We believed the painful cuts made earlier would see us through the sharp revenue declines we’re experiencing, but conditions continued to get worse.
It can be hard to keep the faith through times like these. Nobody suffers as much as people who lose their jobs, of course, but those who remain at work suffer too. Staffers are working harder, with fewer colleagues and less certainty. Pay has been frozen for a year. There are worries about whether the company has a plan to get through this transition and regain a stable footing. Are people making a mistake for sticking with us?
For those of us who love being in the news business – in other words, nearly all of us at McClatchy – such doubts are especially troubling. Will journalists be equipped to do the job our communities depend on us to do? Can we retain the critical core of talented employees upon whom success rests, and provide them the tools they need?
We can. As the national economic news plainly demonstrates, it's impossible to know when the economic tide will turn, but we know it will. We will keep the company safe until then, because despite these painful decisions, that is the foundation of security for all of us, and the only way to ensure we can sustain our mission.
Upon that foundation we are building a new structure that reflects the realities of today's media environment. A great deal of impressive change has already occurred, though it has been masked and obscured by the pall of the revenue declines. We truly are reinventing what kind of enterprise we are, transforming a newspaper company into a hybrid, multimedia information source. I want to outline some of the key components here, and to be as frank about our plans as I legally and prudently can be.
William Gibson observed, “The future has already arrived; it’s just not evenly distributed yet.” If you look closely across the broad range of McClatchy papers, you can see the outlines of our restructured future already taking shape. We will be smaller, more efficient and more sophisticated. Like most other American companies, we will concentrate resources on our core functions – in our case, providing information and selling advertising. We can do so across a broader range of platforms than anybody else in our communities, and growing audiences attest to our success there.
Even something as traditional as printing papers can often be done cheaper and better outside the core newspaper. As you know, we will shortly be printing The Modesto Bee in Sacramento, and have contracted to print Boise and Bellingham at non-McClatchy printers in the Northwest.
In other regions, we are finding ways to cooperate with other newspapers to share costs and hold down expenses. The Miami Herald in now delivering the South Florida Sun-Sentinel in Miami-Dade county, and that newspaper delivers the Herald to the north. Miami’s newsroom is testing a content sharing plan with former rivals in the region. Many other such opportunities are possible, and while we can't talk about them all in advance, you can be sure we are looking for them actively all over the country.
You will have noticed that we're selling real estate, our share of a newsprint company and other assets that aren't central to the mission. Knight Ridder sold a very valuable Miami parking lot, and we are working to close that deal. Smaller parcels elsewhere are being marketed; we sold the Knight Ridder jet a long time time ago, and have likewise sold our plane.
All of this helps pay down the debt we undertook in buying Knight Ridder. Reducing that burden – particularly some bank loans amounting to about a billion dollars – is the single most important thing we can do to ensure stability. Until revenues bottom out and begin to improve, the pressure to pay down debt is significant.
You can also see new ways of doing business emerging at various newspapers; as these new practices prove out, you can expect to see them adopted more widely. We know not every newspaper or market is the same, so we won't look for pure cookie-cutter solutions, but we will move emphatically to embrace operations that make sense. In Charlotte and Raleigh, several newsroom departments have been merged. When Raleigh gets the technology to do so around the first of the year, page and perhaps even section production duties can be shared, and we look to extend that as quickly as possible amongst our Carolina newspapers. These moves will allow the papers to devote more of their resources to unique local coverage while common jobs are done once instead of many times.
A small staff working with our new advertising vice president at corporate is expected to return many times its cost in new advertising revenue by leveraging our size and multiplatform reach with national customers. Advertising sales staffs at all papers are being trained and incentivized to sell digital products better. McClatchy Interactive is optimizing its operations, too, handling things like digital ad placements, our Yahoo partnership and social networking tools that build audience.
Pains from contraction and restructuring are being felt across the company, including the corporate offices. As you know, our corporate staff is much smaller than the Knight Ridder staff that handled about the same number of papers, and we have saved a lot of money by eliminating duplicate services and keeping tight rein on expansion. Pay freezes and other programs affect corporate employees like all others.
Some of you have questioned whether well-paid senior staff are sharing the pain. Our salaries were frozen a year earlier than other employees, and because a larger percentage of senior staff pay comes as bonus, stock appreciation rights and the like, total pay goes down dramatically when the company performs poorly. The average corporate vice president's compensation has been significantly reduced over the past two years, and will surely be lower still this year.
I have faith in our combined efforts to see us through to a profitable, stable future. There is no question of our ability to survive as a business, or to produce public service journalism that serves our communities. Both require some sacrifice and patience, but both are true.
Because we will be smaller, we need our smartest, most dedicated and most capable employees to move us forward. We intend to make sure you are well paid and well treated over the course of your career at McClatchy, and as revenue conditions improve, that will be a top priority.
Don’t give into pessimism. Times are tough, but they won’t be tough forever. We have important, essential work to do, and we need to be about it every day.