Screen Test
Reuters CEO Tom Glocer wants to build an online broadcast network. Can the venerable newswire take on Fox and CNN?
By John Battelle

(Business 2.0) – During its formative days, Reuters was a relentlessly innovative company, using the best tech it could get its hands on to carry the news. Before the telegraph came along, it beat competitors by using carrier pigeons to send information about stock trades. But back in the 1980s, Reuters decided to wholesale its newsfeeds to Ted Turner—and watched CNN become a billion-dollar business. As broadband video blossoms on the Web, Reuters CEO Tom Glocer doesn't want his London-based company to make the same mistake twice.

In 2003, 10 years after joining Reuters's U.S. law department, Glocer worked his way to the corner office—the first American and first nonjournalist to helm the venerable company. He immediately restructured it into four customer-focused divisions, a move that's saving a billion dollars over five years and has sent the stock price up nearly 50 percent in the past year. What's more, he's managed to pull this off while sending hundreds of journalists to Iraq and losing some in the line of fire.

Now Glocer is shaking up Reuters's highly respected newswire business. Think of the newswire as wholesale; Glocer, in essence, is using the disruptive power of the Internet to get into retail. The move would have been unthinkable 20 years ago for reasons of both cost and culture. But Glocer has learned the hard way that you don't make much money selling your content to others. Successful media companies, he says, make their money either by creating branded products or by controlling distribution. Glocer recently sat down with Business 2.0 to explain how he plans to do both.

Despite the costs of the ongoing conflict in Iraq, your stock went on a tear in 2004.

The market sees Reuters as a classic recovery story. By the end of 2006, we will have taken $1.7 billion out of our costs since we started restructuring in 2000. Our core subscription revenues are still declining, but the Street is increasingly confident that we can return these to growth next year.

Last summer you pulled your news off Yahoo. Why?

For 153 years Reuters has run a wholesale media strategy. We produce raw text, video, and pictures and make it available to the world's publishers, who in turn slap their brand on it, develop brand loyalty, and aggregate an audience. Go back to 1980 and ask yourself, as I often do: Between Reuters and CNN, who had the greater assets and likelihood to launch an international news network?

Did Reuters consider competing with CNN back then?

I don't know. I wasn't there. But I do know that Ted Turner has said that they kept looking over their shoulder because they couldn't believe their luck. When they were starting out, they really were the Chicken Noodle Network. Reuters had bureaus in 200 places and a hell of a brand name. Who had ever heard of CNN? More recently, Reuters repeated the mistake—we were the wholesaler to Yahoo and others.

But this time you pulled out.

The only way you really make money in media is either to produce finished, branded content—a television show, a newspaper, whatever—or to own the means of distribution, like Comcast. If you can do both, like Time Warner, even better. We had neither. Our wholesale media business is nice, but it's $300 million a year and there's no growth. We grew to $6 billion in revenue on the backs of our financial services business, where we have a finished product and control the means of distribution—the 327,000 terminals we sell to subscribers.

The challenge now is, Do we have the opportunity to build a consumer franchise using broadband video?

I'm taken by the fact that during the most recent Iraq war, Fox's ratings were high but the BBC outdrew CNN in the U.S. during a certain period. Even in the U.S., there is unsatisfied demand.

Enough to build a business?

Here's the interesting economic question. There's no question Fox and others are brilliant at what they do. Fox understands that basically people want to watch news a bit like they do sport: We want to root for the home team. It's war as a grown-up sport, and Fox has always been good at sport. But there is a disaffected, smaller group who don't want that. Now, if I have to pay the cable networks for carriage ...

Those costs won't allow you to serve the niche.

Right. But online, if I can pick off 10 percent of the Americans who are disaffected and the Germans who I guarantee you don't even watch CNN, and aggregate an international audience serving up what only Reuters can provide ...

If this new Reuters offering doesn't look like CNN or Fox, what does it look like?

What you might have is something like "Inside the Reuters Newsroom." Every morning there are editors meeting in each bureau. Why can't we bring that experience to programming? We have 2,300 journalists around the world, and we need them just to support our wholesale media and financial services business. We have pretty much all the raw content, not the packaging skill and on-air talent. But you have to start and you have to experiment. I don't want my successor looking back in 10 years and saying, "What an idiot that Glocer guy was. He talked to people about how we missed CNN, but then, right under his eyes, a new paradigm was forming."

Won't this new project undermine the wholesale business?

For wholesale news, there really is only one other source, the Associated Press. We would lose some of the online business. But we've already pulled back from Yahoo.

Reuters has a certain technological lightness on its feet. In any given era, we've been good at not getting so sucked into the last generation that we get the innovator's dilemma. We were first to use satellites, first to use radio, first to go to the PC standard when everyone was still building their own terminals. I have seen a lot of the great names in the U.S. financial information business die off—Knight Ridder Information, dead; ADP, dead; Quotron, the granddaddy of them all, dead; Telerate, struggling—mostly because they failed to get onto a standards-based platform. Fast-forward to a live battle we've got with Bloomberg. It's got a proprietary messaging standard. I killed our project rivaling it and instead teamed up with Microsoft on an open standard.

What do you make of Google News, which is one of the largest news sites on the Web but employs no journalists?

We have a wonderful relationship with Google, because they get a feed of Reuters headlines, which their search engine pings, and then if you click the headline, you go back to Reuters.com.

You seem to be at peace with Google, unlike many in the media business. They fear that Google will make their websites less valuable as destinations.

I don't know any solution other than to play with the technology yourself. That's no guarantee that you'll survive, but it's sure a hell of a lot better than sticking your head in the sand and saying, "Oh, the problem doesn't exist because my content is unbelievably good."

How are things going in Iraq?

Nothing is as bad as the call that says, "Tom, I'm sorry, we've lost another one." And, unfortunately, at least two of the three people we've lost, and arguably the third one as well, have been at the hands of U.S. forces, due to friendly fire.

You have a dispute over a case in which some of your journalists were interrogated by the military in Iraq.

I have been to the Pentagon and spoken to [Secretary of Defense Donald] Rumsfeld's chief of staff. I take it at face value that they do not intentionally target journalists. My difference with them is over how hard do you try not to target them. Their stock answer is essentially, "You want to be safe, you embed." From a journalistic point of view, we refuse to do only that.