May 27, 2024

The Media Equation: In Boston, CNN Stumbles in Rush to Break News

It’s a common impulse, although less common than it used to be. The news audience has been chopped up into ideological camps, and CNN’s middle way has been clobbered in the ratings. The legacy networks’ news divisions can still flex powerful muscles on big stories, and Twitter and other real-time social media sites have seduced a whole new cohort of news consumers.

But the biggest damage to CNN has been self-inflicted — never more so than in June, when in a rush to be first, it came running out of the Supreme Court saying that President Obama’s health care law had been overturned. It was a hugely embarrassing error.

Still, when big news breaks, we instinctively look to CNN. We want CNN to be good, to be worthy of its moment. That impulse took a beating last week. On Wednesday at 1:45 p.m., the correspondent John King reported that a suspect had been arrested. It was a big scoop that turned out to be false.

Mr. King, a good reporter in possession of a bad set of facts, was joined by The Associated Press, Fox News, The Boston Globe and others, but the stumble could not have come at a worse time for CNN. When viewers arrived in droves — the audience tripled to 1.05 million, from 365,000 the week before, according to Nielsen ratings supplied by Horizon Media — CNN failed in its core mission.

It was not the worst mistake of the week — The New York Post all but fingered two innocent men in a front-page picture — but it was a signature error for a live news channel.

CNN has been in the middle of a rehabilitation ever since Jeff Zucker was appointed at the end of last year to run CNN Worldwide. Until now, the defining story in the Zucker era had been a doomed cruise ship that lost power and was towed to port, where its beleaguered passengers dispersed. This week, CNN seemed a lot like that ship.

It’s clear after a busy week that Mr. Zucker can hire all the talent he wants, broaden the scope of their coverage and freshen the look of the joint, but if the network continues to whiff on the big stories, all of that will be for naught. Two people I spoke to at the network, which featured a lot of good work and tireless reporting when it wasn’t getting it wrong, called the error “devastating.”

Twitter and commentators vibrated with umbrage — “Breaking News Is Broken” suggested a headline on Slate — all asking some version of how can this keep happening.

Here’s how: As a general practice, wall-to-wall live television reporting is perilous. Maybe instead of the constant images of police tape, television news should frame their own coverage with a virtual version, indicating that viewers proceed at their own risk.

Despite the suggestion otherwise, people who are on the air talking about the news cannot report while they are doing it. Producers make hundreds of decisions on the fly. The incrementalism and vamping required to fill the hours — “Again, as we have been saying, Anderson … ” — makes everyone desperate to say anything vaguely new.

Throughout the week, I saw anchors and reporters staring at their phones, hoping a new nugget might arrive to give them something to say. (Memo to television executives everywhere: news is a better product when presenters look at the camera.) And the live environment means that at a certain point, the bosses have to quit shouting into the ear piece, trusting their staff and crossing their fingers.

Several people involved in reporting the Boston bombing case said the story presented particular challenges. In a large-scale assault on public safety, the audience wants to know everything, right this second. Yes, they want you to be accurate, but the implicit promise of a 24-hour news service is that it will happen quickly.

The pressure to produce is ratcheted up accordingly. Editors and producers begin leaning on their reporters, and they, in turn, end up in the business of wish fulfillment, working hard to satisfy their audience, and meeting the expectations of their bosses. It creates a system in which bad reporting can thrive and dominoes can quickly fall the wrong way.

In the instance of the Boston story, the scope of the crime, the number of victims and the fact that it smacked of terror on American shores provoked a vast law enforcement response at the federal and local level. A multiagency array of command centers and responsibilities created a target-rich environment for reporters. But it also created an unwieldy patchwork of sources, all operating in the fog of war, albeit a domestic one.


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DealBook: Ex-Brokers Say JPMorgan Favored Selling Bank’s Own Funds Over Others

Given what the customer is paying, they should be getting a lot more performance for their money, said Geoffrey Tomes, who left JPMorgan in 2011.Librado Romero/The New York Times“Given what the customer is paying, they should be getting a lot more performance for their money,” said Geoffrey Tomes, who left JPMorgan in 2011.

Facing a slump after the financial crisis, JPMorgan Chase turned to ordinary investors to make up for the lost profit.

But as the bank became one of the nation’s largest mutual fund managers, some current and former brokers say it emphasized its sales over clients’ needs.

These financial advisers say they were encouraged, at times, to favor JPMorgan’s own products even when competitors had better-performing or cheaper options. With one crucial offering, the bank exaggerated the returns of what it was selling in marketing materials, according to JPMorgan documents reviewed by The New York Times.

The benefit to JPMorgan is clear. The more money investors plow into the bank’s funds, the more fees it collects for managing them. The aggressive sales push has allowed JPMorgan to buck an industry trend. Amid the market volatility, ordinary investors are leaving stock funds in droves.

In contrast, JPMorgan is gathering assets in its stock funds at a rapid rate, despite having only a small group of top-performing mutual funds that are run by portfolio managers. Over the last three years, roughly 42 percent of its funds failed to beat the average performance of funds that make similar investments, according to Morningstar, a fund researcher.

“I was selling JPMorgan funds that often had weak performance records, and I was doing it for no other reason than to enrich the firm,” said Geoffrey Tomes, who left JPMorgan last year and is now an adviser at Urso Investment Management. “I couldn’t call myself objective.”

JPMorgan, with its army of financial advisers and nearly $160 billion in fund assets, is not the only bank to build an advisory business that caters to mom and pop investors. Morgan Stanley and UBS have redoubled their efforts, drawn by steadier returns than those on trading desks.

But JPMorgan has taken a different tack by focusing on selling funds that it creates. It is a controversial practice, and many companies have backed away from offering their own funds because of the perceived conflicts.

Morgan Stanley and Citigroup have largely exited the business. Last year, JPMorgan was the only bank among the 10 largest fund companies, according to the research firm Strategic Insights.

“It said financial adviser on my business card, but that’s not what JPMorgan actually let me be,” said Mathew Goldberg, a former broker who now works at the Manhattan Wealth Management Group. “I had to be a salesman even if what I was selling wasn’t that great.”

JPMorgan has previously run into trouble for pushing its own funds. In a 2011 arbitration case, it was ordered to pay $373 million for favoring its products, despite an agreement to sell alternatives from American Century.

JPMorgan defends its strategy, saying it has “in-house expertise,” and customers want access to proprietary funds. “We always place our clients first in every decision,” said Melissa Shuffield, a bank spokeswoman. She said advisers from other companies accounted for a large percentage of the sales of JPMorgan funds.

At first, JPMorgan’s chief, Jamie Dimon, balked at the idea of pushing the bank’s investments, according to two company executives who spoke on the condition of anonymity because the discussions were not public. Several years ago, Mr. Dimon wanted to allow brokers to sell a range of products and move away from its own funds. Jes Staley, then the head of asset management, argued that the company should emphasize proprietary funds. They compromised, building out the fund group while allowing brokers to sell outside products.

Now, JPMorgan is devoting more resources to the business, even as other parts of the bank are shrinking. Since 2008, JPMorgan has added hundreds of brokers in its branches, bringing its total to roughly 3,100. At the core of JPMorgan’s push are products like the Chase Strategic Portfolio. The investment combines roughly 15 mutual funds, some developed by JPMorgan and some not. It is intended to offer ordinary investors holdings in stocks and bonds, with six main models that vary the level of risk.

The product has been a boon for JPMorgan. Begun four years ago, the Chase Strategic Portfolio has roughly $20 billion in assets, according to internal documents reviewed by The Times.

Off the top, the bank levies an annual fee as high as 1.6 percent of assets in the Chase Strategic Portfolio. An independent financial planner who caters to ordinary investors generally charges 1 percent to manage assets.

The bank also earns a fee on the underlying JPMorgan funds. When Neuberger Berman bundles funds, it typically waives expenses on its own funds.

Given the level of fees, one worry is that JPMorgan may recommend internal funds for profit reasons rather than client needs. “There is a real concern about conflicts of interest,” said Andrew Metrick, a professor at the Yale School of Management.

There is also concern that investors may not have a clear sense of what they are buying. While traditional mutual funds update their returns daily, marketing documents for the Chase Strategic Portfolio highlight theoretical returns. The real performance, provided to The Times by JPMorgan, is much weaker.

Marketing materials for the balanced portfolio show a hypothetical annual return of 15.39 percent after fees for three years through March 31. Those returns beat a JPMorgan-created benchmark, or standard of comparison, by 0.73 percentage point a year.

The actual return was 13.87 percent a year, trailing the hypothetical performance and the benchmark. All four models with three-year records were lower than the hypothetical performance and the benchmarks.

JPMorgan says the models in the Chase Strategic Portfolio, after fees, gained 11 to 19 percent a year on average since 2009. “Objectively this is a competitive return,” said Ms. Shuffield.

The bank said it did not provide actual results for the investment models in the Chase Strategic Portfolio because it was standard practice in the industry to wait until all the parts of the portfolio had a three-year return before citing performance in marketing materials. She said the bank was preparing to put actual returns in the materials.

Regulators tend to discourage the use of hypothetical returns. “Regulators frown on using hypothetical returns because they are typically very sunny,” said Michael S. Caccese, a lawyer for KL Gates.

While brokers do not receive extra bonuses or commissions on the Chase Strategic Portfolio, some advisers said they had felt pressure to recommend such internal products as part of the intense sales culture. A supervisor in a New Jersey branch recently sent a congratulatory note with the header “KABOOM” to an adviser who had persuaded a client to put $75,000 into the Chase Strategic Portfolio. “Nice to know someone is taking advantage of the best selling day of the week!” he wrote.

JPMorgan also circulates a list of brokers whose clients collectively have with the largest amounts in the Chase Strategic Portfolio. Top advisers have nearly $200 million of assets in the program.

“It was all about the money, not the client,” said Warren Rockmacher, a broker who recently left the company. He said that if he did not persuade a customer to invest in the Chase Strategic Portfolio, a manager would ask him why he had selected something else.

Cheryl Gold said she got the hard sell when she stopped by her local Chase branch in New York last year and an adviser approached her about the Chase Strategic Portfolio.

“They pitched this product to me, and I just laughed,” said Ms. Gold. “I saw it as a way for them to make money at my expense.”

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Apple’s Profit Doubled on Holiday Customers Snapping Up iPhones

The company reported on Tuesday that its profit for the holiday quarter more than doubled. And that was largely thanks to sales of the iPhone 4S, which, when it was introduced in October, was greeted with grumbling from pundits and some users for lacking the razzle-dazzle that many imagined an iPhone 5 would bring.

But consumers still came out in droves to buy the iPhone 4S, helping the company sell more than double the number of iPhones for the quarter ending Dec. 31 than it did a year ago, a figure that was also lifted by sales of cheap, older models of Apple’s cellphone.

With the 37 million iPhones that customers snapped up over the holidays, Apple has sold 183 million of the devices since the product went on sale in 2007. Underscoring the transformation of the company, revenue from the iPhone and iPad — neither of which could be bought five years ago — now accounts for 72 percent of Apple’s total revenue.

And although phones based on Google’s Android operating system had been gaining more customers in recent years, Apple has begun to chip away at some of the advantages of these phones, narrowing Android’s lead in the United States over the holidays.

In a conference call with Wall Street analysts, Timothy D. Cook, Apple’s chief executive, described the customer response to the new iPhone as “breathtaking” and said the company could not meet global demand for the device despite producing a record number of iPhones. “As it turns out, we didn’t bet high enough,” Mr. Cook said.

The supporting act in Apple’s product lineup — the iPad — also had a record quarter, with the company selling 15.4 million of its tablet devices over the holidays, more than double the number it sold during the same period the year before.

After watching competitors stumble for the last two years, Apple faced its first credible competition in the tablet computer category this fall when Amazon introduced the Kindle Fire. The $199 device from the Internet retailer is significantly cheaper than the $499 starting price for the iPad and is closely linked to various Amazon online offerings including its e-book store, movie and music services.

Mr. Cook said Apple’s iPad sales were not hurt by Amazon’s Kindle products, which have less computing power and are missing features like cameras for now. “Customers will buy those and they’ll sell a fair number of units,” he said. “But I don’t think people who want iPads will settle for limited functions.”

The rosy results sent Apple shares soaring more than 7 percent in after-hours trading to more than $450 each. The jump increased the total value of Apple’s shares to more than $426 billion, pushing its market value past that of Exxon Mobil and making it the most highly valued company.

Apple, which is based in Cupertino, Calif., said its net income for the period rose 118 percent to $13.06 billion, or $13.87 a share, compared with net income of $6 billion, or $6.43 a share, a year earlier. Revenue rose 73 percent to $46.33 billion, from $26.74 billion a year ago. Apple’s results were inflated slightly because its 2011 holiday quarter included 14 weeks of sales, rather than the 13 weeks in 2010, because of a change by the company.

The results were better than the $10.08 a share in earnings and $38.85 billion in revenue expected by analysts, according to a survey by Thomson Reuters. Apple had forecast earnings of $9.30 a share and $37 billion for the quarter.

“It almost defies words in terms of the strength across all products,” said Toni Sacconaghi, an analyst at Sanford C. Bernstein Company. “Everything about it eclipsed even the wildest expectations of analysts.” 

Apple said it sold 5.2 million Macintoshes during the holiday quarter, 26 percent more than it did a year earlier.

The performance of Apple’s iPhone business underscores how the company has thrived in the mobile phone market, even as Google steadily nibbled away at the iPhone’s share of smartphones in recent years with handsets based on the Android operating system.

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U.S. Jobless Claims Increased by Striking Verizon Workers

Initial claims for state unemployment benefits rose 5,000 to a seasonally adjusted 417,000, the Labor Department said. Analysts see 400,000 as the level where the economy is creating net new jobs.

Striking Verizon workers filed 8,500 claims for jobless benefits last week, after submitting 12,500 applications the previous week, which covered the period for the August nonfarm payrolls survey.

That suggests that the strike would reduce the monthly payroll count, which will be reported on Sept. 2. The strike against Verizon ended on Monday.

Economists polled by Reuters had forecast claims would be 405,000 last week. The previous week’s claims were revised up to 412,000 from the previously reported 408,000.

The claims showed little sign that companies were laying off workers in droves in response to the recent tumble in share prices. Fears that the economy is on the brink of slipping back into recession have rattled stock markets, helping to lower business and consumer confidence.

While the labor market regained some ground in July, a new wave of layoffs, coupled with the deterioration in business sentiment, could reverse the trend in the months ahead.

Employers added 117,000 jobs in July after increasing payrolls by only 99,000 in May and June combined. The unemployment rate fell to 9.1 percent in July from 9.2 percent in June.

A Labor Department official said there was nothing unusual in the state-level data released Thursday. The four-week moving average of claims, considered a better measure of labor market trends, rose 4,000 to 407,500.

The number of people still receiving benefits under regular state programs after an initial week of aid fell 80,000, to 3.64 million, in the week ended Aug. 13.

The number of Americans on emergency unemployment benefits fell 43,827, to 3.09 million, in the week ended Aug. 6, the latest week for which data is available.

A total of 7.29 million people were claiming unemployment benefits during that period under all programs, down from 45,989 the previous week.

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