line which matters, not the fact that only 42% of Americans even know what Reuters is.

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So while it might seem that the media CEO is in charge of the newsroom, in reality he has very little leeway to meddle with the core of what the newsroom does. And yet, at least at Reuters, all of the costs associated with the newsroom — and we’re talking hundreds of millions of dollars per year — are attributed to the media business. The media CEO has all of the costs of those coupon-pass reporters, and gets no benefit from them, and has no real ability to alter what those reporters do. It’s a thankless job.

In any organization, power tends to reside in close proximity to where the profits are. At Reuters and Bloomberg, that means the terminal business. And for all that the CEO title sounds very impressive, neither Rashbass nor Smith is responsible for meaningful profits in the context of the size of the larger organization. There’s no real power there.

At Euromoney, by contrast, Rashbass’s situation is going to be reversed. If wires have a boring-but-profitable terminal business and a sexy-but-unprofitable media business, then the Daily Mail and General Trust (DMGT) has a boring-but-profitable B2B business and a sexy-but-unprofitable consumer business. The sexy business is the Daily Mail, and especially the Mail’s massive website. The money, on the other hand, comes from Euromoney, where Rashbass is going to take over.

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Euromoney has a vast range of businesses, and it’s also listed on the London Stock Exchange, which gives it a handy acquisition currency. (And boy is Euromoney acquisitive: in many ways, it exists as the DMGT’s acquisition vehicle.) Running Euromoney is a varied and difficult job, but there are also a lot of profits there. Rashbass, as a result, is going to find himself wielding real power — much more than he did at Reuters. He’ll also get to do what he’s best at, which is improve profits by cutting costs. (The canonical example of this is Institutional Investor magazine, which Euromoney bought in 1997 from Capital Cities / ABC. Euromoney kept the hugely valuable brand, but happily slashed the editorial staff, since most of them were just getting in the way of profitability.)

Euromoney has big challenges (the consolidation of the banking industry, the low value of digital ads), and it also has huge opportunities, mainly in emerging markets. Rashbass can and surely will make a big difference there — while his tenure at Reuters will probably barely be remembered, except, of course, by those of us worked at the ill-fated Reuters Next.

Thomson Reuters CEO Jim Smith hasn’t learned his lesson: he’s already said that he’s looking to replace Rashbass with someone else who can “further integrate and monetize our news and media business.” The problem is that no one — least of all Jim Smith himself — really knows what that means.

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Where, then, does this leave Justin Smith? If the media CEO job is an impossible one at Reuters, is it any more possible at Bloomberg? There, the answer is simpler. Indeed, it comes down to two words: Mike Bloomberg. So long as the owner feels as though he’s getting value out of Smith, things will be fine. But if Bloomberg starts getting frustrated about not seeing a financial return on his media investments, then Smith’s days will surely be numbered. At Bloomberg, just like at Reuters, the CEO title ultimately means nothing if you’re not producing actual profits.