The Purcell report

The Boston Herald is not only debt-free as a result of publisher Pat Purcell’s sale of his Community Newspaper Co. (CNC) division; it also made a small profit last year. At least that’s what Purcell told Herald employees at a newsroom meeting on Monday, according to a respected insider.

Purcell has always played his finances close to the vest, so figuring out how well he is or isn’t doing is inevitably a matter of educated guesswork. According to “a newspaper executive who considered buying Purcell’s properties,” the Herald lost $2 million last year, whereas the 100-newspaper CNC chain made $20 million. I can’t explain the disparity between that account, reported by the Boston Globe’s Steve Bailey, and Purcell’s version. But I can guess:

  • The drastic cutbacks Purcell implemented last year — slashing the newsroom by 25 percent by the end of June — may have finally taken hold, transforming a money-losing operation into a slightly profitable one.
  • The Herald and CNC share a lot of content; not only is the Herald loaded with CNC copy these days, but a vast chunk of the sports section in the Framingham-based MetroWest Daily News, the CNC flagship, consists of Herald coverage. Such cost-sharing allows for quite a bit of creative accounting. And perhaps it was to Purcell’s benefit to pump up CNC’s numbers while having the Herald show a loss on paper.

According to my correspondent, Purcell told his troops that after paying off the debt he took on to purchase CNC (for a reported $150 million) in 2001, and paying a 35 percent contractural fee to his investors, the remainder of the $225 million CNC sale went to the Herald. Purcell wouldn’t say how much that was, but insiders estimate that at roughly $10 million to $20 million. Purcell added that neither he nor his family made any money on the deal, saying that all of it was rolled into the Herald.

So what’s next? Additional cuts and/or layoffs are possible, but Purcell said he has not yet decided whether that will be necessary. He said the Herald and CNC, under new owner Liberty Group Publishing, will continue to share content and advertising, and that he wants to reduce costs on the production end. Reportedly there was a lot of talk about growth and change, too, especially with respect to the Internet. Weekday circulation continues to plunge toward the 200,000 mark, but Purcell said the Herald’s Web site received 12 million hits in March. That should translate to roughly 2 million visitors, which isn’t bad.

One thing that has always impressed me about Purcell is his ability to inspire his employees. In a dozen years of writing about the Herald, I’ve almost always found it to be an incredibly loyal place with a circle-the-wagons mentality when any outsider would dare to criticize the paper. The only exception was a couple of years ago, when Mike Barnicle, who’d lost his Globe column because of ethical transgressions exposed partly by the Herald, was hired, and when well-regarded editor Andy Costello was removed from his post. But Barnicle’s gone (except for an occasional contribution), and, despite massive cutbacks, morale appears to have recovered.

Certainly it doesn’t hurt that Purcell has chosen to stand and fight. It may be true that no buyers wanted the Herald. But after selling CNC, Purcell easily could have taken his millions, shut the Herald and enjoyed a lucrative early retirement. That he didn’t shows that money isn’t the most important thing to him. You can’t say that about too many other newspaper owners these days, and you have to respect him for that.

Will it work? It has to be said that Purcell’s grand strategy of pumping up the Herald with his CNC purchase was, at best, a partial failure. The debt apparently proved to be too much, and he now finds himself the owner of an urban number-two paper with no other properties. Consider this, from Purcell’s front-page essay on Monday:

My priority has always been to keep the Herald viable. The acquisition by Herald Media of Community Newspaper Company in 2001 was a key part of that strategy. And it worked.

I’m very proud of the job we did in making Herald Media a success. But as I announced on Saturday, CNC will soon be under new ownership.

There’s really only one possible reaction to those two short paragraphs: Huh? Nevertheless, Purcell — and the Herald — are still here. I wouldn’t count them out.

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11 thoughts on “The Purcell report”

  1. Hey Dan:Please consider this when measuring Purcell’s legacy. He made CNCs papers (both dailies and weeklies) better. He encouraged us to cover our communities aggressively and backed us up with training and, when needed, the best lawyers in town. He allowed our editorial pages to be autonomous and never asked us to back down when we took stands that conflicted with his own or the interests of advertisers. Rather than call it a “partial failure” I’d argue that it was a great five-year run that pumped vitality and a sense of mission into newspapers that had lost a lot of soul during the Fidelity years.

  2. Greg — It was a failure by Purcell’s own definition. He wrote that he bought CNC as part of his strategy “to keep the Herald viable.” Yet now he can’t hold on to CNC. My comments were not meant as a reflection of how he managed CNC.

  3. Well, leave it Howie Carr to say (yesterday on his radio show) that “Metrowest dailies are worthless. I can say that now that we don’t own them anymore.” There is no question that Pat’s stewardship of the group is going to be far positive than that of the incoming group, poised to make a lot of cutbacks and consolidations and have no local history connection like Pat has.Like Dan wrote, you have to give Pat credit for being hard-nosed and conveying a sense of strength and hope in troubled time to rally his staff.But it is going to take more than that to stay in the black and not go through that cash fast and be in the same predicament again.Hopefully CNC’s quality of coverage will stay the same, not displacing many local reporters needlessly when they fully take over.But with the recent newspaper turmoils, who the heck knows what is next for the Herald, CNC or the Globe. I wouldn’t be surprised if the NYT unloaded the Globe even if it means taking a bath on their original price. If they lose another 8-9% drop of circ next year and continue to “lose money” like some ‘sources’ say.Then what …where does it stop? With how few reporters and journos can any of these companies get away with keeping and still look like a useful paper??Some papers out there are able to stay flat or slightly increase circ. So that means it can still be done. How come? Why can’t either the Herald or Globe do it?Is this a function of Boston losing population count, especially the young professional kind in favor of more Southern states? Can they stop the losses inthe coming year??What will the next drastic move by the Globe this time to avoid losing money quarter to quarter???Time will tell…N.

  4. What’s the deal with the byline-less stories popping up in the Herald the past couple of days? Any idea?

  5. Byline less stories are typically stories written by tryout reporters. The Herald has done it this way for years and is actually a sign that they may be hiring.

  6. As a former CNC employee, I don’t mind divulging a bit. I can tell you the current numbers are probably accurate and they will probably stay profitable, at least with the weeklies, where in many cases, there is no other game in town. Take the two towns I covered during my time at CNC: Belmont and Winchester. I don’t remember the circ numbers exactly, but they were both around 5k or 60-plus percentage of the coverage of both towns. The subscription sales alone for both papers had to be about $200k each. This isn’t counting the ads – just the subs. Sure, you have production costs and postage, but they also have two full-time employees for each paper, with the other production aspects – photographer, sports editors, layout, ad sales, etc. – being done by people who also cover or work on other titles. In other words, there isn’t a lot of overhead but there also isn’t a lot they can cut either. They are at the barebones; they are also at $20M in profit per year, which isn’t a bad clip in the newspaper racket these days. And, I would disagree with Dan about the “Huh” though: Purcell’s actions did save the Herald. The Herald was in trouble before the CNC buy, before 9-11; now, after paying all the debts and slashing everything over there, he is in the black and his coffers have $20M in the bank. Again, not a bad clip for the newspaper market these days essentially when he basically babysat the damn thing.

  7. I wouldn’t count on the Herald being both debt free and Pat having any substantial amount of cash left over from the sale of CNC. CNC was dong about $10 million profit just before Pat bought them. The Herald was making a little but that was being eaten up by the internet investment. Pat paid $150 million for CNC. That should have meant that Pat and his new investors could have borrowed around $60 million for the purchase, leaving the new investors to put up about $90 million of their own money. Firms like this would normally “loan” this money to the company and interest would accrue (compounding). They would also expect a 20% or more compounded ROI. If Pat sold CNC for $220 million, paid off the bank debt (I’d guess $60+ million), paid off the debt to his investors (total debt plus accrued interest could be $120 million), brokers ($2+ million) and the lawyers (at least another million), then the 20% to 35% compounded return to his investors … there’s not much left to support The Herald.

  8. anon, your math is of note: According to my correspondent, Purcell told his troops that after paying off the debt he took on to purchase CNC (for a reported $150 million) in 2001, and paying a 35 percent contractural fee to his investors, the remainder of the $225 million CNC sale went to the Herald. Purcell wouldn’t say how much that was, but insiders estimate that at roughly $10 million to $20 million. Purcell added that neither he nor his family made any money on the deal, saying that all of it was rolled into the Herald.that would mean that the herald is sitting on some sweet cash. combined with the cuts – reportedly putting the herald in the black – and i think tony’s comments are pretty dead on.

  9. Tony did make a very smart observation about how Purcell used CNC to enhance the Herald’s bottom line. But the idea was to build a regional powerhouse, not to flip CNC five years down the road. Now Purcell owns just one property, and it’s not a particularly attractive one.

  10. I wouldn’t count of Pat having a lot of cash on hand. After he pays off the debt to the banks, the debt to his investment partners and then thier25 – 30% compounded annual return on that investment, I don’t expect Pat to have much, if anything, left.

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