Our local media conglomerate, the Tribune Company, has apparently decided that 10-15% operating profits aren't enough for some of their newspapers, notably the Chicago Tribune and the Los Angeles Times. They are looking for 25% profit margins.
So, they are cutting newspaper staff which means less coverage of government and politics, which means a less informed electorate.
MoveOn.org is sponsoring a petition drive here (sign it now) to call on the Tribune Company to reverse the cuts and invest in more reporters and editors.
The Tribune (through an LA Times article) was good enough to write about the petition drive here, and essentially argued that economic necessity forced these cuts.
At the Chicago Tribune, which recently reduced its editorial staff of more than 600 by 28, Publisher David Hiller said the reductions were similar to those being made at many other newspapers, including those owned by Knight Ridder Inc. and the New York Times Co.
"The necessity to make these cuts is unfortunate, but it's the reality of the marketplace that we are in," Hiller said.
I wonder if that's true. Isn't that what Conrad Black said about staff cuts at the Sun-Times when he was stealing hundreds of millions from Hollinger International? I'm not suggesting that anyone at the Trib is stealing anything, but I am suggesting that if the Trib is generating 10-15% profit margins now, is it really necessary to cut staff?
Of course not -- it's just a question of corporate greed versus civic values. If the managers can squeeze more money out of the papers for the shareholders, then they'll do it, civic consequences be damned.
It's a problem with corporate governance -- the push for shareholder value (making money) trumping every other value (democracy, education, and other non-money-making things that make our country great).
Here's the MoveOn email that makes the case on the numbers. The best quote is here:
Steve Wasserman, a former deputy opinion editor at the Chicago Tribune's sister paper, the Los Angeles Times, described how the Tribune Company is running journalism into the ground at his former paper:
Tribune Co. insists that the paper deliver annual operating profit margins nearer 25% or 26% than its more customary return of around 15% or 16%. (Last year...the paper reaped an operating profit margin of about 20%, a figure that failed to satisfy the Chicago moneymen.) The paper's top managers and editors are determined to do so or die trying
Maybe a financial guy (Nathan Kaufman?) can dig into the Trib's balance sheet to see whether the Trib is already making a healthy profit on the papers, and now they're just greedily looking to make more at the expense of the rest of us.
I find this frustrating, because I think the Chicago Tribune should be one of the world's best newspapers (that's what Tribune-owned WGN stands for -- World's Greatest Newspaper), and to do that takes bureaus around the globe running original stories, not a collect of AP stories from pages 5 through 12 of the front section. It's frustrating that people who want to read top-notch news can't also read about the Chicago City Council or the Illinois General Assembly, because the New York Times and the Wall Street Journal simply do not have Chicago Metro sections in their papers. If I had my wish, I'd have the Tribune Company decide to make the Chicago Tribune one of the world's premier papers and double the editorial staff. Then maybe they could get away with charging a dollar per print paper instead of 50 cents (as the New York Times does) and they could start charging for some content on their website. Make no little plans, Tribune!
14 comments:
If the Soros funded MoveOn is unhappy why don't they set up their newspaper? What's stopping them? Soros has the money.Or if they don't like the Trib. from here on out don't buy the newspaper.Isn't that what freedom is about?
First of all, the comparison with the NYT may not be completel analogous in some pretty key ways. For starters, circulation at the Tribune is increasing (vs. decreasing). Second, the NYT recently purchased about.com. It looks like the acquisition was designed to give the NYT more new media savy. Any time a big company buys a smaller company, there is usually going to be a fair amount of turnover. For example, you only need 1 CEO, and many acquired CEOs are not going to work as less-than-a-CEO in part of the new acquiror. So the NYT's acquisition-related employee reduction is not necessarily comparable to the Tribune's headcount reduction.
Second, the Tribune is having a difficult time with the LA Times acquisiton. There was a huge tax liability recently associated with this. Also, the LA Times circulation is decreasing a lot, adn writers in CA may be unhappy. The article below explains a little of this:
http://www.mediainfo.com/eandp/news/article_display.jsp?vnu_content_id=1001221102
Third, getting "big" in media by consolidating is very unclear financially and economically. The companies in media adding shareholder value during the last 5-6 years are focused and niche -eg, Pixar. Big and diversified has big problems - Time Warner and Carl Icahn. Eisner and Disney. Viacom is being split in two voluntarily by Sumner Redstone because he realizes the sum of the parts may be worth more than split in two than combined. There are many possible explanations for why big, diversified media may need to split (beyond scope of this blog posting). Big diversified media may not need to split. Maybe we are just going through an awkward phase where the markets do not appreciate big companies (media and non-media). Who knows.
Fourth, we need a rationalization of board positions at the Tribune. We need written job descriptions, descriptions of duties, frequency, time devoted to the job, skills and experience contributed by each board member, etc. We need to know results delivered by board members. To the extent that current Tribune board members are between jobs or unemployed, maybe they could devote more time to the Tribune in measurable ways that deliver results that trickle down. When it comes to the balance sheet, the Tribune needs the board to be an intangible asset and not a liability.
two edits
1. EDIT 1
"Viacom is being split in two voluntarily by Sumner Redstone because he realizes the sum of the parts may be worth more than split in two than combined."
more clear:
Viacom is being split into two separate companies voluntarily by Sumner Redstone because he realizes the sum of the parts may be worth more when split into two companies, vs. combined into one company.
2. EDIT 2
"For starters, circulation at the Tribune is increasing (vs. decreasing)."
shoud read
For starters, circulation at the Tribune is decreasing (vs. increasing slightly at the NYT).
one more-
i posted the previous comments stream of conscious. more time and the information would have been written with more polish. seriously.
income statement:
http://finance.yahoo.com/q/is?s=TRB&annual
balance sheet:
http://finance.yahoo.com/q/bs?s=TRB&annual
provided by yahoo - do you yahoo?
The Tribune is losing readers. The LA Times is losing many readers, and the Tribune management of the LA Times has not been effective as measured by circulation trends.
What is wrong with preventive medicine or discussing this? Around the year 2000 Motorola lost huge market share to Nokia. Preventive medicine at Motorola might have saved jobs for Illinois and provided more tax revenue for the state budget. There are other examples of Chicago opportunities to be more pro-active and preventive.
The LA Times was an extremely costly acquisition. Many are questioning the "get big" thinking in media.
A focus on quality or additional news content might help the Tribune.
I love the straw man CF! In your world, any suggestion or critique of any corporation makes you a Communist. Maybe, so that you find this discussion reasonable, we should instead run a candidate for the Tribune's Board of Directors or we should file a shareholder resolution. The truth is, it's in all of our interest ('our' defined as Illinois citizens) to have a strong Chicago Tribune reporting on government, so it's entirely appropriate to push a private company to make better decisions. If you don't think so, you might clear your head of that Ayn Rand smoke you've been inhaling....
It should be noted that the tax problem with the LA Times acquisition could wipe out around 2 years of net profit at the Tribune.
I think American corporate governance is less optimal than what I understand many other Western forms of corporate governance use -- where fiduciary responsibility extends beyond simply shareholder value and other stakeholders (workers and community members) also have a voice on the Board of Directors. That's a far, far cry from collectivism, and your somewhat predictable move to tar any discussion of the shortcomings of corporate incentives as collective smacks of anti-intellectualism -- which, given your reference to the Reading Room of the British Museum (and I'll admit, that reference escapes me, Dennis Miller), is a little odd. I don't think it's immoral to earn 20 or 25 or 225% operating profits, but I also don't think that's a good excuse to cut reporters and editors. And there are lots of other ways to influence a corporate board, even under the American legal regime. One way is simply to shine a little light on the actions of a board that negatively impact people. MoveOn is trying to do that, and so am I. That's entirely appropriate and far from collectivist. It's civic. I wonder: in a libertarian worldview, where is there room for civics? Or in other words, if democracy is economically irrational (because you don't make money by voting or by supporting a candidate or by learning about issues and participating in governance), how does a libertarian or Ayn Rander explain why anyone should be a democrat (small d)? If there is no intellectually consistent answer (besides to protect my property from the 'mob'), then I think that's a farily patent weakness of the libertarian view, because I suspect most people think democracy is a very good thing.
http://finance.yahoo.com/q/bc?t=my&s=TRB&l=on&z=m&q=l&c=NYT&c=%5EGSPC&c=%5EDJI
Lest we be too hard on the Tribune, we should point out that the Tribune has done better in the stock market than the NYT (see above). However, the Tribune has not down as well as broader indexes (Dow Jones Industrial Average or S&P 500). The Tribune also is hard-pressed to match a Google or Yahoo.
Getting into specifics about margins is a little bit off-topic. The current strategy pursued by the Tribune may not work long-term. The Tribune may be hard-pressed to deliver results in a new media age (technology, change), and may not have the know-how on the board. This is somewhat objective: we can get the biographies and resumes of board members and scan for new media, or media, experience. Either people have media experience, or they do not have media experience. Either industry experience is desirable, or experience is not needed.
One thing that is very tiring to me is personal attacks. We need to work on answering questions vs. attacking people that ask the questions. These are serious questions. Jobs and an organization's future are at stake. Not everyone has a parachute.
"My point is that the market will punish the Tribune if the quality of its product is reduced by these layoffs."
The market is already punishing the Tribune. Look at circulation.
And I would love to konw more about Red Eye circulation statistics. The local health club has had stacks of the Red Eye. Do stacks of newspapers left at various businesses count in circulation? I see older people reading Red Eye on exercise bikes - not the targeted young demo.
CF
You make interesting points on managing workers.
It would be nice to see the same ideas applied to board members (to the extent applicable). Like workers, the Tribune might be able to help a board member focus on something more suited for his or her strengths and interests.
I think you're missing the key point: we all suffer when the major newspaper cuts back on coverage. There's less education about government, business and the world at large and that leads to a dumber electorate. That's a bad thing. That's a civic value, and that's different than a worker having a right to a job. There's a lot more to the debate than at-will employment, and I think you're missing all of that. I think Europe's worker protections stem more from their for-cause hiring regime rather than corporate governance. So what you portray as the key assumption is a dodge, in my view, of the other values in play here -- there *are* civic values independent of the interests of the Tribune's workers. And if you're going to take a poke at public employees, then I guess it's equally true that it makes a ton of sense for rich people to support the Republican Party because they will pay a lot less in taxes! So on that point, I guess you've got me there.....
There are management problems, the fact that no one there has any idea what to do in tough economic times, and unrealistic expections from Wall Street.
For example, Tribune Company lost its leadership role -- and lost its way to online profits -- years ago.
It boggles the mind that they have not offered a better combination buy between interactive and print. NYT has figured it out. It took 10 years, but...
Newspapers, in spite of their profit margins, are a terrible business to be in. They are bottom-feeders of the economy. If the retail sector suffers, your life inside the newspaper sucks. Really sucks.
There are other solutions, such as temporary cut-backs, self-sacrifice (now, now...) among the executive team, but they're really cutting deep into a staff that never ever saw a layoff between 1848 and 2001.
What's worse, NYT kicks the hell out of both Chicago papers in its Sunday package. (see my post today)
And they don't even live here.
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