Tuesday, January 22, 2008

About Jim O'Shea's strange 1-percent solution

Jim O'Shea quits over budget disputes at the L.A. Times and exits to sustained applause – not just in Los Angeles, but likewise newsrooms around the nation. It's like the Dean Baquet Show, Act II.

I don't know all the details, and I certainly can't know what it feels like in the executive suites at the L.A. Times. I realize that budgets have been shrinking for a while now, and that each new decline is additive. But the Times own story says this dispute boiled down to a one-percent newsroom budget cut. Huh?
The dispute with O'Shea arose several weeks ago, Hiller said, after Hiller told department heads to prepare 2008 budgets with no increase in spending over 2007. Then, after advertising revenue weakened further, Hiller said he asked for a 1% cut.

Hiller said O'Shea responded with a request for a 2008 newsroom budget of $123 million, up $3 million.

O'Shea, in an interview Monday, said his spending plan represented the minimum amount necessary to maintain adequate news coverage in a year when the paper was gearing up for the Olympics in China and continuing to cover the presidential race. He said holding the budget flat or trimming it by 1% would mean imposing drastic cuts in other areas such as foreign news.

Now, this may get me drummed out of the Editors' Club once and for all, but I have to ask: Is there another editor anywhere in the country who wouldn't embrace a flat 2008 budget or one-percent cut with open arms and a hallelujah? If your budget is $5 million and you're asked to cut $50,000, do you make a pretty speech and quit?

I'm sorry, but that's not the way to defend good journalism. I'm disappointed.

McClatchy editors have been asked to do far more, and almost universally have responded with intelligence, fortitude and good intentions. We have cut until it hurts, no denying that, and then cut some more. None of us has the budget she needs or deserves, and none of our operations is operating the way we think it ultimately must.

But the newspaper industry is in the middle of an historic transition and traditional economics have turned upside-down; revenues have fallen farther and faster than anyone imagined, and we haven't hit bottom yet. Now, on top of our industry's parochial concerns, the whole U.S. economy is melting down in a bubbling vat of subprime consequences.

Well, so what? In my book, that means we work harder, make tougher choices and work to sustain capacity for a future when the revenue picture stabilizies. Everybody has a threshold, I suppose, but from where I stand, the mission is too important to just give up and walk away.


  1. Anonymous6:54 AM

    I've actually become more sympathetic to the choices faced by newsroom managers. Once it seemed like cuts were made just to prop up the stock price -- now that revenue has fallen so much that cuts must be made to even _have_ a stock price, it's more understandable. What's still not understandable, however, are Gary Pruitt's million-dollar bonuses. I bet you aren't having problems paying the bills either, Howard. Journalists who've lost their jobs are.

  2. You're right that I do make plenty of money. For the record I'd note that I make a good deal less now than I did last year. There are no raises for officers this year, and bonuses (which account for a large percentage of pay and are even more financially centered here than in the papers) have been in steady decline.

    Gary can speak for himself, and will if you ask him. But I'd say this by way of context: corporate salaries and bonuses are set by a committee of the board, which uses industry comparisons and other benchmarks in determining levels. I'm told McClatchy corporate compensation, certainly including the CEO, is below the mid-point.

    As editor in Anchorage, I often wondered why my salary was so many times that of my assistant, who also worked hard and put in long hours. I suppose it centered on the marketplace: I'd have been harder to replace than her, and there were actually other newspapers offering me more than McClatchy paid in Anchorage.

    Is the marketplace the fair and ethical way to set salaries? That's certainly worthy of discussion, but this much is undebatable: that's they way it's done in the U.S.

  3. Anonymous4:08 PM

    this much is undebatable: that's they way it's done in the U.S.

    So yeah, cut Howard some slack, ok? He's just following orders.

  4. Thanks, Howard, for a thought-provoking post about Jim O'Shea's "budget solution." I do not have anything to defend from a corporate post or otherwise. I have spent dozens of days in dozens of newsrooms as a consultant and teacher in the past four years.
    I have seen fine, talented journalists who are struggling to produce journalism against a backdrop of change and budget angst. I have also seen fine, talented journalists who have little experience in or appetite for making important choices about how to use resources.
    Yes, more is often better. But not always. As someone who worked for nearly 30 years in newspapers, it has been difficult for me to watch the all-or-nothing frame that we often bring to covering matters such as the departures of O'Shea or Dean Bacquet. Are they Knights in shining armor or people who just gave up? Is there a third door?
    Please do not take this as any defense of budget cuts. Short-term thinking -- whether by the business side or newsside -- has been strangling our profession.
    But right now, I think the more important questions revolve around the journalism that editors do with the resources they have. Is it the most relevant, credible and engaging to people who are trying to navigate a complicated society? Is journalism reaching people in ways that make sense for them? Does it consistently provide news and information people cannot get elsewhere?
    More often than I would like to say, I think the answer is "Not necessarily." We (and I include myself as a former editor) too often default to what we've always done, what we like to do, what our colleagues will applaud.
    Michele McLellan

  5. Anonymous1:32 PM

    I would love to see someone with the guts commit to attempting the opposite strategy: investing heavily in the newspaper to re-invigorate reader and advertiser interest.

    Maybe one of the larger chains could try it with one of their smaller properties, for a period of 3-5 years, and see if it works. Commit to a margin of 5% or so on that particular newspaper. I would think that it would be worth a shot.

    Because what the industry is doing now, slashing news budgets to match ad revenue, clearly is not even keeping existing newspaper readers interested. Why not try experiment with a different strategy?

    - Joe

  6. Joe,

    Yeah, I'd love to see that too but there's a fundamental problem there.

    Look, if you went out and bought something - a computer say - you probably had an expectation that it'll perform at a certain level. If it fails to perform, you'll be pissed right? You'll take it back and complain.

    Well we have public investors who purchased stock with a certain expectation.

    Imagine if Apple announced that they'll be dropping the iPhone's memory from 4 GB to 1 GB in the next update to make the phone "work better" or retroactively disabling the wireless bits or something. Think iPhone users would be a little miffed? Think they might, I don't know, sue?

    We can't just flick a switch and suddenly operate at 5%. Don't think I wouldn't love it if we could. Yes, it's a shitty position to be in. Yes, the margins once enjoyed by newspapers are a thing of the past, but that doesn't absolve us of the responsibility.

    Now, if you want to talk about how we got into this mess in the first place, and address the root causes of arrogance, shortsightedness and operational timidness then I'm all ears.


  7. Anonymous10:39 AM


    Valid points, but you are confusing the roles of the investor and the consumer in your iPhone analogy.

    Investors purchase the stock with an expectation the company will be managed to maximize its value. Consumers buy the product because it ads some value to their life. So, investors want to see the company operated in a way that increases consumption of the product. That's exactly the goal of my "5% experiment," to see if a different strategy would increase consumption.

    Besides, a large chain operating one of their smaller papers at a smaller margin for a set period of time wouldn't make a huge dent in the overall margin. And the experiment would be totally justifiable to shareholders, because it has the potential to boost margin (in the long-term) throughout the company.

    Frankly, discussing the root causes of how we got into this mess (and I agree with your points) won't do much good, now that we are already here. We need to discuss how to get out of it.

    - Joe