Black Fridays Ahead for Mainstream Media

Third quarter results were terrible in a bull market
Layoffs have to hit before the holidays

By Greg Michael

The Broad Street boys are mulling over a new memo warning that Philadelphia Media Holdings, new owners of the Philadelphia Inquirer and Daily News are threatening layoffs even if a new contract is signed by October 31, 2006.

The memo circulated around the newsroom. One employee e-mailed it to staffers a second time with a subject line with publisher Brian Tierney’s name and the line:

“Remember that guy who said he was about to start the next great era in journalism?” it reads. “He was full of shit.”

By Wednesday the fallout was raining down. “I’ve been besieged by members who feel outraged and betrayed that Brian Tierney has gone from ‘let’s work together’ to ‘let’s freeze the pension fund and selectively lay off some of our best people,’” says Newspaper Guild president Henry Holcomb.

The new owners are negotiating with the once powerful Newspaper Guild union with an Oct. 31 deadline for a new contract, after already pushing back the deadline once in August. The two sides still face numerous sticking points. But what leverage does the Guild have?

The new management has proposed combining some newsroom functions between the Daily News and the Inquirer, meaning some editorial employees would sometimes work for both newspapers.

The ego maniacs in Hollywood who are considering buying the LA Times from the Tribune, should study this situation in Philly very carefully.

While the LA Times tries to justify their huge sale price to the Tribune Company, and the execs try to make the huge acquisition work. The LA Times is using it’s own investigative reporters to help chart the future of the newspaper both online and in print.

According to the New York Times, the LA Times “is dedicating three investigative reporters and half a dozen editors to find ideas, at home and abroad, for re-engaging the reader, both in print and online.”

Editor-centric companies like this are doomed to failure. It’s not the newsgatherers who created the innovations that opened up Craigslist and Youtube. In fact, it’s not the editors who generated the 20 percent profit margins that newspaper monopolies once enjoyed.

The editors typically look down on the marketing and advertising staff for creating advertorials and special branded sections on travel, homes or automotive. Those in the editor class actually despise MBAs and tech geeks.

Based on horrible sales of several major newspaper chains in the third quarter, it appears that total automotive classified revenues for the year may tumble to as low as $4 billion, a level last seen in 1996.

Auto sales fell 15 percent to $1.8 billion in the first half of this year, as compared with $2.1 billion in the same period in 2005, according to the Newspaper Association of America, the industry-supported trade group.

Classified ads contributed nearly 40 percent of the industry’s $47.4 billion in print sales in 2005. Since the mid-90s, and the rise of such low- and no-cost Web competitors as Monster, eBay and Craigslist.org, the erosion has been swift.

The broadcast media is also losing power to the Web.
NBC announced it will shed up to 700 jobs — 5 percent of its workforce. The changes will be felt from Secaucus, N.J., where MSNBC will shutter its headquarters, to television sets around the country, which will soon begin tuning to game shows and reality programming in the 8 p.m. time slot. NBC said it plans to phase out costly dramas and comedies during the first hour of prime time.

It appears The Chicago Sun-Times, after being stripped of valuable downtown real estate, will be put on the block next. Were the buyouts (layoffs) at the Morning News and Plain Dealer enough to get them back to 20 percent profit margins?

Today, the new owners of the San Jose Mercury News (‘Lean’ Singleton, CEO of Media News Group/Garden State Newspapers, a privately held group of marginally profitable newspapers) announced layoffs.

From: [San Jose Mercury News publisher] Riggs, George
Sent: Friday, October 20, 2006 1:11 PM
To: ALL
Subject: Staff Reductions

October 20, 2006

Dear Colleagues

A few weeks ago, I wrote to everyone about the challenges our business faces, both over the past six years and going forward. Since then, our business outlook has worsened and we have completed our budgeting process. Given continued declines in revenue, we need to reduce expenses significantly, and thus have no alternative but to implement a reduction in work force.

We plan on eliminating 101 positions by December 19th. The process of identifying individual employees subject to layoff is not yet complete. Under California law, if an employer lays off fifty or more employees within a thirty day period, it is required to provide the affected employees with sixty days advance notice of the layoff. This is known as a “WARN notice.” Since our planned reduction involves more than fifty employees, we are providing employees who may potentially be affected with the required WARN notice. Please understand that employees who are potentially affected include all employees in those departments where layoffs are necessary. However, not every potentially affected employee receiving the notice will ultimately be subject to layoff. But in order to meet compliance requirements, notice will be given to a larger number than the 101 employees.

There are some things that could favorably impact layoff plans should they occur. Any significant upturn in advertising revenue would, of course, have an impact. We are seeking additional commercial print work, which would also increase revenues. We are working with our production unions (Pressmen, Mailers and Drivers) to be better positioned to accomplish this. Price reductions in newsprint have been rumored recently, and could lead to expense savings should they occur. Lastly, we have three open union contracts we are negotiating (Guild, Composing and Pressmen) and, depending on the outcome, they may also lead to further expense reductions. All of these could reduce the ultimate number of positions eliminated.

I understand the uncertainty these staffing cuts create for everyone, and deeply regret that we have to take this action. Please know that we would not do so unless it was absolutely necessary to ensure the future viability of our newspaper.

Sincerely,

George Riggs

Meanwhile, the Hearst’s San Francisco Chronicle is privately held and can afford to pay $1,000 a day in court fees for refusing to show sources in its Barry Bonds/BALCO case. That’s enough to pay for five staffers. And shows the power of being privately held. Another good example: The Poynter Institute which owns the St. Petersburg Times is hiring and happy with its profit margins even when they dip below that of oil companies. But there is much more to their success than just private ownership.

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27 thoughts on “Black Fridays Ahead for Mainstream Media

  1. There really is no ‘white knight’ ready to ride in and save failing newspapers. Their staffs have to “right-size” much more. Imagine paying for 400 employees that bring no revenue to the company and of that number only 10 or so are talented and popular with readers. Your average blogger writes more in their spare time than the run of the mill, union activist, esspresso sipping liberal reporter.

  2. See this column in AD AGE.
    Planes, Trains and Steamrollers: New-Media Juggernaut Powers On

    Old Media Delivers Signs of Its Own Demise

    By Scott Donaton

    Published: October 19, 2006

    SOMEWHERE OVER THE MIDWEST (AdAge.com) — I’m on a plane but feel like I’ve been hit by a train.

    The carry-on at my feet contains two books, five magazines and printouts of prep material for a panel I will moderate next week at the American Magazine Conference. It all appears a testament to the endurance of an “old” medium.

    The rate and nature of change across the world of media can even make a veteran change watcher dizzy at times.

    Deep breath
    On my lap are two newspapers (the Times and Journal) and one magazine (Rolling Stone). I’ve just put them down, closed my eyes and taken a deep breath. I feel dizzy.

    Why? Rather than try to explain it in my own words, I will instead offer up the headlines, sub-headlines and a couple of random sentences from the 10 stories I read in just the last half-hour. Ready?

    “Tower Records shuts its doors: Chain is liquidated after declaring bankruptcy.” Tower had been struggling since 2000, when CD sales started drying up.

    “Apple profit rises 27%; stock jumps.”

    “Music companies get a share of the YouTube sale.”

    “NBC Universal to slash costs in news, prime time: Unit aims to cut $750 million as it confronts new media; more spending on internet.”

    “Big advances in tiny screens: A new generation of portable media players is arriving.”

    “Why old media and Tom Cruise should worry about cheaper technology.”

    “‘Boston Globe’ doesn’t deliver for the ‘Times'” That brainy, well-heeled populace turns out to be on the leading edge of a digital migration.

    “A virtual world, but real money: Corporate marketers find much to like in a digital utopia.”

    “EBay reports that profit jumped 10% in quarter.”

    ” Income rises at Dow Jones; ‘Journal’s ads are weaker.” It was not a good quarter for the ‘Wall Street Journal,’ and that follows the trend of the industry.

    Ten stories, one storyline. And if you, like me, earn a paycheck in the media biz, you follow it every day.

    Might of the headlines
    I realize nothing else I write now could be as powerful as the combined might of those headlines. So I pull out my Blackberry, type out this column on its tiny keyboard and send it off for same-day publication on the website spun out of our print product 11 years ago.

    Now I’m going to put away the papers, power up my video iPod and watch “The Village.” Whether to get away from it all, or immerse myself more deeply, I’m no longer really sure.

  3. The truth aparently not being reported at Miami’s Spanish language newspaper.
    This just in from the Miami Herald:

    Miami police evacuated the The Miami Herald building this morning after a man claiming to be armed walked into the sixth-floor El Nuevo Herald newsroom and barricaded himself in the top editor’s office, police said.

    Employees identified the man as El Nuevo Herald cartoonist Jose Varela.

    They said Varela appeared agitated and demanded to see El Nuevo Herald’s executive editor, Humberto Castelló. He appeared to be armed with a handgun, employees said. El Nuevo Herald is a Spanish-language newspaper published by The Miami Herald Media Co.

    ”I thought it was a joke,” one employee said.

    Castelló told police that Varela apparently took over his office and trashed it, including a cartoon of the executive editor that Varela had drawn.

    While barricaded in the office, Varela twice telephoned Miami attorney Joe Garcia, who had represented him in a condominium dispute several months ago. Garcia said that Varela declared his motive is to take control of the newspaper. Garcia said Varela told him in Spanish that, “Now they’re going to have to deal with the truth.”

  4. Bush goes ballistic about other countries being evil and dangerous, because they have weapons of mass destruction. But, he insists on building up even a more deadly supply of nuclear arms right here in the US. What do you think? Is killing thousands of innocent civilians okay when you are doing a little government makeover?
    Our country is in debt until forever, we don’t have jobs, and we live in fear. We have invaded a country and been responsible for thousands of deaths.
    The more people that the government puts in jails, the safer we are told to think we are. The real terrorists are wherever they are, but they aren’t living in a country with bars on the windows. We are.

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