publication – Memphis Flyer

On Wednesday, March 21st, Joseph Pepe, president and publisher of The Commercial Appeal, issued a memo filled with good news and bad. He acknowledged the paper’s implementation of “many cost-saving measures” and noted the creation of nine new advertising zones. Then he dropped the bomb. “These steps have not been enough to stabilize our profitability,” Pepe wrote, announcing yet another round of employee buy-outs to reduce the Memphis Publishing Company’s payroll costs.

By week’s end, employees of three more Scripps newspapers received similar notes from their publishers. In each case, management cited declining ad revenues and stressed that “attractive” buy-out packages, with severance pay and short-term insurance plans, are a realistic, humane alternative to layoffs.

At a glance, this looks like an evenhanded act of corporate benevolence in the face of irreversibly dire circumstances. But that’s not exactly the case.

If daily newspapers are dying, it isn’t because they’re not profitable. It’s because the 15 to 20 percent profit margins that would make most CEOs giddy just aren’t enough for modern media conglomerates. And instead of making a full-frontal assault on the real problem — dwindling circulation — newspapers across the country continue to reduce the size of their products, cut staff, and lean more heavily on wire copy and reader-supplied content. Scripps has followed in the footsteps of newspaper giant Gannett, which, as newspaper scholar Aurora Wallace aptly cited, “champions the local in the abstract as it commits fewer and fewer resources to its service.”

Scripps execs pulled a head-fake in January by suggesting that the company might sell or otherwise separate itself from the “sagging” newspaper division. Then, almost immediately, they said they wouldn’t. The reversal was duly noted by Ad Age magazine in a January 22nd column explaining how Scripps — “a mid-tier media company from Cincinnati” — became a Wall Street favorite with stock prices at a 52-week high and poised to climb. Scripps has the 16th-largest online audience in the country. It’s bigger than Comcast, Viacom, G.E., and CBS. Scripps also made an expensive but wise decision to own all content created for the company’s ever-more-profitable cable holdings.

Buy-outs at the CA and other Scripps papers come on the heels of news that the projected decline in first-quarter revenue, a figure originally pegged at 5 to 7 percent, might be closer to 6 to 8 percent. The numbers don’t inspire confidence, but previous efforts to staunch the bleeding by cutting staff and gutting their newspapers have done little to attract more readers and more revenue. Does anybody really think that this time things will be different?

Newspapers across the country are struggling to maintain their big bottom lines, but Scripps is in a unique position to reinvest and rebuild its print division. Its diverse holdings and healthy outlook should create an environment conducive to enlarging newsrooms, stepping up local coverage, and broadening product visibility. But instead of reinvesting in the communities it hopes to profit from, Scripps is once again applying leeches. Consider this: The CA has reduced staff in six of the past seven years. If you think that doesn’t affect the quality of local news coverage, I’ve got a bridge in Brooklyn to sell you.

In 2006, advertisers spent $46.6 billion on daily-newspaper advertising nationwide, down 1.6 percent from 2005. Circulation took its largest plunge in 15 years. Nevertheless, newspapers remain profitable, and since they often set the editorial agenda for local radio, television, and Internet news sites, they are arguably more important and influential than ever. Scripps has taken risks in the development of its cable and Internet properties. The company has the resources to be similarly courageous with its newspapers, but instead they are in death mode.

“You’re either dying or growing,” Pepe told the Flyer in 2006. “You’ve got to pick one.” Based on the uncannily similar language in the memos distributed to Scripps employees last week, it would appear that the CA‘s parent company has made its decision.

Chris Davis is a Flyer staff writer.

A few months after publisher Joseph Pepe arrived at The Commercial Appeal, he sat down for a candid interview and described the state of that venerable institution as he saw it:

“When I got here, this newspaper was in total cost-control mode,” Pepe told the Flyer‘s Chris Davis in an April 7, 2006, story. “[The management wasn’t] looking for ways to expand markets and grow revenues. They were in total death mode. You’re either dying or growing. You’ve got to pick one.”

Fast forward to March 21, 2007. In an e-mail to employees, Pepe announced a program for a voluntary staff reduction, a cost-cutting measure that was being taken after other steps had proven unable to “stabilize our profitability.” Sixty-four employees — management and rank-and-file alike — who have completed 10 years of service with the company and will be 55 years of age as of April 2, 2007, are eligible. They can decide to take the offer or leave it. The CA has not said what will happen if no one decides to take it.

There were no staff reductions (voluntary or otherwise) in 2006, a welcome respite, considering that there were reductions in 2002, 2003, 2004, as well as in 2005, when a buy-out plan was already in place when Pepe arrived from St. Louis.

To that end, some give Pepe credit for keeping the hounds at bay for just over a year, a period in which the newspaper introduced customizable editions and more advertising zones for Millington, Bartlett, Cordova, Germantown, and Collierville, while attempting to up the ante in DeSoto County. However, the CA also saw a number of reporters and managers exit for a variety of reasons.

So now, with new cost-control measures being undertaken, it’s fair to ask — using Pepe’s words as markers — is the CA dying or growing? Is his strategy failing, or are these latest reductions an inevitable fact of life in a slow-growth industry?

Neither Pepe nor CA editor Chris Peck returned calls seeking comments for this story. The Memphis Newspaper Guild Local 33091, one of the paper’s three labor unions, declined to comment as well. The union has been without a new contract since 2004.

“These are challenging times for the entire industry,” wrote Pepe in his March 21st e-mail. Two other E.W. Scripps papers — the Denver Rocky Mountain News and the Ventura County Star — also announced voluntary staff reductions. At the RMN, 50 employees are eligible; there are 22 eligible at the Star.

“I’ve been in the business 29 years, and I’ve never seen a slump come on as quickly as this one in advertising dollars,” said Star publisher and president Tim Gallagher in the Star‘s March 22nd story on its buy-out offers.

A few weeks ago, Scripps revised its outlook downward for its newspaper division. It expects total revenue to be down 6 to 8 percent in the first quarter of 2007 compared to the same period a year ago; the previous estimate had been a decline of 5 to 7 percent. For the full year, the company expects the percentage decrease in newspaper revenue to be in the low single digits, as previously forecast, the company said.

It also doesn’t help that some Scripps executives ruminated briefly about the potential of spinning off the newspaper division or selling some of its assets. And though executives later denied any sale plans, it has been clear that Scripps is focusing its energies on its high-growth businesses, such as cable TV networks and interactive media units.

So, back to the cost-cutting. At the Star, there’s also a hiring freeze, though that doesn’t seem to be the case at the CA. Several new reporters have been hired in the last few months and other staffers have been shuffled to fill areas of need. And in some cases, like the departure of food critic Leslie Kelly, the CA has partly filled those openings through agreements with free-lancers such as Jennifer Chandler.

In interviews with several CA editorial employees who would qualify for the buy-out, most expressed a reticence to discuss the offer because it’s still unclear what the terms will be.

Though the terms were not disclosed in Pepe’s e-mail, a later brief on the buy-out included an indirect quote from Pepe, who said “they [the offers] are generous enough, including health benefits, to give people close to retiring an incentive to help close the gap.”

Since the Star‘s Gallagher gave a similar appeal to those close to retirement, that paper’s offer could indicate the kind of buy-out being offered at the CA. The Star‘s package includes “a week’s pay for every six months an employee has worked for the newspaper, for up to a year’s worth of pay, and 18 months of health benefits covered by the company.”

Richard Thompson’s Web site, Mediaverse:Memphis.blogspot.com, focuses on Memphis media. He is a former business writer for The Commercial Appeal.