From $20 Million to $50,000 in 12 Months: APBnews.com’s Mark Sauter

APBnews.com–as in the old police call “All Points Bulletin”–seemed to have all the ingredients of a successful online news venture. The 18-month-old crime and justice news site assembled a veteran team of editors and reporters, including Sydney Schanberg, the Pulitzer Prize-winning reporter and former columnist for The New York Times and Newsday , as well as veterans of the Associated Press, The Washington Post , ABC News, the Bergen Record and the U.P.I., all of whom pride themselves on their hard-nosed, old-fashioned crime reporting.

APB had established a good reputation among stalwart journalism organizations; had built up an audience of over a million unique visitors per month; had secured distribution deals with Yahoo, MSNBC.com, Universal Press Syndicate, radio station WINS-AM; had put plans in place to expand into book publishing, television, radio.

In the end, though, what the crime site did not have was cash.

On Monday morning, June 5, with just $50,000 cash on hand and $7 million in liabilities, according to one source, APB’s management gathered its 140 employees and told them they were all fired, without severance, effective immediately.

“They probably did it at 9:30 in the morning,” said one staff member, “rather than at noon or that afternoon because then they would have owed a half-day’s pay.” Asked if the $50,000 figure was correct, chief operating officer Mark Sauter told Off the Record on Monday evening, “I don’t know if that’s true but it’s certainly within an order of magnitude. Let’s put it this way, I haven’t checked in the last two hours, but we’re out of money.” Of the $7 million in debts, he said, “We haven’t given out that number but I wouldn’t quibble with it.”

It was less than a year ago, in the summer of 1999, when APB closed a $20 million round of financing, in which the investors assumed at the time that APB was worth $100 million. Since then, including debts, the company managed to lose well over $2 million per month. Prior to that round, the company had raised $3.5 million in financing in September 1998.

After chief executive Marshall Davidson and Mr. Sauter fired all their employees, they then asked them to go back to work–without pay–while they continued to look for a “strategic partner” for the broke Web site. An APB spokesman said that probably three-quarters of the staff volunteered to continue.

One of those working for free was Mr. Schanberg, who was staying optimistic. “Spirits are good,” he said. This has not been the first time Mr. Schanberg has been part of newsroom laid off wholesale. He said the experience was not similar, however, to the closing of New York Newsday in 1995. “Times Mirror [which had recently bought the paper] was, how should I put it, an unpleasant employer,” he said. In comparison, Mr. Schanberg said management at APB was very encouraging of its editorial staff. “If we all have to leave, we’ll leave knowing that this was a good experience,” he said.

Attempts to find financing for the crime news site since March had been fruitless. “If it weren’t for bad luck we wouldn’t have had any luck at all in the corporate finance world in the last three months,” Mr. Sauter said. “We had more than one deal come within days of being done and fall apart, all for different reasons.”

One of those potential buyers was News Corporation, which owns Foxnews.com, among other media properties. According to a source familiar with negotiations, News Corp. came close to purchasing the site for $10 million plus the assumption of debts, a far cry from the $100 million valuation last summer and the $150 million number an APB source said management was hoping to get. The source said that it was APB that rejected the offer.

Mr. Sauter would not comment on any negotiations, except to say, “We have been chatting with some of the leading international media companies and hope to conclude a deal in the very near future.”

Another company with which APB is reported to be speaking is NBC and its Internet unit NBCi. APB currently has a distribution agreement with Snap.com, part of NBCi.

Attempts to keep APB a going concern lasted nearly until the announcement that APB had exhausted its funding. “We were negotiating up until the wee hours of [Monday] morning,” Mr. Sauter said.

The previous Friday, Mr. Sauter had sent out an e-mail to his staff informing them of the negotiations over the weekend and of Monday morning’s meeting. “There will be news,” Mr. Sauter wrote. He also told the staff that they would be receiving their pay–their last paycheck as it turned out– that Friday, a week early.

APBnews.com’s sensibility seemed closer to an idealistic J-school professor’s than a savvy Silicon Alley content developer’s, and had been widely accepted by mainstream journalism. For a new-media company, APB had always seemed old, and not just because of its–relative to other Internet businesses–graying newsroom, which, with its industrial carpet, fluorescent lighting and piles of disarrayed notes and papers–is dingy in a way only a newspaper newsroom can be. Near its entrance hang two framed but yellowed and tattered front pages from the 1930’s. One, an April 3, 1932 edition of the Arizona Daily Star , leads with “Gangland Power Outlined Before Senators.” It’s classic crime-reporting style. Important, dry, sensational, but not prurient.

When the site made its debut in November 1998, with live police scanner Webcasts as its calling-card feature, it looked like APB was going to be akin to Fox’s World’s Wildest Police Videos . Its motto was a Jack Webb-like “To Inform and Serve”; its edgy and dire green-text-on-black-background scheme indicated something grimy and active. Soon, though, APB found a more attitude-free A.P.-style voice, appropriate for its syndicators.

By the time the financial crunch came, the site was, if nothing else, earnest. The site’s editorial framework focused on breaking news (a dozen or so stories culled from its staff and a national network of stringers) and data-intensive projects that simply could not exist anywhere other than the Web. Its “APB-College Community Crimecheck” database included all 1,497 four-year colleges in the U.S. with block-by-block maps of crime-risk ratings, and reports of all campus crimes from both the school’s security and the F.B.I.

Its information attracted affirmation from old-line journalism organizations like Columbia journalism school, the Society of Professional Journalists and the Scripps-Howard Foundation. On Saturday, June 3, the site was given an award at the Investigative Reporters and Editors awards luncheon.

One former APB staff member pointed to a gap between the plan for APBnews.com and the site itself. Competing with CNN.com and MSNBC.com drained resources from larger projects, he said. “In 18 months there were what, maybe two dozen all told?” the staff member said. “There should have been one solid investigative narrative piece a week.”

In the end, though, the site was an editorial project waiting for a business to gel. APB had established a brand and increased its audience, linking with other Internet sites, but it had not focused on making money. Many of its syndication deals did not generate revenue, just drove back traffic to its site. The company made some money on advertising on its own site. Its e-commerce division–selling books, polo shirts, and police figurines–however, was still in a larval stage.

Mr. Sauter blamed April’s Internet stock crash for APB’s inability to raise money. “Up until April when the Nasdaq collapsed, the market was telling you to become an international multimedia company, the international ESPN of crime, justice and safety,” he said. “Then in a space of about 72 hours, the market’s message changed to, ‘what you really need to do is build a modest Web site that will achieve profitability in the near future.’ It’s sort of like driving a semi down a mountain road in Montana and, you know, having to brake to make a curve.

“You know,” Mr. Sauter said, “we missed the curve.” Then his phone line went dead.

Last Wednesday, May 31, a group of media goody-goodies–including George Gerbner, dean emeritus of the Annenberg School for Communication, Mark Crispin Miller, a professor at New York University and Robert McChesney, author of Rich Media, Poor Democracy –dashed off a letter to Bill Keller, the managing editor of The New York Times . They were protesting separate agreements made May 23 by The Wall Street Journal , The New York Times and The Washington Post with a publicist working for United Airlines and U.S. Airways. The flack gave each the story of the merger between the two airlines, along with access to company officials, in exchange for not calling up anyone outside the companies, such as industry analysts, consumer groups, or the pilot’s union–all of whom were critical of the deal in the days following–and not publishing the story on the papers’ Web sites until after midnight, May 24.

The agreement came to light primarily because the Financial Times , which wasn’t offered the scoop, broke the news on its own Web site before the Journal-Times-Post embargo expired. In its paper the next day, The New York Times then put a strange paragraph at the bottom of its merger story recounting the details of the embargo.

Perturbed at the revelation, Gary Ruskin, head of Washington, D.C.-based Commercial Alert, which opposes advertising in public spaces, organized the group. They wrote Mr. Keller: “By adopting such secret agreements, your newspaper basically tells the story the corporate subject wants you to tell, while pretending to be an objective news source. Other voices are excluded entirely from the discussion and debate, even though the corporate conduct in question may affect them personally and deeply.”

The group went on to ask whether The Times would consider making disclosure of any sort of agreements to not call outsiders standard practice.

Off the Record contacted Mr. Keller to see what he thought of this request. “It’s a legitimate issue, I think,” he said. All in all, Mr. Keller said that he doesn’t like accepting embargoes, especially when they include restrictions on whom his reporters can contact, such as in the United-US Airways story.

However, in a kind of off-the-cuff policy statement, Mr. Keller said, “I can imagine some situations where we might accept these kinds of conditions.” And in those instances, he said he would direct his editors and reporters to make sure “we supplied as much of the context as we could on the first day.” He added, “I think it’s fair to report in the story the manipulative conditions in which it was made available, and we follow-up with critics’ views.”

At The Wall Street Journal , managing editor Paul Steiger deferred to Dow Jones & Company spokesman Dick Tofel. When asked whether the Journal would consider disclosures for stories where it agreed to restrict its reporting, Mr. Tofel said, “The answer is no.”

“As a general policy, we don’t discuss our sourcing,” Mr. Tofel said, arguing that by dissecting how they get stories, the paper would get fewer sources. He added that since the vast majority of the Journal ‘s readers get the paper by subscription, they are therefore likely to read the second-day story with no restrictions. In that case, he said, “What people are getting is more sooner and the rest later.”