These are challenging times for journalism, and I’m not even talking about President Trump deriding great media organizations like the New York Times as “fake news” and “enemies of the people.” As you doubtless know, journalism companies are still working through a long, painful repositioning to convince readers and viewers that they should pay for the news we produce. As revenue models shift from advertisers to subscribers, the media business is increasingly preoccupied with selling access to valuable information.
Against that background, I’m troubled by a decision last week from New York State Supreme Court Justice Carol Edmead. Justice Edmead ruled that the financial news outfit Reorg Research must disclose its confidential sources for a story about the privately held coal company Murray Energy. The judge rejected Reorg’s arguments that it is entitled to protect the identity of its sources under New York’s exceptionally potent shield law for journalists, holding that Reorg is not covered by the shield law because it sells its news to a relatively small number of financial professionals who pay between $30,000 and $120,000 a year for subscriptions and are prohibited in subscriber agreements from republishing Reorg’s stories.
The very essence of Reorg’s business model, Justice Edmead said, is to persuade distressed debt investors – she calls them “vulture funds” – that they need access to Reorg’s very expensive news and analysis to stay ahead (or at least abreast) of their market competitors. That mission, she said, is not what New York lawmakers had in mind when they enacted the state’s shield law to protect the public’s interest in a free press. According to her, Reorg failed to explain how the public benefits when vulture funds gain an informational edge on the rest of the market. In fact, she said, “The press would not be better protected by an extension of its freedoms to companies, like Reorg, that do not carry out the vital function of informing the public.”
As you can see, the essential question in the Reorg case is defining whether news is available to the public when readers have to subscribe to see it. I’ll admit to a vested interest in the answer to that question. Some of my stories appear only behind a paywall restricting access to certain Westlaw subscribers. Are my Westlaw stories outside the protection of the New York shield law? What about my stories published on the Reuters newswire, which is seen by Reuters subscribers before stories become available to everyone else?
Justice Edmead shrugged off any comparison between Reorg and traditional subscriber-based news publishers like the New York Times and the Wall Street Journal. Those publications don’t charge tens of thousands of dollars for subscriptions, she said, and their stories become part of the public record so “members of the general public benefit from these newspapers, whether they have a subscription or not.”
But if you read the affidavit from former Wall Street Journal editor and ProPublica founder Paul Steiger, who appeared as a journalism expert for Reorg, you’ll see that the news business is more complicated than Justice Edmead would have it. News organizations charge different prices for different levels of access, often depending on the depth of the information they are providing. Bloomberg, for instance, charges subscribers thousands of dollars a year for its terminals, which publish news to subscribers before stories are available to non-subscribers, Steiger said. Reorg similarly targets financial subscribers willing to pay a lot for access, just in a narrower niche.
“Clearly, dissemination comes both in many different forms and at many different prices: video, audio, text; desktop, laptop, handheld; free, cheap, expensive, very expensive,” Steiger said. “The variety is so great, it seems hard to swallow a contention to exclude Reorg Research based either on its price or on its effort to lengthen the time its scoops remain exclusive, which, as mentioned above, is hardly unique.”
So where is the line between subscriber-only journalism covered by the New York shield law and unprotected news? Murray Energy lawyer Leonard Marsico of McGuireWoods told me in an interview Friday that Reorg just isn’t a journalism operation. “The whole value of its information does not exist if it is available to the public,” Marsico said. “The whole concept is keeping information from the public.” The cost of Reorg subscriptions, the limited pool of financial professionals Reorg sells to and the service’s prohibition on distributing news beyond its subscriber base all distinguish Reorg from news organizations protected by the shield law.
I asked Marsico about how my Westlaw stories - and other journalism published behind subscriber paywalls – would fare under Justice Edmead’s analysis. He said that it depends on whether members of the public are permitted and financially able to subscribe. “If the subscription service is open to the public, it’s protected,” he said. “If it is prohibitively expensive, available only to multimillion-dollar investors, then it is not public.” It’s entirely possible, he said, that the shield law may protect one publication from a news organization but not cover a different product from the same company – even the same journalist. (Precedent on the First Amendment rights of the credit rating agencies backs Marisco on this point: State and federal judges have ruled that agencies like Standard & Poor, Moody’s and Fitch are akin to news organizations when their securities ratings are published but not when they are privately distributed to clients or a small group of investors.)
Marsico allowed that the reach of the shield law is “a gray area,” but he said the uncertainty goes both ways. Plenty of people obtain and distribute confidential information. Many of them are not journalists. “There has to be a limit,” Marsico said. “Not everyone is entitled to the shield law.”
I’m not convinced Reorg is as different from traditional news companies as Marsico and Justice Edmead portray it to be. Justice Edmead, for instance, mentioned several times that Reorg has only 347 subscribers. But the company’s founder, Kent Collier, said in an affidavit in the Murray Energy litigation that many of the subscribers are institutions that allow lots of people access to Reorg reports. So those 347 subscriptions add up to about 9,000 readers. The Murray Energy story, for instance, went out to nearly 6,000 readers – more than the circulation of many local newspapers and niche publications.
Reorg’s subscriber base isn’t just rich hedge-fund moguls, either. Investment banks and law firms also subscribe – and yes, they’re rich too, but lots of niche publications target those groups as subscribers. I worked for nearly a quarter-century at The American Lawyer, which derived half of its revenue from subscribers – mostly big, wealthy law firms - long before that model became a necessity for broader-based publications. I’d like to see anyone tell my old boss, the legendary journalist Steve Brill, that the work we produced at AmLaw wasn’t journalism because many of our subscribers were rich lawyers.
I don’t want to get carried away about the implications of the Reorg ruling. Justice Edmead is one judge in one state. Reorg and its outside counsel from Lowenstein Sandler and Davis Wright Tremaine are appealing her decision to the New York State Appellate Division, First Department.
But every chip knocked out of the firmament of journalism matters. If Murray Energy – which has a history of suing financial news publishers such as Mergermarket and Bloomberg – can squelch coverage by suing to expose confidential sources, what’s to stop other companies from using the same strategy against subscriber-based news outlets? At the very least, corporations can scare confidential sources out of talking to reporters and can saddle publishers with legal costs, even if there’s no doubt about the truth of the stories they put out.
That’s the last thing the news business – and its consumers – needs.