City Voice: Fallout Among Idealists
Fallout among idealists
A unique electronic news service has split into two rival businesses.
Simon Collins reports - the following report is republished with the permission of City Voice newspaper - its publication does not signify Scoop's acceptance of all its content. That said it is a fair appraisal of the reasons behind Scoop's beginnings.
NewsRoom was founded with high ideals.
The idea was simple.
Newsroom collected press releases and speeches from ministers, agencies, businesses and lobby groups, and distributed them both by selective emails to paying clients and by posting everything on a free public website.
The goals were noble.
Says Alastair Thompson: "Newsroom was a cooperative venture set up by four guys who had a dream about something that was going to make a difference from a political point of view D by publishing a very wide range of opinions independent of the mainstream media.
For two and a half years it did that, posting everything from prime ministerial speeches to Thompson's editorial blasts at Lambton Harbour or Bill Clinton.
It was watched.
By the end it averaged 15,000 page-hits a day, plus 100-200 subscribers for selected email news.
But the dream has ended abruptly.
On 28 May, two shareholders, Thompson and Andrew McNaughton, walked into their internet service provider Actrix and took away the personal computer that was Newsroom's server.
Thompson, McNaughton and a third shareholder, Ian Llewellyn, have started a new service, Scoop.
The remaining founder, Peter Fowler, has rebuilt Newsroom.
The two services are now direct competitors in a tiny market where, says collaborator David Nicholson, "There's not room for both of them."
Both leading protagonists are strong-minded individuals.
Radio journalist Peter Fowler organised the campaign against demolishing Broadcasting House in 1996-97.
Alastair Thompson, who edited the Federated Farmers paper Straight Furrow, published an expose of Lambton Harbour property deals in City Voice in 1996, and helped form the group Chaffers Park - Make It Happen! Fowler registered the internet site in Nov 1996 and, with help from Billy Naylor of Actrix, developed the software to run it.
In January 1997, Newsroom won a contract to help ex-TV journalist David Nicholson provide a news service for Clear's internet service provider, Clear Net.
With his income secured, Fowler asked Alastair Thompson to monitor TV3 and the Evening Post and cover the Reserve Bank.
Through Billy Naylor, they brought in software whiz Andrew McNaughton.
Ian Llewellyn, Greg Meylan and Auckland-based Brody Sinclair joined as journalists.
Peter Fowler's dedication was total.
David Nicholson says: "He's like a donkey - he can work 15 hours a day, seven days a week He has no social life.
Fowler says he paid himself only $1800 a month initially, and more recently $2700, while paying Ian Llewellyn $3700 a month.
Alastair Thompson was to earn $400 a month on top of his job at Straight Furrow, but agreed that his pay should go to Andrew McNaughton, who had been unemployed.
In Nov 1997, Thompson, Llewellyn and McNaughton took up 40% of Newsroom shares.
Peter Fowler kept the other 60%.
The company grew slowly, ultimately turning over $180,000 a year.
But, says Ian Llewellyn, the accounting was "loose".
He only saw one set of accounts.
Things started to go wrong after Federated Farmers sold Straight Furrow in Oct 1998 to Australian Rural Press.
Realising that his job there might go, Thompson talked to Fowler about paid work for Newsroom.
He was surprised when Fowler "decided that this was a great opportunity to suggest that I no longer write any stories about Iraq and the war.
"His reasoning was that it was not commercially orientated. He wanted me to write a series on Y2K."
Fowler says screen-based users want quick facts, not opinions.
In January, when Newsroom lost part of the Clear Net contract, Fowler told Thompson there was not enough money to pay him.
But Thompson insisted, saying the company had "some really good sales" in February and March, and "the expectation was that at that point we had enough money."
Thompson, McNaughton and Llewellyn felt too much was being spent on taxis and other expenses.
"It was petty stuff," says Llewellyn.
"We started to pressure Peter to produce some accounts so that we could make decisions," says Thompson.
But although sales were good, Fowler says there was a lag before the cash came in.
He says Thompson wanted Newsroom to either borrow in anticipation of that cashflow, or sack Brody Sinclair.
Thompson says his first preference was to fund his wage out of new email subscriptions.
"I offered to work on commission only to try and do some selling.
By early this year, Fowler says, he and Thompson were "arguing about everything"
In April, Fowler wanted to put in a quote to Radio NZ to subedit their news for the internet, and Thompson "ripped it off the fax machine".
"I was concerned that Peter was quoting for a Radio NZ job at a price which would have been impossible for us to service," says Thompson.
He says Fowler hadn't consulted the other shareholders about it.
At this point, Thompson rang Peter Fowler's brother Michael, a Hawke's Bay accountant who did Newsroom's books, and discovered for the first time that he, Llewellyn and McNaughton had never been formally appointed as directors.
All three felt betrayed.
Says Llewellyn: "We were lied to - about where the money was going, and if I was a director."
In May, Thompson took a part-time job in the Beehive writing speeches for John Luxton.
About the same time, Peter Fowler got lawyer John Tizard to write to the other three shareholders stating that Fowler was the sole director.
Then the "server" started going down at key times, such as when Fowler was about to file stories from the Reserve Bank.
Only Andrew McNaughton knew the password to get the system up.
Alastair Thompson says: "There was a hacker - we don't know if it was a coincidence or not."
Fowler acknowledged that the company owed McNaughton $1700 for two months' work.
But he paid him only $1000, and said McNaughton could have the rest only if he handed over the password.
The next day, 28 May, McNaughton and Thompson walked into Actrix and took the server.
Fowler went to Glazier Systems, and over Queen's Birthday weekend got a new system up.
He says he has kept all clients.
Thompson, Llewellyn and McNaughton have established Scoop, using McNaughton's software and with debenture finance from "someone with interests in the media industry".
At first, they worked from Alastair Thompson's Karori garden shed.
This week they moved into a Victoria St office.
Jonathan Hill, last year's editor of Salient, has been employed as a fulltime journalist.
The Scoop trio still own 40% of Newsroom.
On 14 June, Peter Fowler offered to buy them out with what he owes them in unpaid wages: $1000 for Llewellyn, $3400 for McNaughton and $4000 for Thompson.
Scoop has counter-offered informally to settle for $200,000 - $100,000 for Andrew McNaughton's software and around $40,000 each for their shares.
Both sides acknowledge that negotiation will be difficult because key agreements were never written down.
David Nicholson says the future for both Newsroom and Scoop is "fragile", with Ministerial Services now offering an email service for press releases directly.
"The internet is a business fraught with difficulties because the barriers to entry are extremely low," he says.
"What it comes down to is first in, first served.
Pictured: 1. Scoop's
founders and their garden shed, from left: Alastair
Thompson, Andrew McNaughton, Ian Llewellyn.
2. Happier days: Alastair Thompson (left) and Peter Fowler in 1997
(c) City Voice