About the only positive note in McClatchy Co.’s announcement that it will cut another 1,150 jobs is that the year-over-year decline in August revenues was a little better than in July. Other than that, what can you say? The stock, which closed at 60 as recently as early 2006, spiked briefly below $3 a share yesterday before recovering to close at $3.40. This is the third round of cost reductions this year by McClatchy, which operates 30 daily papers in the US. In June, it announced plans to cut its workforce by 1,400 people and on Sept. 1, it froze wages for a year. When the new cuts are completed, McClatchy will have reduced its workforce by about 16% this year. The company also cut its dividend for the first time in 20 years, saying that money would be better used to pay down its $2 billion debt.

There was a bit of good news. August revenue fell 15.7 percent from a year earlier to $142.8 million, and ad  sales were down 17.8 percent. This was a bit of an improvement over July, when revenue fell 16.4 percent. Online ad revenue was also up 7.4%, bucking an alarming recent trend toward declines in that critical area for many newspaper companies.

Troubles at a newspaper parent are felt most strongly at the local level. The Sacramento Bee expects to avoid being hit by this latest round of layoffs, but it is eliminating nine regional sections and scaling back newsstand sales. The Bee has already cut 219 employees, or nearly 10% of its workforce, this year.

Another company that’s struggling to survive, Cox Newspapers, said it will sell 29 newspapers, including the Austin American-Statesman. The Austin paper is one of the jewels in the Cox crown, showing consistent profitability and strong online growth. The paper has pared headcount judiciously and has expanded into contract printing and direct mail. Hearst Corp. and private equity firm Austin Ventures.

The piece in the American-Statesman has some interesting tidbits. According to media analyst John Morton, publicly traded newspapers made a pre-tax average of 22 cents for every dollar of sales in 2003. In comparison, Dell Computer  made about 5 cents on the dollar in its most recent quarter. Morton also said a rule of thumb for valuing a newspaper is $2,000 multiplied by the average daily circulation over a week. However, that ratio is probably much lower in the current economic climate. He added that five years ago, a newspaper typically sold at 12 or 13 times its pre-tax earnings, but that ratio is in the 5- to 7-times-earnings range today. 

The news was not as good at Gannett Co., which reported that ad revenues in  its publishing division were down  16.8% in August compared to last year. Repeating a familiar refrain, Gannett blamed the declines on a sharp drop in classified advertising revenue, which was down 28%. Real-estate advertising was off a mind-bending 40%, a figure that isn’t likely to improve amid the ongoing meltdown in the mortgage industry.

WSJ Evolves its Design

With online subscribership up 26% over the past two years and a growing base of visitors from social networks, The Wall Street Journal overhauled its website design this week. The most notable change is a departure from the print-like look of previous versions. The new site is horizontal, rather than vertical, and adopts the three-column structure used by USA Today and The Washington Post. One notable change is that all stories are now open to reader comments, a feature that was previously available only on blog entries. Each story now includes tabs for comments and multimedia elements, such as slide shows and video. There’s also a social network called Journal Community that mimics similar efforts by BusinessWeek and Fast Company.

Wired  likes the new look, but notes that the Journal still hasn’t bitten the bullet on giving away content for free. It quotes an exec saying that the newspaper is gradually ratcheting open its paid content wall to new readers. It adds that subscriber-only articles have always been readable through a back door for free by searching on Google News. Firewalled articles are also accessible through a new BlackBerry application and links from social networks.

The New York Times notes that the redesigned site has more advertising units and sponsored sections. It’s more colorfull, features photography more prominently and has a moving newsreel with headlines and photos linking to related content.

We like it. In ditching its old design, the Journal has fallen into step with the look and feel of other news sites, which makes for easier navigation. The comments feature is a lso a nice touch. With all national newspapers now acceptin g user feedback, it’s wonder all newspapers don’t adopt this openness.

Layoff Log

• The Wichita Eagle laid off six employees and accepted voluntary buyouts from 16 others. That amounts to 6% of its employees. The paper offered voluntary buyouts to all full-time staff in August.
• Phoenix Newspapers, which publishes The Arizona Republic,  announced 37 involuntary layoffs spread across several departments. That’s on top of  56 people who recently left in a buyout deal.

At Poynter Online, Jon Greenberg writes of the remarkable impact of a letter written by longtime Wasilla, Alaska resident Anne Kilkenny about her former neighbor and current Republican vice presidential nominee, Sarah Palin.

The letter (you can find it here, along with several hundred comments) lays out in plain language Palin’s record as mayor of Wasilla and governor of Alaska. Kilkenny is quite open about her distaste for Palin (who was known as “Sarah Barracuda” in high school), but also takes pains to point out Palin’s intelligence, ambition and political savvy. Most important is that the letter is factually detailed. Kilkenny, who calls herself “just a housewife,” assembled details about Palin’s administration from years of attending city council meetings and reading local newspapers. She even disclaims facts of which she is unsure. It’s not the work of a professional reporter, but it’s just as good in its own way.

Greenberg sees big potential in citizen reporters like Anne Kilkenny and wonders why publishers don’t do more with them. “Non-journalists can be invaluable when they use their own eyes and ears to report what they see — but they rarely deliver on that promise. Why? In my experience, most citizens worry that they are not up to the task of producing objective journalism. Worse still, they believe that if they are going to throw their words into the public arena, they must be an advocate for something.” Greenberg goes on to recommend that news organizations Adapt their culture and processes to leverage citizen journalist contributions.

Some veteran journalists might turn up their noses at Kilkenny’s 2,500-word essay. It is subjective and judgmental in some cases, and the writer has probably edited facts to make a point. It is, however, also very enlightening because it comes from someone who has lived and worked with the candidate for years. The language is homespun simple. Kilkenny, who hasn’t had a day of journalism training, turns in a pretty good piece of journalism. That’s because she has a perspective that no journalist could duplicate, even with hundreds of interviews.

Strangely, the Kilkenny e-mail has received relatively little mainstream media attention. Some of the media has questioned her facts and biases. Those are legitimate questions, but not a good reason to ignore the value of what Kilkenny has to say. Perhaps the fact that the writer is “just a housewife” disqualifies her from being taken seriously in the eyes of journalism pros. Yet it seems to us that there’s an opportunity for news organizations to embrace these citizen activists and to apply professional journalistic techniques to vet their work and surround it with context. Anne Kilkenny doesn’t make journalism irrelevant; she actually makes it richer. Judging by the number of comments on the Mudlfats blog, this citizen has touched a nerve. Isn’t that the essence of what good journalism tries to accomplish?

If You Send Them Away, They Will Come

How counterintuitive is this? Scott Karp analyzes Nielsen’s top 30 news sites for May and June according to how often visitors visit and how long they stay. The breakaway winner is Drudge Report, a site that does almost nothing but link to other sites. Drudge had more than double the sessions-per-person of any other news site in May and nearly four times the performance of the highest-rated newspaper site. Drudge’s audience also spent an average of nearly an hour on the site in June. The newspaper site that came closest was The New York Times at 29 minutes.

What’s the lesson? Outbound links are a good strategy. Sites that aggregate and contextualize content from around the Internet gain search engine visibility, link love from others and attention from readers who value their efficiency. This isn’t say to say original reporting isn’t important. News executives often snub Drudge and others like it as parasites on their original work. But at an estimated 500 million monthly page views and 1.75 million daily viewers, this parasite appears to have gained a following. Could your news organization learn from this success without sacrificing your mandate?

The Future of the Times

Reader Arthur Piccolo has been perturbed by The New York Times’ recent decision to combine sections, as well as other cost-cutting initiatives at the paper of record. He offers his perspective on what the Times will look like in 2015. Here’s a summary. You can download the PDF here.

• All print articles will be shortened versions of on-line content, with each ending with an Internet address and other online pointers.
• Staff will be dispersed to their homes and field; headquarters staff will be condensed to a small core of editors and production people.
• The organization will have relationships with lots of domain experts who will contribute insight regularly on pressing topics. There will be a large stringer network.
• Virtually every story on-line will contain rich audio and/or video elements.
• “Community correspondents” will feed regional and local information to the website. Subscribers will have the ability to localize their version of the Times.
• The Times will produce branded on-line versions underwritten by large corporations and even countries.
• The print edition will be kept alive for branding but not for profits.
• The Times will seek to become a broadcast business to rival the top TV and radio networks.

Most of these predictions are pretty safe. This is the direction visionary newspapers are already taking. We’re not so sure about the branded editions sponsored by corporations, though.

Layoff Log

• The Akron Beacon Journal has given the Newspaper Guild notice of its intention to lay off 11 people, including five reporters, three copy editors, a photographer, an artist and a clerk.
• The Northern Michigan Review will cut 11 jobs at newspapers in Petoskey, Gaylord and Charlevoix, as well its PhoneGuide. “Our future forecast remains optimistic,” the president and publisher said.
• The Daytona Beach News-Journal announced a second round of layoffs, cutting 41 jobs on top of 99 eliminated three months ago. The paper’s parent company, which employs more than 600 people, is for sale, but there have been no takers. “The company’s financial performance has taken a dramatic turn for the worse over the past few months,” said Jim Hopson, News-Journal chief executive manager.
• The Los Angeles Timeslaid off 50 people in its IT organization but didn’t bother to tell anyone outside the company about it. At least that’s what pressman Edward Padgett says. A redesign of the paper is coming, and Padgett says there is speculation that the California section will be consolidated into the main news section and Business will be merged into Sports. That could result in the elimination of the second shift production on some days, which would probably mean more layoffs.

Investors were all aflutter at the news late last week that Mexican billionaire Carlos Slim had purchased a 6% interest in The New York Times Co. Slim, whom Forbes estimates to be the world’s second richest man behind Warren Buffett, has made his fortune principally by buying low and selling high. It helps that he owns one of the world’s largest privatized monopolies, Telefonos de Mexico, which he acquired in 1990.

Shares of NYT jumped nearly 15% on Thursday on the news, helped by Slim’s statement to reporters that his interest in the publisher was “purely financial.” Are newspaper stocks finally going to be perceived as the bargain investors believe them to be? Probably not, argues The Wall Street Journal‘s Martin Peers. Writing in Thursday’s “Heard on the Street” column, Peers notes past failures by investors who tried to wrest control of the Times company from the controlling Ochs/Sulzberger family. He also brings up Slim’s $2 billion bet on failed retailer CompUSA as an example of the billionaire’s fallibility. Finally, he points to the lofty price/earnings ration of the NYT Co. – more than 20 right now – as reason to “see Thursday’s pop in Times stock as a selling opportunity.”

Tech Publisher Bucked Trend, Cashed in With Print

In the publishing market for technology enthusiasts, print has almost evaporated. That’s what makes O’Reilly Media’s Make magazine so remarkable. Make was launched well after the destruction of the technology print media had already begun. The publishers thought there was value that print brought to their target audience of tinkerers that couldn’t be reproduced on a Web page. Not that the Internet isn’t important. In fact, most of Make‘s circulation development has been done on line. The publication also hosts a series of popular fairs where readers show off their inventions. But in a market that has largely turned up its nose at print, Make is a notable – and profitable – exception.

In this podcast, publisher and editor Dale Dougherty tells of the counter-intuitive wisdom that led to the creation of the Make brand. The speech is only 17 minutes long, but it will remind you of the value that print still brings to the publishing equation when applied sensibly.

Rx for Newspaper Websites

Mark Potts has a set of idea for fixing newspaper websites that are well worth reading. Potts recently wrapped up an engagement with Philly.com in which he says staff attempted to break the mold with some success. What is the mold of newspaper websites? Too much information crammed into too little space and surrounded by blinking banners ads. This is a legacy of the print mentality, Potts writes. Why do newspapers still organize everything by news/features/sports/metro/arts when they don’t have to be tied to such rigid structure on the Web? And what’s with all the banner ads, which are the least effective form of online advertising? Why not do more with targeted text ads and search? Again, the legacy mentality favors display ads, he says.

Potts recommends that publishers take more risks and look at the example of the online pure-plays for inspiration. Web publishers think nothing about launching mobile services, for instance, and if the gamble doesn’t pay off, they just shrug. Newspaper publishers, on the other hand, research any new initiative to death and then finally launch something that’s uninspired and late. Classified ads are dead, Potts says. Deal with it. And newspaper sites still aren’t local enough. Aggregate and outsource content to readers. Lively debate ensues in the comments section.

Easy Come, Easy Go

Novato, Calif.’s hometown newspaper since 1922 is no more. The Advance shut down last week, citing the usual factors: tough economy, stiff online competition, spiraling costs. The paper hadn’t made a profit in nine years. An unbylined announcement ticks off a list of investments and innovations the Advance undertook in an effort to stay afloat – adding staff, sectionalizing and boosting circulation among others – but the efforts were fruitless. The paper’s demise apparently wasn’t for lack of quality. It won the California Newspaper Publishers Association’s highest award four consecutive years through 2006.

Meanwhile, the state with the toughest economy in the nation saw the launch of a new title. The successful Florida Weekly will come to Naples on Oct. 2. The lifestyle-oriented tabloid covers news, arts and entertainment, dining, regional business, and real estate. The original Florida Weekly of Ft. Myers has a readership of 50,000, according to Editor & Publisher. Naples Florida Weekly will be distributed through more than 500 newsstands and by mail.

Miscellany

Tragedy in San Francisco: the long-suffering Chronicle yesterday published obituaries for several of its Sunday comics. Among the deceased are Mister Boffo, the Fusco Brothers, Brevity, Tokyopop and Sherman’s Lagoon. Dilbert is also moving. The decision was guided by more than 13,000 responses to a poll conducted this summer. “We know that readers feel strongly about comics,” an unnamed Chron editor writes. Indeed they do.

The Bowling Green Daily News is an afternoon daily that has adopted a “print first” strategy. Its audience isn’t terribly Internet-savvy and the afternoon publishing schedule limits its timeliness. What’s more, the paper is still growing revenue. The managing editor sees no reason to favor a website because print pays the bills. Moreover, the capital investment required to launch a competing website and put a staff in place is prohibitive, he says. He is on drugs.

The Sacramento Bee is cutting staff by 7% on top of an earlier round of cuts in June. This time, a buyout offer enticed 87 people to leave the company, including 23 newsroom employees. The editorial department had been largely spared from the June round of cuts, but the reduction took a bigger toll, with the features department along losing 11 people. Bee executives said they didn’t know if more cutbacks would be needed.

Gannett Blog reports on an innovative idea by the Pensacola News Journal: it’s distributing newsstand copies with a distinctive front page. The idea is to attract the generally younger group of readers that buys newspapers on impulse. Single-copy sales are about 18% of the Pensacola paper’s circulation, according to Gannett Blog. Commenters generally approve of the idea.

The Fort Worth Star-Telegram plans to sell its 88-year-old headquarters building at the northwest corner of Seventh and Taylor streets. Its 184,000 sq. ft. are simply more than the shrinking newspapers needs, the publisher says.

The Rushville (Inc.) Republican joins the ranks of newspapers that are cutting out Monday editions. The move will save enough money to enable the paper to avoid layoffs, at least for now.

And Finally…

While strolling through Pet Rock 2008, the annual festival in east-central Massachusetts that brings hundreds of dog owners together in a celebration of their pooches, we were struck by the old cliche that dog owners and their pets frequently look alike. We started snapping examples where we thought this  was true. While the cliche is by no means universally valid, there are some striking similarities in some cases. Just for fun, here are a few examples. Do you have any of your own? Send us a link to the online photos or post them in the comments section and we’ll add them to our Flickr slideshow.

The Newark Star-Ledger quit the Associated Press cold turkey – but just for one day. New Jersey’s largest daily, which is hemorrhaging money, tried publishing en entire issue on Wednesday without any AP copy, relying instead upon feeds from a variety of alternative services.

Was it a protest against the news cooperative’s new rate structure or a test to see if there is life after AP? The paper isn’t saying. However, what the AP is saying publicly amounts to giving the newspaper industry the finger.

Responding to inquiries about the Star-Ledger boycott, AP spokesman Paul Colford sent Editor & Publisher a vapid statement that concluded that the service’s new pricing plan, called Member Choice, “was in fact developed as a response to member requests for simpler content and pricing options.” In other words, if members don’t like the new rate structure, it’s their own fault.

The new plan offers a lower-cost core service of national, state and international news. Subscribers can then buy add-on subscription or individual stories instead of paying by volume of news delivered, which was the old pricing plan. AP says 90% of its customers save money under the new structure.

It’s surprising, though, that the lucky majority is so silent while several party poopers threaten loudly to quit. Why aren’t the many customers that are so pleased with the new plan shouting them down? Maybe Paul Colford should hit the phones a little harder.

Or perhaps the AP’s real attitude is summed up in comments by its Executive Editor, Kathleen Carroll, to a group of newspaper editors, In an E&P article generously titled “We Can Work It Out,” Carroll is quoted as saying “We certainly hope that the basic fundamentals of the economy and the marketplace will firm up enough so that the pressure is off some of the people who own the AP.”

In other words, we’re not changing a thing. If business doesn’t get better, then have a nice life.

Like co-dependent substance abusers, the question for the AP and its members is who needs the other more. Alan Mutter published a cogent analysis last month concluding that the AP would have a hard time getting by without its largest members.  Many newspapers are experimenting with innovative arrangements for sharing stories that end-run the wire, perhaps in preparation for an AP-less existence. Meanwhile, there are reports that the AP is shoring up its broadcast and Internet businesses in case its newspaper members start quitting en masse.

One of the big problems facing newspapers is that information is becoming free. It’s not surprising that they might be wondering why they still need to pay the AP so much to get it.

NAA Goes Web 2.0

Perhaps financially challenged newspaper executives can commiserate by throwing sheep at each other. The Newspaper Association of America will launch NAA.org Community this fall. It’s a social network that will provide forums, personal profiles, user ratings, keyword tags, photo- and video-sharing and RSS feeds. Users will also be able to share files and send private messages within the community. The stage site is here. The home page also says you can use the site’s Community Blogs list to “find blogs about the newspaper industry, written by leading experts.” We don’t expect to make the list.

Dated Newspaper Story Triggers Airline Stock Plunge

A Google search bot triggered a 75% plunge in shares of United Airlines over the weekend when it assigned a Sept. 6, 2008 date to a six-year-old story about United Airlines’ bankruptcy filing. Although the stock had recovered all but 10% of its value by midweek, officials at the South Florida Sun Sentinel, parent Tribune Co. and Google were trying to sort out the mess and pointing a few fingers.

No one was saying why the story popped up on the Sun-Sentinel website at about 1 a.m. Sunday in the first place. Whatever, the reason, the Google News search bot quickly picked it up. Because the story lacked a time stamp, Google News automatically assigned that day’s date to it (note to Google: you might want to revisit this policy), and that’s when all hell broke loose. A few minutes later, traffic from Google began to pour in. It remained heavy all day Sunday, making the story one of the most viewed on the Sun-Sentinel site. On Monday morning, an investor forwarded the story to Bloomberg News, which posted it to its subscribers. Bloomberg quickly issued a retraction, but the damage had been done.

The question hanging over the whole fiasco: who are investors going to name in the class action suit?

Say It Ain’t Zell!

Is Sam Zell gearing up to buy the San Diego UnionNews-Tribune? That’s the word on the street, according to this E&P account. With Tribune Co. barely able to meet its existing debt obligations, it seems doubtful that Sam Zell would want to make an acquisition, but hey, you have to admit that the name fits well.

And Finally…

Esquire

Esquire‘s 75th-anniversary issue has hit the newsstands, and 100,000 copies of the 725,000-circ monthly are using some eyebrow-raising technology to add a digital feel. A 10-inch-square-inch display on the cover of the issue flashes the theme “The 21st Century Begins Now” with a collage of illuminated images.  On the inside cover, a two-page spread by Ford also has a 10-square-inch display with shifting colors to illustrate the car in motion at night.

The stunt can’t have been cheap. Media Bistro says it involved Chinese electronics that came by refrigerated truck via Dallas to a Mexican manufacturing facility, which assembled the conductive ink engines that energize the display. The cover show is powered by batteries that were themselves printed in conductive ink. The displays were developed by E-Ink Corp.

The Politico will partner with several newspapers to deliver political news in exchange for ad placements. The Politico will also sell ads to national advertisers that will be placed in partner newspapers and sites in return for a share of revenue. Early partners include the Atlanta Journal-Constitution, Philadelphia Inquirer, Denver Post, and the Cleveland Plain Dealer. 

People who complain that the implosion of the newspaper industry will create a vacuum in American democracy should perhaps take a harder look at The Politico. Launched just a little over 18 months ago as a specialized print/online/broadcast hybrid focused exclusively on politics, The Politico is reportedly profitable and has become a must-read for political junkies. Those folks are pretty desirable to advertisers. The company claims that it has more high-income and highly educated readers than Forbes.com or WSJ.com. 

Lindsey McPherson of American Journalism Review takes a look at The Politco’s success. The venture has succeeded in attracting top journalists who are, by most accounts, turning out first-class work. While The Politico makes most of its revenue from a print edition distributed on an unusual schedule (three days a week, but only when Congress is in session), its business model is clearly to grow in all media in which it operates. The site features a mish-mash of articles, blogs, video and slide shows. While that kind of stuff is pretty typical fare for all newspaper sites these days, The Politico is different. Its tight focus on politics gives it a kind of nudge-nudge insider feel that adds edginess to its videos and thematic slide shows. You get the feeling that these guys know the inside scoop. 

The Politico’s mission statement is a matter-of-fact explanation of why the collapse of newspapers has created a need for ventures like this. Born amid the early rounds of newspaper layoffs, the company promotes its journalists as brands, even encouraging them to peddle their work elsewhere. “Today, many of the reporters having the most impact are those whose work carries a unique signature, who add a distinct voice to the public conversation,” the mission statement says. “Their work, in other words, matters more than where they work.” The AJR article quotes several top reporters from major newspapers praising The Politico.

Game-changer

One of the most common complaints we hear about the death spiral of American newspapers is that it will leave an information gap. Citizens will no longer have the benefit of big Washington bureaus to investigate the government and keep government honest. While it’s true that decimated Capitol Hill news staffs will no longer send 100 journalists to cover the same Presidential press conference, there’s reason to take note of new models like The Politico’s.

Perhaps what will emerge is highly specialized news organizations that publish in whatever media make sense and that do one thing very well. Sites like Talking Points Memo and The Smoking Gun are already demonstrating that this model can work. These organizations will provide the same watchdog function as newspapers, but they won’t be distracted by the need to cover high school sports as well as Congressional committee meetings. As long as they attract the right audiences, the ad dollars will emerge to support them.

The idea of branding journalists ahead of media organizations is particularly noteworthy. We’re often asked what the future holds for professional journalists. Will there even be journalism jobs in the future? The answer is a resounding yes, but the new realities of the more competitive market will force journalists to be faster on their feet and more responsive. The cushy staff jobs are going away, and good riddance to them. There will still be a need and a market for good reporters, but the people who succeed will be the ones who work in a variety of media for a variety of bosses, moving quickly between assignments and selling to the highest bidder. They will be adept at promoting themselves as the brand rather than their employers. A few prominent journalists have done this in the past. In the future, nearly all will need to work this way. The Politico recognizes this and that’s why it may be an early glimpse at the future of news media.

Googling the Morgue

Continuing on its campaign to digitize the known body of human knowledge so that it can sell ads against it, Google announced a campaign to scan and index pre-digital age newspapers. The company has partnered with about 100 newspapers to digitize their archives. The venture will use technology developed for Google’s two-year-old book scanning project that figures out what articles are about and serves other relevant content – as well as ads – against them. Google used the 1969 moon walk as an example of the kind of pre-Internet content it will make available to the world. We just hope it doesn’t fail to include this classic from The Onion.

Newspaper In Your Pocket – Almost

Plastic Logic display

E-ink continues to evolve to the applause of a newspaper industry desperately seeking an alternative to costly newsprint. Plastic Logic used the Demo conference to introduce its electronic newspaper reader.  The device is slim, lightweight and big enough to display a full page of a newspaper. The Plastic Logic Reader uses a flexible plastic display that’s about the size of a standard sheet of paper, or 2.5 times as large as Amazon’s Kindle.  The big advantage is the slim profile and light weight. The reader comes the closest of any electronic device to being truly portable. However, it hasn’t yet achieved the Holy Grail of the e-ink industry: a display you can roll up and stash in your pocket. That’s coming, officials say, but it’ll be at least a couple of more years. E-Ink Corp. has been working toward this goal for more than a decade and its research is now bearing some commercial fruit. You can see a demo video on Plastic Logic’s home page.

And Finally…

Ink-stained wretches who complain that industry layoffs hit working stiffs the hardest can perhaps take some satisfaction in Gannett’s announcement of consolidation moves that will eliminate 100 management positions around the company. Circulation, finance and some other functions that are common across Gannett properties will be merged into regional groups, with some managers getting promotions and others getting the door. The cuts are in addition to the 1,000 people just laid off.

The New York Times Co. will close its regional distribution center in January and outsource the business to a third party. The move will eliminate 550 jobs. The Times’ City & Suburban center delivered The New York Times and about 200 other newspapers and magazines to outlets in the New York metropolitan area. Laid-workers will be offered a severance package.

McClatchy Planning to Go Private?

Alan Mutter blows the whistle on some goings-on at McClatchy that could be a precursor to an effort to take the company private. The company filed a document with the SEC late on Friday stating that CEO Gary Pruitt had resigned as one of the four directors of the family trusts that control McClatchy stock. There are three possible reasons for the move, Mutter theorizes: The family plans to take the company private; Pruitt himself plans to buy the company; or Pruitt is about to be shown the door.

Mutter’s numbers indicate that it wouldn’t cost a whole lot for McClatchy to buy out its shareholders at a 20% prevmium to the company’s depressed stock price and that it could use funds now being applied to shareholder dividends to pay down its $2.1 billion debt. This makes a leveraged buyout appealing if the buyers truly believe in the value of a newspaper business. It would also likely spark a protest by jilted shareholders, who would be left with a few pennies on the dollar as a result of McClatchy’s 88% stock decline over the last two years. Mutter knows finance and his analysis is convincing. Something big is probably brewing at McClatchy (for the record, the company told the Sacramento Bee that the move is a routine adjustment).

Miscellany

We mentioned last week that the Riverside Press-Enterprise of southern California was planning to lay off 30 people. What we didn’t know is that the paper has also had 120 employees accept its buyout offer. That brings to 413 the number of A.H. Belo employees who have opted for buyouts. It’s not clear what the total employment is at the Press-Enterprise. A listing on Manta says 700 but Spoke says it’s over 1,000. If Manta is correct, then the departure of 150 staff is a big hit.

 

The chart (from Alan Mutter) says it all. The U.S. newspaper industry experienced its ninth consecutive quarter of falling print revenue, according to the Newspaper Association of America. Worse is that the rate of decline is accelerating and online revenue is now dropping, too. Although the second quarter decline was only 2.4%, it’s a stark contrast to the 20%+ growth rates the rest of the industry is experiencing.

Classified advertising is a disaster. Look at these numbers: Real estate ad revenue down 36% to $619 million; recruitment advertising down 40% to $600 million; automotive classifieds down 23% to $580 million. The lifeblood of newspaper profitability has historically been classified advertising and the blood is gushing away.

This has a ripple effect on online ads, which had previously been the industry’s sole bright spot. MediaPost puts its finger on the problem: “Unfortunately, most of the growth in [newspaper] online revenues was due to ‘up-sells’ from print classified listings. As the volume of print listings declines at an ever-faster pace, that means there are fewer opportunities for online ‘up-sells.'”

TechCrunch chips in: “Advertisers trained to buy bundled ads are more likely to drop the entire bundle when making budget cuts.”

Inflation-adjusted newspaper revenues

These trends continue to have all the makings of a classic death spiral: accelerating revenue declines create alarm among traditional customers who start fleeing in droves out of fear of being associated with a dying business. Print revenue declines have accelerated each quarter for the last two years, with the most profitable parts of the business taking the biggest hits. For example, automotive advertising, which totaled $5.2 billion in 2003, is now on track to do less than $2.5 billion in business this year. That’s more than a 50% fall without accounting for inflation.

If you do account for inflation, it gets worse. As the above chart by Tim Windsor shows, inflation-adjusted newspaper revenues are now below 1982 levels (click here for a readable version). The right side of that chart looks like a cliff, which is what the newspaper industry is hurtling toward.

There are simply no bright spots left. Between a recession, Internet competition and dramatically increased newsprint costs, this is a perfect storm. Quoting TechCrunch: “At this rate, there won’t be an industry left by the end of next year.”

Or, as one comment on Mutter’s blog put it, “The best news recently at our paper: the cleaning staff determined that the mold growing under the Coke machine is not hazardous.”

The New York Sun, which was launched in the shadow of 9/11 with the mission of providing a politically conservative alternative to The New York Times, is on its last legs. An eloquent column by Editor Seth Lipsky says the Sun, which is published on weekdays, will have to shut down at the end of this month if the owners can’t find financial backing. Interestingly, the Sun tried to compete with the worldly Times by being hyper-local, a strategy that is sometimes cited as the salvation of the newspaper industry. “It would put Manhattan and New York state news on its front page (in contrast to the Times’ emphasis on national and international news over local issues),” reads a very good description on Wikipedia. While the paper claims a readership of 150,000, its actual daily sales are less than 15,000. Talks are underway with potential partners and investors to continue publishing the Sun, but time is clearly running short.

Crisis is breeding cooperation in Philadelphia, where Newspaper Guild members from the Inquirer and Daily News voted to forego a scheduled $25-a-week pay hike for at least a year. The owner of those two papers is in serious danger of defaulting on its debt. “We want to see this company thrive, now and in the future,” said the Guild’s administrative officer.

There’s a new group on Facebook called Newspaper Escape Plan. “The newspaper industry is an abusive relationship,” writes Martin Gee, who created the group. “We keep getting beat up but we keep coming back because we love him.” The group has signed up 1,300 members in less than three weeks. Discussion forums are quiet but the wall is busy. (via Robb Montgomery).

The weekly Raytown (KanMo.) Tribune is no more. The paper stopped the presses after 83 years, citing the same pressures everyone else cites. Most of its 11,000 circulation was free, but there were a couple of thousand paid subscribers. If you want to see something depressing, take a look at its home page.

The independent Daily Orange campus newspaper at Syracuse University will stop printing on Fridays. However, its problems appear to be an exception to the rule. The president of the College Newspaper Business and Advertising Managers organization is quoted in this AP story saying that campus newspaper ad revenues actually rose 15% in 2007. Apparently, it’s all about focus.

Layoff Log

The Oklahoma City Oklahoman will cut 150 positions, beginning with an early retirement offer to 102 of its over-55 workforce and making up the difference through layoffs. The paper employs 1,100 people. The publisher noted that newsprint costs are up 40 percent.

The Providence (R.I.) Journal, which is often cited as an example of a paper that has thrived in a competitive market by staying true to its community roots, will lay off an unspecified number of employees. Owner A.H. Belo had hoped to avoid cuts through a buyout offer, but there weren’t enough takers. There’ll also be layoffs at The Dallas Morning News (50 jobs) and the Riverside (Calif.) Press-Enterprise (30 positions).

The Missoulian of Montana will lay off four full-time and three part-time employees. No word on whether that’s a lot for Montana’s third-largest daily.

One of those employees is going to work for the Ravalli Republic in Hamilton. But the Republic is also laying off three full-time and three part-time people. But it’s also planning to make another newsroom hire in the next few weeks. Which is a lot to digest for an organization with only 17 employees.

Clarification on yesterday’s reference to a vaguely worded item in Editor & Publisher about the Raleigh News & Observer: The paper is offering buyouts to 40% of its employees. It doesn’t expect to cut 40% of its staff, although it may get there if business doesn’t improve. “We’re not anywhere near where we thought we were going to be on the revenue side,” says the publisher. The N&O is also consolidating some sections to save on printing.

And Finally…

How will technology innovation support journalism and participatory democracy? Heck, we don’t know. We’re just a blog. But the Media Giraffe project will delve into that issue at a conference in Philadelphia Oct. 23-25. It’s called Rebooting the News, and the focus is on how educators can respond to the alarming flight of young people from traditional news media. Registration is downright cheap at $105.

Here’s a cost-saving idea: pay your best employees to leave the company. Sound dumb? More than 20 newspaper companies have done just that during the past year.

Buyouts are a popular alternative to layoffs because they’re voluntary and they avoid a lot of anguish. From a management perspective, though, buyouts are a terrible idea. They reward the employees who are the most ambitious and whose skills are the most marketable. The people who apply for buyouts tend to be the people who are confident they can find work elsewhere. In most cases, these are precisely the people a company should want to keep.

A layoff is a far more effective management tool than a buyout. It’s a way to slim down the organization from the excesses brought on by past prosperity. During good times, organizations tend to grow fat and inefficient. Growth masks a lot of problems and no one wants to cut staff when they don’t have to. As a result, organizations are inclined to hold on to marginal performers and sustain questionable jobs because the alternative is too painful. Nearly every company does this. It’s human nature to tolerate a certain level of inefficiency in order to avoid the emotional turmoil of depriving someone of his livelihood.

Invariably, a slowdown comes and companies have to cut back. This hurts, but it’s also an opportunity to make adjustments to the organizational structure to prepare for new growth. It’s a way to get rid of under-performing employees and unnecessary jobs while also redoubling the commitment to top performers. Good companies reward their best people even during difficult times. Across-the-board cutbacks make no sense because they penalize your best people. Why would you want to do that?

A buyout takes bad management to a new level. In effect, the company is saying, “You’ve taken initiative to develop skills that are in demand in our industry. We’ve paid you to do this. Now please go away. And take this bonus with you.”

Buyouts are very popular with ambitious employees who are seeking new opportunity. Who can blame them? Wouldn’t you rather get paid to look for a new job than do it in your spare time? People actually slept in the lobby of the San Diego Union-Tribune this week in order to take advantage of a limited buyout offer. Those are motivated folks. Could management possibly find a more productive way to harness that ambition?

Sorry if this sounds calculating and insensitive, but businesses aren’t charities. They need to run as efficiently as they can, particularly at a time like this. Buyouts are simply a way of dodging unpleasantness by paying good people to leave the company. They’re bad management.

Miscellany

They’re piling on the ailing San Francisco Chronicle. Clint Reilly digs up some past dirt about the early days of Hearst ownership. Of course, this happened eight years ago, so keep it in perspective. One passage did strike a chord, though: “I repeatedly witnessed bizarre behavior at newspapers that no other business would ever allow. Some reporters and columnists were frequently drunk or on drugs on the job. Such conduct was not simply tolerated, it was condoned. These third-rate Hunter Thompsons screwed up appointments and scrambled facts but were never called to account for their mistakes, incivility or disruptive behavior.” Sound familiar to anyone?

The Wall Street Journal is redoubling its commitment to print with plans to launch WSJ. magazine this weekend. The coming-out party gave new Journal managing editor Robert Thomson the chance to take a shot at the rival New York Times and to use the word “eschatological” in a sentence.

Here’s a little good news for magazine publishers: rich people are actually reading more magazines. Research by Ipsos Mendelsohn shows that folks making more than $100,000 a year said they read 15.3 publications on average compared to 15.1 in 2003. People who make more than $250,000 read an average of 24 print publications. Favorite titles: People, National Geographic, Sports Illustrated, Time, Newsweek and Southern Living. Four in five rich folks also shop at Wal-Mart.

Is the Raleigh News & Observer really seeking to cut 40% of its staff? That’s what this short item in Editor & Publisher appears to say. If so, this would be the paper’s third round of job cuts in the past year. Oh, and it’s a buyout.