by Stephen Buel
If there are any lingering doubts that the new owner of virtually every major East Bay and South Bay newspaper intends to radically remake its properties, Friday's news should change that. Contra Costa Times Editor Chris Lopez was relieved of his duties in a move related to the merger of the Times into the family of papers that includes the Oakland Tribune, Tri-Valley Herald, Argus of Fremont, and Daily Review of Hayward. Executive editor Kevin Keane will assume his duties. Far more significant was the news from out of the sister San Jose Mercury News, where publisher George Riggs alerted his staff that 101 employees will be laid off sixty days from now. The announcement was seen by employees as a shot across the bow of the unions currently in contract talks with the newspaper. On the heels of other recent announcements, the developments seem to herald a significant downsizing across many or all of the company's dozens of Bay Area papers.
Company employees, speaking under the promise of anonymity, see the layoffs at the Merc as the likely first act to a similar reduction in force at the Times and possibly also the company's long-time East Bay papers. "The general feeling around here is that the hammer is coming down here soon too," said one ANG employee. Indeed, Riggs, in his memo, warned archly of "continued declines in revenue" that these days afflict most daily newspapers and many other old media properties. Here's the Riggs memo in its entirety:
October 20, 2006
A few weeks ago, I wrote to everyone about the challenges our business faces, both over the past six years and going forward. Since then, our business outlook has worsened and we have completed our budgeting process. Given continued declines in revenue, we need to reduce expenses significantly, and thus have no alternative but to implement a reduction in work force.
We plan on eliminating 101 positions by December 19th. The process of identifying individual employees subject to layoff is not yet complete.
Under California law, if an employer lays off fifty or more employees within a thirty day period, it is required to provide the affected employees with sixty days advance notice of the layoff. This is known as a "WARN notice." Since our planned reduction involves more than fifty employees, we are providing employees who may potentially be affected with the required WARN notice. Please understand that employees who are potentially affected include all employees in those departments where layoffs are necessary. However, not every potentially affected employee receiving the notice will ultimately be subject to layoff. But in order to meet compliance requirements, notice will be given to a larger number than the 101 employees.
There are some things that could favorably impact layoff plans should they occur. Any significant upturn in advertising revenue would, of course, have an impact. We are seeking additional commercial print work, which would also increase revenues. We are working with our production unions (Pressmen, Mailers and Drivers) to be better positioned to accomplish this. Price reductions in newsprint have been rumored recently, and could lead to expense savings should they occur. Lastly, we have three open union contracts we are negotiating (Guild, Composing and Pressmen) and, depending on the outcome, they may also lead to further expense reductions. All of these could reduce the ultimate number of positions eliminated.
I understand the uncertainty these staffing cuts create for everyone, and deeply regret that we have to take this action. Please know that we would not do so unless it was absolutely necessary to ensure the future viability of our newspaper.
At the Merc, the Riggs memo was seen by members of the Newpaper Guild as a bold gambit to make union members agree to the company's spartan new contract proposals. Among the company's many requests is a proposal to create a new tier of newsroom employees who would be paid substantially less than current employees. Management's stated rationale for these changes is that the Merc and other newspapers are experiencing significant, long-term declines in profitability as advertising revenue moves online. That trend is indeed a very real one, and has perhaps occurred nowhere more noticably or swiftly than in Silicon Valley and the rest of the Bay Area.
Although the company's East Bay newspapers are all believed to be considerably more profitable than the Mercury News, no one we contacted on Friday believed that the East Bay properties would be spared from similar cuts -- and soon. Thursday, former CoCo Times publisher John Armstrong, now vice president of the California Newspaper Partnership, sent employees a very long memo that warned of dire economics and seemed to suggest that cuts are soon likely in the East Bay. Here's that memo:
Over the nearly two years I've been issuing these monthly updates to employees at Contra Costa Newspapers and, more recently, at ANG Newspapers, I've concentrated on all the good news because there has been so much of it.
Unfortunately, this is an update with a distinctly different tone.
The newspaper business is under siege on multiple fronts, and in the last couple of months we have felt the full blast of that siege at the Contra Costa/ANG group. Some of the negative advertising trends were there in the first half of this calendar year, but their effects were masked somewhat by large volume increases in the real estate category.
With the sharp and rather sudden decline in real estate advertising since summer, we no longer have an offset to declining volume in other categories.
Following are some numbers at Contra Costa to illustrate what Advertising & Marketing VP Mike Jung describes as this year's "tale of two halves." Newspapers in the former ANG Group have experienced the same trends.
* Monthly revenue in the real estate category plummeted 23% from June to what we're generating in October. I'm sure you've read the headlines on declining home prices and sales; the slump now is affecting advertising.
* Recruitment revenue volume in October is running 25% less than August's volume. Some of that decline was unavoidable, the result of a change in our relationship with the CareerBuilder job site stemming from our sale by McClatchy to MediaNews.
* Due principally to reduced ad schedules from Verizon, Sprint and General Motors, we now project that our National revenue in the last six months of this year will be 23% below that of the same period a year earlier.
* Retail is struggling to stay even with last year's pace, due largely to the Yardbirds and Good Guys closings and continuing consolidations in the retail category. Moving forward, there is concern that the real estate slump will depress consumer spending.
Not all the news on the advertising front is bleak.
Automotive is a positive story. The category started slowly this year but is picking up steam, primarily through sales into our AutoFinder weekly and Cars.com. We now expect auto revenue to be up about 8% year-over-year in the second half.
And we're starting to get results from the joining of all the Bay Area suburban papers under the MediaNews umbrella. LazyBoy moved half a million dollars out of the Chronicle and placed it in our newspapers. A joint selling effort involving San Jose, Contra Costa and ANG produced more than $300,000 in ad revenue for an upcoming Holiday Survival Guide (produced in partnership with the Food Network).
While we're facing increasing troubles on the advertising front, we are struggling to maintain readership levels. The audited circulations of newspapers across America are declining, and we're not immune to the trend. It's been clear for some time that Internet use is affecting newspaper readership, just as it's affecting television viewing.
As a consequence, our revenue from circulation is suffering. Compared to the same three-month period a year ago, circulation revenue in the July-September quarter was down nearly 9% at the ANG newspapers and nearly 5% at Contra Costa.
The bottom line is that our consolidated Contra Costa/ANG enterprise has less revenue to underwrite our operations. We're now forecasting that operating revenues in the Contra Costa/ANG group in the 12 months from last July through next June will be down $11.3 million from the same period a year earlier.
One of the most troubling aspects of this revenue decline is that much of it appears to be "structural" rather than "cyclical" in nature; that is, a decline that reflects basic and perhaps permanent changes in our revenue base rather than temporary adjustments. And driving most of the structural change is the migration of revenue to the Internet.
We have aggressive initiatives in place and in development to capture dollars that migrate from print to digital, but online rates are a fraction of what we charge for print. Under such a scenario, maintaining market share results in lower revenues.
WHAT CAN WE DO ABOUT IT?
We have to act quickly and aggressively on three fronts simultaneously:
* Lower our costs of operations to compensate for the loss of revenues, just as a household that loses income must balance its budget by reducing expenses.
* Take advertising revenue from competitors through the power of the MediaNews network of newspapers and Web sites in the Bay Area.
* Continue to drive improvements in our newspapers and Web sites to grow the size and involvement of our audiences.
Over the past couple of months, as we have witnessed the alarming declines in advertising and circulation revenues, the Contra Costa/ANG leadership team has worked on plans to reduce costs and build advertising revenue share. At the same time, through the increased sharing of content among the Contra Costa and ANG newspapers, each of our print and Web editions has become stronger in local news coverage.
We present our revenue and expense plans to our overseers, the California Newspapers Partnership Board of Directors, next week. Our intention is to begin immediately to implement them following Board approval.
Some of our initiatives represent tweaks to what we're doing now. Others are basic changes in how we do business. We will share these initiatives with you as they are implemented.
What we are facing together is formidable, but I have confidence that we have the brains, energy and determination to emerge a year from now as a stronger, more effective enterprise.
As always, I welcome your comments, questions and suggestions.
"This memo makes it seem like whatever is going to happen is going to happen late next week," said one long-time employee of ANG Newspapers, the Bay Area subsidiary of Dean Singleton's MediaNews empire.
But at least for now, the East Bay job loss stands at just one. Armstrong announced the departure of Times Editor Chris Lopez in yet another bittersweet Friday memo. Here's that one:
The single most difficult duty I have is to bid farewell to a valued colleague and friend, and this I must do now. Chris Lopez, a 6 and 1/2-year member of the Times news staff who became editor 23 months ago, is leaving the newspaper. Our executive editor, Kevin Keane, will assume Chris's day-to-day responsibilities, effective immediately.
As we consolidate the operations of Contra Costa and ANG newspapers in the Bay Area, there are some positions that become redundant, and, unfortunately for Chris, his is one of those positions. In better times, we might have found a way to ignore an extra position or two or even three. But given the serious revenue pressures all newspapers are facing, about which I wrote to you this week, we cannot afford any redundancy, especially at the senior management level.
Chris has been a superb editor. When he succeeded me as editor nearly two years ago, we talked about pushing on investigative reporting and community coverage and involvement, and he and the news staff delivered in spades. I am indebted to him for the energy and dedication he brought to his service as editor.
Please join me in wishing Chris, MaryAnne, Katie and Eva every happiness in the years ahead.
Fortunately, Kevin Keane is well suited to assume the reins at the Times. Twenty four years ago he began his journalism career as a reporter in the Philadelphia area. He has served MediaNews as an editor for nine years, most recently as VP of News for ANG Newspapers.
I know I can count on all of you to give your full support to Kevin.
For those of you in the newsroom who would like to ask questions of Kevin and me, we will be available in Room 202 at 4 p.m. today.
Lopez, an Armstrong protege who was considered a rising star within the Times before the merger, was well-regarded in some circles, and merely endured in others. His standards of journalism were considered high, and under his watch the paper continued to flourish. But he was described by one newsroom veteran as an often-stern and occasionally hostile manager whose passing would not be mourned by a number of people in the newsroom.
All in all, it was a black week for East Bay print media. As previously noted today by 92510, the publisher of Black Diamond Living magazine announced earlier this week that his Concord-Pittsburg-Antioch-area magazine was closing up shop. Also this week, the production department of the East Bay Express was merged into that of our sister paper, the SF Weekly, in a move described as an effort to acheive greater efficiency.
Back to 92510, the East Bay Express news blog.