By Dan Kennedy • The press, politics, technology, culture and other passions
Old friend Steve Syre analyzes GateHouse Media in today’s Boston Globe and comes to a conclusion that’s sadly familiar when looking at newspaper companies these days: its papers, though not in great shape, would be doing fine if it weren’t for the corporate debt under which they’re staggering.
Not to keep linking to a story I wrote on GateHouse for CommonWealth Magazine last fall, but it’s relevant.
I just posted an item pulling together what we know about the GateHouse cuts over at the Beat the Press blog. It includes some quotes from GateHouse Media New England chief executive Rick Daniels, whom I interviewed a little while ago.
GateHouse’s Patriot Ledger of Quincy has posted an admirably straightforward story about what’s going on inside the ailing newspaper chain. The article, by Jon Chesto, describes the 7.75 percent pay cut announced by GateHouse New England chief executive Rick Daniels as “temporary.” The goal, Chesto writes, is to save $2.5 million this year.
Chesto explains:
The size of the pay reduction will vary depending on an employee’s salary, ranging from 7 percent up to just under 15 percent for the company’s top earners.
The average pay cut would be 7.75 percent. If the reduction lasts through the end of 2009, it would have the effect of an average pay cut of 4.5 percent for the full year. They will take effect next week except at the chain’s three [not two, as I wrote earlier] unionized papers: the Ledger, the Enterprise of Brockton and the Herald News of Fall River.
We also learn more about the downsizing that’s taken place recently. According to Chesto, “GateHouse cut its New England work force by about 10.5 percent since the start of the year through a mix of layoffs, voluntary buyouts, attrition and work-week reductions. After the latest round of job cuts, GateHouse Media New England will have the equivalent of more than 1,100 full-time employees.”
That amounts to a bit more than 100 positions lost since the beginning of the year.
This is miserable news if you’re a GateHouse employee. But it’s encouraging that Daniels has committed himself to reversing the pay cuts if and when the advertising market recovers. I’m also impressed that GateHouse — like my friends at the Boston Phoenix — is cutting higher-paid employees by a larger percentage than those at the bottom of the pay scale.
Media Nation just received a copy of an e-mail sent out to GateHouse employees in Eastern Massachusetts from Rick Daniels, the CEO and president of GateHouse Media New England. Bottom line: a 7.75 percent pay cut. Here is the full text:
A MESSAGE FROM RICK DANIELS, CEO/PRESIDENT GHMNE
As we all know too well, the road out of the horrendous economic and advertising slump has been extremely difficult, and yet we have a lot to be proud of on how we have responded. We are still bringing valuable and unique local news, information and advertising to our huge print and digital audiences. Together, we have taken many tough actions that have preserved — and often enhanced — our capabilities, while substantially decreasing GHMNE’s structural costs.
Regrettably, we need to share some tough news: Beginning June 1, we will implement a temporary reduction of our salaries and wages. The average GateHouse Massachusetts employee will see a reduction of about 7.75%. If this were to last through the remainder of 2009, the effect would be to reduce 2009 salaries by about 4% — given it is not starting until June. Rates will vary, and will be “progressive” — meaning that higher earnings will be reduced at higher rates. Your supervisor will share your amount with you. All publications and units in Massachusetts are affected by this step. We are sitting down — today — with representatives of our unionized colleagues to start negotiations on this issue. We expect participation from all — fully and soon.
Why are we taking this step? Why now? It’s really pretty simple: As much as we have done everything in our collective power to blunt the negative effects the economic crisis has had on advertising, virtually ALL major metropolitan markets have been hit by advertising declines that have soared to the mid-twenties to mid-thirties percent (compared to prior year months) since early January. These revenue declines have dramatically hit the cash flows of most publishers.
We are NOT — thankfully — in the kind of trouble that we never want to be in — producing lots of red ink, HOWEVER, if we don’t act soon, and decisively, we could see advertising trends reduce our revenues to a point where we could no longer cover our cash expenses with any margin of safety. Common sense tells us that when companies start suffering from negative cash flow, there is NOTHING good that happens, and these days, with lenders and vendors on short strings themselves, the “bad stuff” happens quickly. We seriously considered a wage reduction earlier this year, but given the obvious difficulties a pay cut creates for each of our family’s finances, we decided to make sure we were not going to see an advertising rebound that could allow us to avoid this painful step. We also considered the possible use of additional staff reductions to generate the almost $2.5 Million of savings this pay cut will generate for the remainder of 2009. Such cuts would have to be about 100 positions, and we did not believe we could continue to operate and deliver the high levels customers value were we to quickly cut this many positions.
We are hardly alone in taking this step. In fact, a great many publishing companies have already taken steps to reduce their single biggest expense — compensation, using furloughs, pay cuts, or even both. While we might be a bit “late” vs. our peers, it’s not too late for us given the many aggressive cost reductions we have already made. At this point, GateHouse Massachusetts is the only GateHouse region that is implementing pay reductions, because we, being in a major metro market, have seen substantially greater losses in advertising expenditures. Because no one can predict the economic future, we can’t reasonably predict when revenues and cash flows will strengthen to the point where there is little concern about cash flows being stable and safe (i.e. positive) levels. Obviously, the sooner we can end this temporary reduction, the better — for all.
Some might ask: Aren’t newspapers dead anyway? Are we just prolonging the inevitable? As a consumer and advertising medium, newspapers that deliver truly unique news and information are still very much in demand, although some very important parts of the business model, including the need to be fluently digital, are changing. One of the largest advertising agencies in the country visited us recently with a very simple message: Large local newspaper companies, with some changes, will be the major beneficiaries of the newspaper industry restructuring. Our industry IS going through wrenching changes, but a great many of the changes that are bedeviling major Metro papers are poised to benefit us — as long as we remain economically sound in the near term. We will keep you informed about our challenges, AND our victories.
The senior management team and I will be conducting employee information sessions at a great many of our locations in early to mid June, we look forward to updating you further at these meetings. Thank you — in advance — for your willingness to support personally difficult steps during these times that WILL allow us to grab the opportunities that arise out of adversity.
Richard Daniels
President and Chief Executive Officer
GateHouse Media New England
Publisher, The Patriot Ledger and the Enterprise
I’m hearing that GateHouse Media has imposed an 8 percent pay cut for managers and will be talking with the unions next. The only union shops among GateHouse’s 100-plus papers in Eastern Massachusetts are the Patriot Ledger of Quincy and the Enterprise of Brockton*, so I don’t know what this means for the vast majority of employees who work for non-union papers.
The Ledger is also cutting back on its coverage area from 26 cities and towns to 12, according to one of my reliable informants. Among the towns being cast out of Ledgerland is the fast-growing community of Plymouth. Supposedly the Ledger will continue to run press releases but will no longer have town reporters in the communities from which it’s pulling back.
*Correction: The Herald News of Fall River is also unionized. See follow-up item.
Two weeks after GateHouse Media laid off perhaps a dozen or so people at its Eastern Massachusetts papers, I’m hearing from sources that a mandatory, company-wide meeting has been called for Thursday at 10 a.m.
No idea what it’s about, but folks are bracing for bad news.
8:57 p.m. update: Another source has heard nothing about a meeting Thursday. For what it’s worth.
I’m hearing a few reports from out in the field that the GateHouse Media cuts, which I mentioned here earlier in the week, are now starting to come down. I don’t have any details, and I have other matters to attend to for the next few hours. But I’m hoping that a clearer picture will emerge later on.
11:06 p.m. update. Still hearing scattered reports of layoffs here and there. Nothing comprehensive. One thing I’ve heard from several sources is that GateHouse is moving to paid obituaries, and that some typesetters who had formerly handled obits are losing their jobs.
Actually, I despise the term “paid obituaries.” An obituary is a news story, as important as anything in the paper. If it’s paid, it’s no longer a news story; it’s an advertisement.
Media Nation is picking up reliable buzz that GateHouse Media, which owns some 100 community newspapers in Eastern Massachusetts, will be announcing significant downsizing moves in the very near future.
GateHouse owns midsize dailies such as the MetroWest Daily News of Framingham, the Patriot Ledger of Quincy and the Enterprise of Brockton as well as scores of weeklies, from the Cambridge Chronicle, the Somerville Journal and the Newton Tab to tiny papers in the exurbs.
Not good news.
GateHouse Media is launching a free, 25,000-circulation daily on Cape Cod that will be published from late June through Labor Day weekend. As I’ve written before, newspapers need to embrace free, advertiser-supported specialty publications as a way of bolstering the bottom line.