Saturday, September 06, 2008

Calibration

These data from the Newspaper Assocation of America show that newspaper revenues have dropped $13.4 billion since 2003. Allen Mutter says they dropped $3 billion in the first six months of this year.

The aggregate data don't reflect McClatchy's performance precisely; for example, our online revenues are growing robustly, which apparently isn't true everywhere. But it's obvious that the whole industry is in recession, and we're hurting, too.

I mention this to suggest that you consider the scale of the problem before blaming it all on Gary (or, worse yet, me). We've made some mistakes and haven't done everything right, but the serious financial situation that mandates layoffs and expense reductions is way bigger than us.

Right now, the issue is ad revenue decline. We know we're never going back to the days I've referred to as Fat, Dumb & Happy, but we don't need to. Our company is already considerably more efficient than it was then and becoming more so, so our operating costs are falling. If revenue can stabilize, we'll be able to operate healthy news organizations without the continued threat of further cutbacks.

And when will they stabilize? Nobody knows, and signals are still mixed. But they will, and our job is to get from here to there, and then start building.

18 comments:

  1. Anonymous6:40 PM

    This is truly a lame post, Howard. The “whole industry” is not in a recession. Take a look at the Wall Street Journal, whose owner News Corporation reported a 59 percent increase in annual profits, from $3.4 billion to $5.4 billion. For the last quarter, profits were up 21 percent.
    If Rupert Murdoch can do it, why can’t Gary Pruitt and Howard Weaver? The Wall Street Journal, Rupert’s latest purchase, is even hiring. I know what you are going to say that Murdoch is diversified, but my point is McClatchy would not be facing the problems if it also had chosen to be diversified instead of taking a roll of the dice it did with KRI.
    So enough of peddling the whole world sucks, so we are doing okay line. It is not intellectually honest. The problem is leadership.

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  2. Anonymous9:34 PM

    Working for the Modesto Bee the last 20 years, I have noticed it has always run in the black, or so I've been told. The employees in general have been proud to work there, and they have taken care of YOU, Gary and the rest. (How did you get those big pay checks anyway?) We have worked hard to produce an award winning product both in content AND in quality of reproduction. You have served the Community of Modesto well in the past.
    The McClatchy debt grew due to what many within the company and outside the company perceive as poor investment choices, and some have even called greed in that McClatchy Co. wanted to be No.1 and couldn't be happy with being No.3. The debt shows no sign of easing, it appears to most that the top execs. are grasping at straws, and many of us on the nuts and bolts end have ideas that could save the company money without sacrificing so many jobs, but you won't listen. It now appears you are telling the Modesto Bee market that you could care less about them, and if you really want to read the Bee, go on line to Modbee.com. This is from actual conversations I have had with at least 25 (or moree) people over the last week or so and how they feel about the Bee (and McClatchy in general).
    Now here is the interesting thing 1. On the same day you announced the printing would move to Sacto., the A-1 story was about unemployment rising, 2. At another layoff announcement there on A-1 was another article about rising unemployment. 3. While the readers of the Modesto Bee will be getting an inferior print quality paper delivered probably later and written with less staff, your paper to the south...Merced Sun Star gets an upgraded press, and Publisher Hank Vander Veen (a former Modesto Bee employee) announces their "Commitment to their community" just days before the operation department at the Modesto Bee is shut down for good. The few left at the Modesto Bee really don't want to work there anymore but have no choice so they keep plugging away "beating a dead horse" (as one person put it) trying to produce a quality product while working with a greatly reduced staff and also working with the Sacto paper to get the pages to fit the new format...perhaps you let the wrong people go at the wrong time. This seems to be a trend with the majority of your papers.
    As the above poster said, the whole industry is not in a recession, YOU GUYS just got too deep into "it" at the wrong time and didn't take proactive steps to avoid the carnage at all of your papers. Perhaps the decline in ad revenue is due to the fact that the advertisers are assessing their options and finding better use of their advertising dollars. It really is simple...as circulation declines, less readers see the ads. I am sure there are things you could have done to improve the numbers, but you didn't ask the right people how to bring back readers. You needed to ask the average employees and the man on the street why he would want to read the local news paper...most of your papers are becoming generic cut and paste from the AP...read it in USA Today, Wall Street etc.

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  3. Anon 640: Clearly this is a pointless argument that you don't want to engage honestly, but for the benefit of others reading I have to say your point reflects ignorance to the point of willfulness.

    News Corp. includes Twentieth Century Fox, the Fox network and Fox News, Sky satellite TV, DirecTV, music labels and much more. News Corp just isn't comparable to MNI or any other U.S newspaper publisher and you should know that. It does publish newspapers, including the NY Post, which is estimated to lose tens of millions each year, and the WSJ, which Murdoch was able to buy because its owners thought it was underperforming (like other American newspapers) and didn't have faith in the future.

    The whole newspaper industry most certainly is in financial distress.

    I wrote this post to try and introduce a little reality interlude into the discussion. While fact-free blaming may make you feel better, it won't help us dig out of this hole, and there are thousands of us working every day to do so. We're going to base our efforts on honest appraisal, admitting mistakes and calibrating future decisions on credible facts, not meandering accusations.

    Anon 934: I'm not sure what your point actually is, but your argument likewise rests on fanciful facts and figures you seems to have invented. You say "The debt shows no signs of easing ..." Huh? We paid down $800 million last year alone. It's projected to be at or near $2 billion at year end, down from $4.5 billion. Doesn't that indicate "signs of easing"? Perhaps more important to the short term, only about $1 billion of that is bank debt with near term due dates.

    You say the KR purchase was motivated by our desire to go from number three to number one among publishers, but that's wrong too. We were number nine before the purchase and never even flirted with overtaking Gannett as number one. When you get basic facts so wrong, your subjective arguments (whatever they are) are easy to dismiss.

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  4. Fester4:23 PM

    I can't read Mutter because I think an editor stole his ice cream/car/wife once. Maybe all three. At once. He really has it out for the business.

    Anyway, it will stabilize. I think so, too. I just hope I'm around long enough to be able to keep doing what I'm doing.

    But then again I'm not one of the people at my McClatchy paper writing the stories or taking the pictures. I help the place run (I'm being as non-specific as possible here). Trouble is, I can take my talents elsewhere, too - every business needs someone like me. A buyout wouldn't kill me. A wage freeze got me looking elsewhere. So I do. And, employers are starting to nibble.

    I'd rather not go, though: how do you intend to retain people like me? People you might need for the nuts-and-bolts of new initiatives? (I don't have an exaggerated sense of my importance at all, but I've had co-workers say to me "God, please don't take the buyout.") Because if I left, the people I serve would say, "Damn, Fester is leaving? There goes the ball game."

    Also, what kind of other debt is there besides bank debt?

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  5. The other main kind of debt is bonds, which are sold in a set amount to become due at a certain date in the future. As I understand it (I'm no expert) the key difference is that bank debt is due monthly or so some regular schedule like most of us have in our lives, while the bond debt all comes due at once at a date fixed at the time of sale.

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  6. Anonymous7:54 PM

    There's no reason to expect it will get better. Put yourself in the shoes of an advertiser: why would you pay premium prices to put your ad promoting your wonder-widget in a newspaper that sells yesterday's news. Readers are savvy enough to realize they can read today what they are going to pick up on their doorstep tomorrow, and advertisers can point to Internet sites where all the stories running in tomorrow's paper are already published.
    Welcome to the used news business. Maybe we should to adjust with used news ad rates.

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  7. Anonymous10:54 PM

    Hi Howard,

    You have no idea who I am -- I've only emailed you a couple of times trying to find out about any jobs that are available in McClatchy regarding the web. It would seem that the jobs on McClatchy's online division have not been updated since February.

    But, be that as it may, I have a real question that is very pressing (although I would still llove to know about a job.)

    I know that McClatchy ended its contract with Weather Underground much earlier this year. I know this because I was the architect of the original deal in Miami when Knight Ridder had no weather coverage following the "MarketLeader" implementation and I had to strike a deal on my own just to barely compete against the TV stations and Sun-Sentinel on the web.

    Knight Ridder picked up this concept that I had implemented and replicated everywhere in their network.

    McClatchy came along and picked it up -- briefly.

    But, then, dissolved the contract despite protests in some markets from people who knew better.

    It's possible that some newspapers then struck independent deals with Weather Underground. But, apparently the Charlotte Observer did not.

    I know this because I tried very unsuccesfully a couple of weeks ago to find coverage on Charlotte.com of a hurricane then. It was impossible to find and when I finally found it, it was sad. Pathetic.

    But, I just discovered the Weather Underground is still in FULL effect in Raleigh at the N&O.

    Well. Why the double standard? Why is Raleigh getting it and not Charlotte?

    Charlotte is actually just as close to the coast and got hit badly during Hurricane Hugo (I remember because I had to take a generator to my parents in my hometown of Charlotte the day after Hugo -- barely navigating from Greensboro to Charlotte.)

    So, tell me and everyone: Is Raleigh paying extra for this coverage from Weather Underground or is it being stolen? Really. I trust Suzanne Levinson -- and only her -- in Miami that she would not "re-appropriate" the Weather Underground data without paying for it specifically.

    However, I am not so sure another market that is in the web fight of its life (Raleigh) would do so. Perhaps it would just be an oversight. Perhaps they ARE paying for it.

    But, who knows. Please tell me. The Weather Underground people are checking their records now. I have alerted them -- and encouraged them to check all their KR/McClatchy records vs. what is on the real websites.

    I am not amused as a Charlotte.com reader -- and my parents are not as print subscribers. In effect, they are subsidizing the online excesses of Raleigh through their paid subsciption of the print edition in Charlotte.

    I have found everyone at McClatchy so far -- when approached in a very kind and professional manner -- to completely ignore me. It's sad to be treated this way especially when I have shown to prove that I can easily beat the N&O's site daily when I was at WRAL. One would think there would be some sort of courtesy extended to a former foe who is reaching across to help in some manner.

    Maybe this will actually receive a response.

    Rod Overton

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  8. Anon 754: No reason? So you don't think the subprime real estate crisis, the slow sales of U.S. autos or the effect of recession on retail sales have ANY impact? Or do you just not think the U.S> economy will ever recover?

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  9. Anonymous10:26 AM

    Howard, I kind of agree with anon754. US automakers are kind of like newspapers to some extent. They are like lumbering dinosaurs and VERY slow to adapt to change. Case in point, SUV's and large trucks. Detroit still has huge resources plugged into these gas guzzlers and when you se advertising you might think they're giving them away ($10,000 off list price) but they're still horrendously expensive. Tack that on to their 12-15 mpg and they wonder why no one wants to buy them? The same goes for newspapers. Less content, less substance but we raise subscription rates, and the mere fact that most ad sales people are stuck in the same old rut of print sales. It's no wonder we can't seem to make any real money from internet yet. Our ad staffs are slow to respond to trends which in this day and age are instantaneous. I would have to agree with a poster from several weeks ago who said perhaps newspapers shouldn't be firing editorial people (who for the most part are open to rapid change) they should be looking for advertising salespeople who have a clue about internet ad sales. And those who don't want to or can't change should find a new career...the same as us on the editorial side.

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  10. Anonymous10:49 AM

    Here's the thing, Mr. Weaver. We know that things are bad.
    A lot of people I know who read newspapers are dropping their subscriptions, not just McClatchy papers. They noticed the cutbacks in the size, the staff, the sections, and the "used news." Sounds like a vicious cycle.

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  11. Anonymous12:10 PM

    In my McClatchy town, our daily paper's weekend section has shrunk to virtually nothing. Last Friday, I counted only 8 paid ads.

    By contrast, the free weekly had dozens of full-color ads for a huge variety of upscale restaurants, shops and services - more than a few national ads as well. The free weekly is 4-5 times larger than the McClatchy paper's Friday tab and consequently has more listings for events ect. While the cover stories are not of the calibre of the journalism in the daily paper, I still find that I must turn to the alternative press to plan my weekend and pick out a neat place to eat.

    Ads are content. Instead of jacking rates through the roof, why don't you folks consider cutting them in half and gain more revenue by bringing some of these advertisers back to the McClatchy section? It would also make for a more meaty section and increase value for readers.

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  12. Anonymous12:22 PM

    I want to agree with Anon 10:49.

    I understand that some of your newspapers are losing money. But not all.

    But if you continue to slash and burn -- with smaller papers, fewer pages and fewer locally produced stories -- don't you just make it worse?

    Isn't there a point where leadership needs to say "we'll take just breaking even this year if it means keeping some semblance of the product our customers are paying us for"?

    I know in some of your smaller markets, people are getting less and paying the same and the publications are not losing money. They may not be making what they once did, but they are not in the red.

    But if we keep slashing, at some point won't all readers just turn away?

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  13. Anonymous1:26 PM

    Responding to Howard's 9:39
    I stand by no reason based on what I see economists are predicting for this economy, which is an L-shaped recovery, rather than a V-shaped. I don't see autos coming back for a year until they get their new gas-savers online, and I don't have to tell you where you live about the huge overhang of unsold real estate that has to disappear before there will be a recovery in real estate. So I really don't see anything on the horizon coming to the rescue to reverse this downward spiral. I also suspect that Christmas will be bad. We have to work through a whole lot of debt problems in the United States before the consumer gets back into a buying mood. Notwithstanding today's government action on F&F, I think we are only halfway through this problem and have yet to see the full impact of the economic recession before any sing of recovery c.2011-2012. When advertisers get ready to advertise again, where will newspapers be?

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  14. Anon 1222: I don't know how I can explain this better, but I will try one more time. Our financial pinch is not a function of trying to reach a certain profit margin, or maintain executive salaries, or raise our stock price. We have debts and bank covenants we must meet, and doing so in a time of dramatic revenue decline means cutting costs.

    We know we can't just cut our way to prosperity. We are also working hard to retrain sales forces, offer innovative products, get partners like Yahoo and the like. In the meantime, we have to pay the debt. It's just about that simple.

    Anon126: I don't see how I can argue with an economist of your insight, so I have now stopped trying.

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  15. Anonymous10:07 AM

    Anon 126 here: you asked

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  16. Wanna view moi's lill' 'Palin' paordy?

    If'in yes, here it is

    http://www.amiright.com/photoshops/p/the-paladins-power-shake-live-1220638620.shtml

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  17. Amy Lander12:55 PM

    Howard:

    Two thoughts, please:

    1) Certainly the current recession, the bank payments McClatchy must make to pay off the money they borrowed to buy KR and other such supply side issues are the bulk of our troubles. But too, isn't the profit margin that McClatchy will consider acceptable also an important variable? When you consider that most of the advertisers in our pages and on our websites are struggling these days just to make payroll and that even in the good times, most of them would be delighted to clear ten percent profit after expenses, the argument the McClatchy's profits have plummeted to 19% or lower seem somehow specious, even insular? Why not be willing to break even for a while? The employees took care of the company when profits were quite high, wouldn't it be smart of the company to look after the workers now that the profits are lower, build goodwill, keep the workforce intact til things get better?

    2) I think that it would go a very long way to building morale if the top members of the McClatchy executive team felt some of the same financial pain we down in the trenches are feeling. I'd like to see Gary, you, the others up there to take a 15% pay cut and use that 15%, plus your bonuses, to pay down the Bank debt service for the next few years.

    Respectfully,

    Amy

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  18. Anonymous1:43 PM

    Howard, Another day; another WashPost scoop on Palin. Will the ADN print this one, too? Time was the national media cribbed from the ADN on Alaska stories, because the ADN had a decent-sized stuff and enough firepower to cover the state. Then McClatchy did like Gannett and now the ADN has to crib from the national media to figure out what's going on in its backyard. Simply because the ADN doesn't have enough people on the case so McClatchy can keep enjoying those margins instead of investing in quality. And if you really can't see that, they sure must pay you good.

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