Publisher shutters websites after journalists unionize

A week ago, employees at the Gothamist and DNAinfo were celebrating after a successful vote to join the Writers Guild.  The Gothamist is a noted New York City website devoted to covering local news.  It operates affiliated sites in Washington, D.C.; Chicago; Los Angeles; and San Francisco.

The reporters' celebration was short-lived.  Yesterday, the publisher of the Gothamist and its parent website, DNAinfo, informed all employees that he was shutting them down.

Joe Ricketts, who founded Ameritrade, made the announcement in an email.


"Today, I've made the difficult decision to discontinue publishing DNAinfo and Gothamist. Reaching this decision wasn't easy, and it wasn't one I made lightly," said Ricketts, who founded TD Ameritrade and is worth a little more than $2 billion according to Forbes.

He added that DNAinfo, which was founded in 2009, "is, at the end of the day, a business, and businesses need to be economically successful if they are to endure."

"And while we made important progress toward building DNAinfo into a successful business, in the end, that progress hasn't been sufficient to support the tremendous effort and expense needed to produce the type of journalism on which the company was founded. I want to thank our readers for their support and loyalty through the years. And I want to thank our employees for their tireless effort and dedication."

Ricketts made the reason for his action brutally clear:

"I believe unions promote a corrosive us-against-them dynamic that destroys the esprit de corps businesses need to succeed," he wrote. "And that corrosive dynamic makes no sense in my mind where an entrepreneur is staking his capital on a business that is providing jobs and promoting innovation."

And the reaction of employees?

"It was literally like the daily flow of the newsroom came to a screeching halt," said Scott Heins, a photojournalist at Gothamist. "It was just an absolutely normal day at the office and then someone said 'oh my god the email' and then everyone checked their work email. Some of my colleagues burst into tears really quickly, others shouted. It was immediate shock when we got the email."

Rachel Holliday Smith, a reporter for DNAinfo who covered the Brooklyn neighborhood of Crown Heights, told CNNMoney that Ricketts' decision will hurt "all New Yorkers who care about news in their cities and neighborhoods."

"I've been getting a lot of messages of support from readers thanking me for my coverage, which is heartbreaking because I truly don't know now who will provide thorough, on-the-ground reporting in large swaths of the city, as we did," Smith said. "There are so many people whose stories were told by DNAinfo and Gothamist. Those voices have been snuffed out. I say this often but it's worth repeating: support local journalism in any way you can."

The question isn't whether Ricketts was justified in pulling the plug.  The question is why employees thought the outcome would be at all different.

Many unions in 21st-century America offer a fantasy.  Simple arithmetic would show even the dumbest worker that the dream doesn't add up and that reality wins in the end.  The best example of that is the drive for a $15-an-hour minimum wage.  When you disconnect the cost of labor from the value of labor, the numbers don't add up, and companies end up losing money or, at best, dramatically reducing profits.  In the real world, radically increasing the cost of labor means increasing the price of the products sold.  In the case of fast food restaurants, that means a reduction  in traffic, leading to fewer customers and less profit.

But organized labor has sold the idea that there are no consequences to raising the minimum wage to $15 an hour.  We are already seeing franchises moving rapidly to automate their operations as much as possible and reduce the number of employees – leading to job losses and, just as importantly, fewer jobs created.

The Gothamist employees are shocked, shocked, I say, to find out that a news website doesn't make money, and even a billionaire can tolerate losing only so much money before throwing in the towel.  Unionizing also brings other headaches that are intolerable to management unless they are gluttons for punishment. 

The writing was on the wall for these employees, but they were blinded by their own delusions and naïveté.