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Wednesday, July 15,2009

What's wrong, LSJ?

What the most recent round of Gannett layoffs means for our local daily.

by Neal McNamara

If this were a movie, executives at Gannett would be crowded around a conference table at the head of which would be a giant poster that reads “ad revenue,” and underneath would be a big red arrow plummeting toward hell. Then, a white-haired man in a suit would lean down, place his hands gently on the table and say something like, “We
need to make cuts.”


The result of that scenario played out last week —
again — as Gannett, a media company that owns 101 papers in the U.S.
and the U.K., including USA Today, laid off 1,400 workers. Among the
hardest hit were the Cincinnati Enquirer and the Arizona Republic, two
of the chain’s largest papers.

Here in Lansing, the
Gannett-owned Lansing State Journal cut 26 workers — that’s the
official word, though some blogs covering Gannett report that two more
were let go from the LSJ, but aren’t counted because they work for
corporate — including the paper’s controller and circulation director.
The official word from the LSJ is that no reporters were let go, but
the editorial staff did suffer: at least two copy editors were cut and
the staff librarian, too.


A call to LSJ Publisher Brian Priester was
not returned; neither was an e-mail sent to Priester and Executive
Editor Mickey Hirten with specific questions about this most recent
round of layoffs.

Between August and December 2008, the LSJ
cut 40, including the entire staff of Noise and longtime entertainment
writer Mike Hughes. Leading up to last week’s layoffs, every Gannett
employee was required to take 10 unpaid furlough days. (Some employees
say that the furloughs screwed up their finances; others, like the
LSJ’s John Schneider, got creative, donating their unemployment pay to
a charity, forcing a match from Gannett.) According to the LSJ Web
site, 310 work for the company, but that number has not been changed
since last week’s layoffs occurred.

Newspaper industry
analysts say that the layoffs Gannett and many other newspaper chains
are doing should not be taken sentimentally. Yes, it sucks to lose reporters or any staff, but at the same time, newspapers are businesses that exist to make a profit. And
if you’re not making a profit, you must do something to change that.
(City Pulse recently cut the hours of its part-time Lansing City Hall
reporter, who chose to resign instead.)


The
State Journal has long been known as one of Gannett’s cash cows, and it
may still be. After all, Gannett’s cutbacks aren’t the result of losses
or even imminent losses. Rather, they are resulting from
reduced but still substantial profits.


The official word from Gannett
is that ad revenue is tanking and so operations need to be cut back.
The reasons for declining revenue are several: a national recession,
the ongoing technological revolution that seems to be driving more and
more people each day to the Internet, and a lack of creativity when it
comes to making money on that technology.

The firm JP Morgan
predicted in a report released last week that Gannett’s advertising
revenue would drop 32 percent in the second quarter, which ended June
30. That means that instead of posting a profit margin of 25 percent,
it would post a profit margin of 17 percent. Additionally, the
company’s stock has plummeted in the last year from around $17 last
July to around $3.50 today.

John Cribb, a newspaper broker
with the firm Cribb, Greene and Associates, says that while local
newspapers are making cuts, they are not fading away. The LSJ may have
shed at least 66 employees in the last year, but that doesn’t mean it
is being prepared for sale or permanent closing.

Newspapers
are valued so low right now and for the foreseeable future, that it
would not make sense for Gannett to sell it.


“It’s not a slam on
employees, but when there’s less revenue, there’s less money to support
all your business expenses,” Cribb said. “Gannett is a smart company
operated by smart people. The prices for newspaper properties right now
is so low — I’ve never seen newspapers valued so low. It doesn’t make
sense to prep and sell a property if the values are the lowest they’ve
ever been.”


Conversely, although newspapers appear to be doing badly,
the information product they produce is more highly sought than ever,
Cribb said. But that’s the problem. Newspapers haven’t found
the magic bullet that allows them to make money and provide information
in a digital world.


“The product you create is in demand — the problem
is that our economic model has failed,” he said.


Robert Broadwater, a
newspaper broker with Broadwater and Associates, was asked why Gannett
would choose to spend resources on things other than reporters when the
company’s product relies on those professional information gatherers.

The
answer is cold, but true. The company makes decisions on what’s best
for the bottom line, not on what makes people warm and fuzzy.

“There
is the idea that somehow this is sentimental,” Broadwater said of the
layoffs. “Hiring another reporter may not generate enough revenue —
it’s just math, it’s not sentimental.”



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