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How Gannett Newspapers Got into This Fix

December 1st, 2008 · 18 Comments · Hong Kong, Sports Journalism, The Sun

Or, we could subtitle this post, “the numbers at Gannett leak out, and they reinforce what Gannett veterans already knew.”

That is, Gannett never has owned newspapers. By its own preferred corporate-speak, it has owned “profit centers” — and the greedy bastards who ran the company were bold enough to call it just that.

A former long-time Gannett employee (as I am) named Jim Hopkins has created a blog at gannettblog.com that just has to be the single most painful piece of citizen journalism Gannett Co. Inc. ever has encountered.

Gannett apparently is going to conduct a huge round of layoffs this week, even as the company’s newspaper-by-newspaper profit margins, from 2007, were released on (and this is the correct address) gannettblog.blogspot.com last week.

First, check out some of these numbers. They don’t border on the obscene, they have crossed the frontier and taken up residence in the capital city of Outrageous Profit.

Look at Green Bay. Look at Phoenix. Look at, closer to our SoCal home, Palm Springs.

Thing is, Gannett has been taking profit margins like that out of its “profit centers” for decades.

Those of us who worked in Gannett, as I did from 1976 until 1999, knew the company made boatloads of cash. But what we knew tended to be limited to numbers that sort of leaked around our particular newsrooms. We often were unaware of what the average Gannett newspaper profit center was generating. At my paper, we heard numbers like “30 percent” and were stunned.

Now, here, we have leaked to gannettblog.blogspot.com the whole shootin’ match (aside from USA Today), and it shows just how enormous profit margins were in 2007 — when the economic collapse was in the air and the company should have been investing in its infrastructure, and not raking off the usual take from the various and sundry communities it, uh, serves.

OK, America is a capitalist country. We are out to make a profit in whatever business we are part of, from the family restaurant to the Wall Street hedge funds.

The moral crime of newspaper chains such as Gannett is how much profit it deemed necessary.

People go nuts when Exxon or other oil companies report billions of dollars of profit. But that profit almost always is 10 percent or under. The profit itself is huge because the numbers are so big.

Gannett papers worked on smaller scales, but the percentage of what was taken out of each of its communities and sent off to Arlington (and, later, Reston) was staggering. Not even the oil companies expect, ever, 40 percent profit.

There is this, too: At some point, Gannett should have remembered it was a media company, a newspaper company, with all the First Amendment privileges and responsibilities that brings. It could have and should have spent more on its newspaper products and tried to scrape by on, oh, 20-25 percent profit.

Thus, when the crisis came — and we are in it now — Gannett papers had not progressed as they should have in new technologies. They are not as deeply enmeshed in their newspapers’ communities as they could have been and should be. They have not established a standard for competence and the accompanying reputation (as, say, the New York Times and Wall Street Journal have) for such … and in times of crisis Gannett papers’ readership felt marginal loyalty to the hometown paper and is just walking away.

Remember, too, the Gannett model was based on a sort of advertising tyranny. Gannett preferred medium-sized papers in markets with little or no local TV, with little or no print competition — so it could set advertising prices higher than they should have been because advertisers had no real options for communicating information.

And if a particular newspaper suddenly found itself in a bad situation, and was unable to hit those goals of 20, 25, 30 percent profit … then Gannett was looking for the “eject” button.

That is precisely what happened to my newspaper, the San Bernardino Sun (which, believe me, was quite a good suburban newspaper for about 20 years there). It reported a profit of only 8 percent in 1998, and so in 1999 it was abandoned to the not-so-tender mercies of MediaNews — that is, Dean Singleton’s ridiculously leveraged, cut-and-slash journalism gulag.

And, a decade later, The Sun is an empty shell, its communities underserved, its staff shriveled to perhaps 30 percent of its highs a decade before, and long-time readers alternately laughing and wincing at the thin, amateurish product dumped on their driveway — if the circulation department hasn’t suffered another of its collapses.

The biggest problem for American newspapers is this: It isn’t that they all are unprofitable, because even now most of them are. It’s that they are not profitable enough. Wall Street got used to those enormous profit margins, and when Gannett couldn’t produce them, Wall Street dumped the company like a bad habit. The stock price now is about $8. During my Gannett career, it ranged from $30 and up — and it was $30 only because it had just split and soon would be climbing again.

The L.A. Times still makes money. The Chicago Tribune still makes money. Most U.S. newspaper still make money, and will even in a horrible year like this one. But it isn’t enough. That is what is killing American journalism outside the handful of papers owned by families or individuals with the moxie (and authority) to ride this out.

So, because Gannett’s profit isn’t high enough, a bunch of people inside Gannett will become casualties of the Great Newspaper Die Off of 2008, specifics of which are expected to come down this week, according to gannettblog.blogspot.com.

Sigh.

Oh, and here is one amusing sidelight from the same blogger, about the mechanics of firing people — a skill set the soul-dead management drones have mastered over the past year.

I can imagine Gannett, being the highly centralized kingdom it is, long ago issued very detailed memos on exactly how to get this done. As opposed to, say, Dean Singleton, whose company allowed me to clean out my own desk and e-mail myself a bunch of files before they got around to severing my company links. Gannett doesn’t make that sort of mistake. (I just hope the lackeys they have cleaning out desks don’t break too much crockery. And make sure you pack my pica poll; I am attached to that thing.)

Anyway, the way out of this? Something like not-for-profit institutions, or locally owned publications backed by deep-pockets guys with deep ties to the community who can stand living off a 10 percent profit margin and are willing to endure the “pain” of a couple of bad quarters or even a bad year before they start chucking employees into the abyss.

The corporate model of print journalism has failed. Better off with some hometown idiot running the business, because at least you have a shot that everyone knows his personal preferences and can edit them out of their newspaper reading … and what is left is a local product that actually covers the community and plows its profits back into it.

Ack.

I still know lots of people who work for Gannett. Good luck, all of you.

For those of you about to be fired … don’t be surprised at what happens, even if you gave most of your adult life to Gannett. There is no loyalty here. There is no sentiment. You will be on your own.

Don’t take it personally. You probably made too much money because you were too good and stayed too long, and that salary stuck out on the ledger sheets.

You will be OK. And there will be some relief, actually, knowing it is over. It will be liberating.

Take a few months. Or more. Look around and give serious thought to what you would like to do next. (And, no, this is not a good time for a lot of discretionary spending.) Journalism may seem like a really narrow skill set, but you know more about a lot of things than the average person. You will find a slot somewhere, whether it’s public relations or some small online startup or a bookstore or teaching.

You didn’t fail. The company you worked for failed.

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18 responses so far ↓

  • 1 Willie King // Dec 2, 2008 at 12:28 am

    Got laid off in 1989 after 10 years with a paper. I was ahead of my time. The paper had ventured into a neighboring community that already had a larger paper. Lost a bundle of money. Our paper responded by cutting 90 grand in the salary of middle managers — 30 grand or so of it being mine, which wasn’t all that bad for those days. It wasn’t Gannett. Never had a problem finding a new job when i really needed one, but as you get older you become more entrenched in your community. Been leery and suspicious since ’89 and surprised by nothing. Do it to them before they do it to you … if you can.

  • 2 EDP // Dec 2, 2008 at 1:58 pm

    Good post. I had always heard bad things about Gannett’s sweatshop culture, and it certainly lived down to its reputation when it bought the paper I left two years ago. I’m glad I got out before the bloodletting began, but it’s terrible to see so many hardworking journalists be treated this poorly.

  • 3 j // Dec 2, 2008 at 2:31 pm

    Worked for the (Gannett) Courier Post in NJ over a quarter century ago for a year in which it was a spectacularly good newspaper, cracking story after story in the Philadelphia market. Spent a little too much money on this distinction. Overnight one day, the editor and publisher were fired and the new publisher, a commissioned Gannettoid, was installed in his office WITH HIS PARKING SPACE PAINTED by noon the next day. Crappy paper ever since.

  • 4 I'm not Gary Pruitt // Dec 2, 2008 at 2:48 pm

    Viewed one way, these numbers are absolutely stunning. Viewed another way, they’re not surprising in the least bit. But I can’t help but wonder: If every major chain’s paper-by-paper profit numbers were leaked and published like Gannett’s, would the public finally wake up to the shell game these companies have played on them and demand a change? The only way I see the industry altering its business philosophy is if readers demand — with the real threat of boycott — that the companies stop being content to cut staff and put out a shoddy product for the sake of maintaining these shameful margins.

  • 5 Craig // Dec 2, 2008 at 11:15 pm

    Your blog was very insightful for me…a young aspiring sports/online journalist who took the leap toward the Web/grad school after my supervisor at Gannett’s Democrat and Chronicle told me things looked very grim and even though I worked very hard, nothing was assured. I’d still love to go back into print journalism if I can, and you’re right that the corporate model has failed. Let’s hope these new models do spring up. Great blog.

  • 6 TomB // Dec 3, 2008 at 7:22 am

    As a Gannett employee from 1980 until 2007, I agree. As revered as Doug McCorkindale and Gary Watson were (especially by Wall Street), they did not reinvest those profits into Gannett’s people and infrastructure, which would have protected the company in the long term.

    Another egregious mistake was ignoring the internet, and failing to comprehend the impact of specialized cable TV programming, i.e. ESPN. (Remember Gannett Broadcast?) Management was too old school, believing that newspapers had survived radio and TV (remaining highly profitable), so they certainly would outlast what was seriously considered a fad for many years.

    In the end, Gannett’s doctrine of cutting its way to prosperity didn’t save the stock price or the company. Instead, it destroyed good products, good people and hurt the communities they professed to serve.

    Print might be dead, or dying. But there is still an enormous demand for newspapers. Good newspapers. Strong newspapers. Had Gannett only reinvested in itself years ago, so that today it was still providing the same level of customer service to subscribers and advertisers, and still delivering impact journalism, circulation would not be falling like its stock price. (Guess what, Gannett? The stock price tanked anyway, in spite of all your cuts.)

    But Gannett – other media companies are just as guilty – abandoned its core principles and responsibilities to the communities it serves (including the non-profits making a real difference), so readers and advertisers are walking away. Who can blame them?

  • 7 Opinion // Dec 3, 2008 at 8:13 am

    I remember being told the reason our margins had to be this high was due to the large capital investments we had to make from time to time in press halls and presses. When is the last time most of these newspapers have made these investments? Where did that money go, to the banks in interest for debt they did not need.

  • 8 David Poulson // Dec 4, 2008 at 4:59 am

    Some very good points in this blog. Also some cheap shots. It’s too easy to blame corporate honchos as greedy SOBs. Certainly some of them are. But who’s pushing for spectacular profit magins? Those of us with 401Ks and other retirement investments are also to blame. We’ve told the market to maximize our profits. That pressure is pervasive.
    I love newspapers and newspapering. But I’ve never told the people who manage my portfolio to get me the best rate of return on everything but newspapers. Who has? Who even has the mechanism to do that?
    This is a very complex issue. It’s simplistic to blame evil news managers out to bleed their communities dry.
    Although there certainly can be some of that.

  • 9 George Alfano // Dec 5, 2008 at 8:05 am

    The people in news management and managers of newspapers are the primary people to blame. There are other factors, but what the publishers did is primarily responsible for this situation.

    It’s great to say, as the above poster did, “We have met the enemy and it is us.” It’s just not the real world. In the first place, individuals who aren’t fund managers have little control over their 401-K portfolios.

    Newspapers are unique in their greed because of the large profit margins they feel they are entitled to. In most businesses, a 10 percent return is considered fantastic. But newspapers kept cutting, kept doing things on the cheap, and didn’t invest in their product. This failure is the business failure – many businesses recognize their need to invest for the future.

    The newspapers are in panic over challenges from the Internet, where advertising isn’t extensive or profitable with the exception of sales of music and books. Newspapers are the worst-managed business in the US today.

  • 10 Dave // Dec 5, 2008 at 6:43 pm

    You’re wrong about one thing — Gannett handled the layoffs themselves reasonably well (at least at my paper). I was able to clean out my old desk, and when I got home my e-mail and company blog were still working (though they got shut off the next day).

    Gannett Blog is doing a nice job of posting the total numbers, but I wish there was someplace that had all the names as well. I’m still trying to learn who all got laid off at my paper, aside from the handful who got the ax before I did.

  • 11 Elizabeth // Dec 9, 2008 at 1:16 pm

    My friend worked for Gannett for almost 20 years. She worked in recruitment advertsing, bringing revenue in the amounts of $70,000-$100,000 per month. Brought in a CIRCULATION DIRECTOR to TRY and run advertising – ruined the newspaper – Gannett sold them and we still have ONE friend working there. All the rest are gone. Now we laugh about her working there – it is the joke of the community – Hopefully Julie Metzger in Muncie will lose her job. She played a part in bringing down the CT.

  • 12 Kevin Boneske // Jan 24, 2009 at 2:14 pm

    There Gannett goes again – placing profit margins over people.

    The Gannett Corporation has implemented more change for the worse in the newspapers it owns in Northeast Wisconsin. The megacorporation’s local staffing reductions in early December, for example, amounted to throwing people overboard shortly before Christmas as part of an effort to boost company profits nationwide.

    However, the reduction in news personnel at the Door County Advocate, which Gannett bought out from Frank Wood almost 4 1/2 years ago, will undoubtedly bring with it a further decline in the quality of news content and give people less reason to buy a paper or advertise in it. The “flash” of the Advocate’s new design can’t hide what the paper lacks in journalistic “bang,” such as in-depth investigative reporting and commentary that holds public officials accountable.

    While acknowledging the replacement of the editor with someone already an editor elsewhere, Gannett’s self-serving spin announcing the Advocate’s staffing reductions conspicuously omitted mentioning the departure of the assistant editor, someone who had more than 20 years of reporting experience at the paper.

    In contrast, Gannett proudly proclaimed in the Green Bay Press-Gazette that it wasn’t eliminating any reporting or advertising sales jobs at that daily newspaper, where president and publisher Kevin Corrado claimed, “We are committed to our First Amendment responsibilities.”

    The megacorporation obviously isn’t as committed to its “First Amendment responsibilities” at the twice-a-week newspaper, where Corrado claimed the personnel moves demonstrated “we remain committed to serving our customers in Door County.”

    Instead of being someone who champions the First Amendment by holding public officials accountable, Corrado is better known over the past two years for having assumed the “editorial position” when he attempted to cover the Advocate’s hide after one of its reporters had too much to drink and was driving with the assistant district attorney as a passenger. Door County residents won’t be served by someone who prefers being cozy with people in power, something for which the Advocate’s new editor is also notorious.

  • 13 Kevin Boneske // Jan 24, 2009 at 2:16 pm

    Has Gannett no shame? Now comes word in Northeast Wisconsin of the megacorporation placing its puffy profit margins on the backs of the employees.

    Instead of dipping into past pocketed profits to pay employees, Gannett has announced it is imposing “one-week unpaid furloughs for almost all employees in its U.S. divisions and corporate headquarters to avoid layoffs.”

    The megacorporation’s self-serving spin announcing the furloughs, to be taken before March 28, conspicuously omitted mentioning whether the employees would be eligible for jobless benefits, either treating the affected workers like they’re being punished and suspended for a week without pay, or that taxpayers would have to foot the bill to have the employees off of work when Gannett won’t pay them to do their job.

    While the furloughs are an attempt to pump up the profits, they also take precedent over Gannett committing the time and effort for in-depth journalism. The megacorporation’s superficial reporting, however, gives people less reason to buy a Gannett paper or advertise in one.

    The megacorporation is more interested in taking money out of a local community than serving one, as evident by Gannett shutting down the Denmark Press last month, after which two new weeklies not owned by the megacorporation have emerged in the Denmark area.

  • 14 Lesley // Jan 28, 2009 at 6:37 pm

    Just got laid off Friday by a small weekly here in the Berkshire’s… general manager said the internet is a “fad”, o k ,like the telephone I guess .All it ever was about was the shameful taking of the communities money ,and when it was hard for them to keep giving to the owner and his wife who also own a Miami area paper ,they showed me the door ,after five loyal years ,no vacation ,no health insurance ,said no more check because advertisers didn’t pay ….you reap what you sow ,their day will come …

  • 15 Kevin Boneske // Feb 9, 2009 at 5:57 pm

    The negative impact that results from a monopolistic media takeover has become obvious in recent years in Northeast Wisconsin. For example, the Gannett Corporation’s buy-out more than 4 1/2 years ago of what were known for decades as the Algoma Record-Herald, Kewaunee Enterprise and Luxemburg News, which were replaced in 2007 by the “Kewaunee County News,” has brought about change for the worse with corporate cookie-cutter journalism placing profit margins over people.

    Along with the local staffing cuts, Gannett initially rolled out the Kewaunee County News in a tabloid-style publication as the megacorporation went “on the cheap” with less space for news and sports, before trashing the tabloid after only about a year of existence. The so-called “broadsheet” format that now appears also illustrates Gannett’s preference for superficial journalism.

    The year before Frank Wood sold out the newspapers he owned in Northeast Wisconsin to Gannett, former Door County Advocate editor Warren Bluhm, who is now the opinion editor for Gannett’s Green Bay Press-Gazette, described the Gannett Corporation as “the print equivalent of the Wal-Mart-style companies that swoop in, gobble up locally owned businesses and crush what’s left of local competition with predatory pricing and adherence to corporate formulas. Lord help any community that is ‘blessed’ to have its local flavor absorbed by Gannett.”

    While I held in high regard a number of the staff members who remained before Gannett’s “launching” of the Kewaunee County News, it is the megacorporation’s misguided management that has tainted what appears locally. For example, I witnessed how certain editors prefer being cozy with certain sleazy people in power, rather than publicly holding them accountable for disgraceful deeds.

    To put it simply and nicely, it was because of Gannett’s sleazy practices that I sought out employment elsewhere after more than seven years being a journalist for the former Algoma Record-Herald, Kewaunee Enterprise and Luxemburg News.

    When I wasn’t hampered by the heavy hand of Gannett’s misguided management, however, I enjoyed covering issues of interest to people in Kewaunee County. Individuals from across the political spectrum praised my election-related coverage, for example.

    I worked most of 2007 as a reporter in Wisconsin’s Northwoods, before returning to Northeast Wisconsin in early 2008 to begin another better-paying job than what I had in approximately 2 1/2 years working in the Gannett Empire.

    In 2007 I filed a labor standards complaint against Gannett with the Wisconsin Department of Workforce Development after the megacorporation resorted to smear tactics against me. The DWD found Gannett violated state employment regulations after improperly releasing false accusations about me contained in personnel records I disputed.

    While Gannett claims to promote journalistic “diversity,” the megacorporation arguably turned the newspaper market in Northeast Wisconsin into the Green Bay Press-Gannett, Kewaunee County Gannett, Door County Gannett, etc., etc. Hopefully other information sources, such as blogs on the World Wide Web, will provide true diversity by covering in-depth what Gannett would rather suppress or superficially present.

  • 16 Alicia Simonsson // Feb 24, 2009 at 8:35 am

    The media is controlled by 5 men. We must protest or we become cowards. The military -industrial -medical -pharmaceutical -intelligence stranglehold of information about alternatives to war and chemicals and bioengineering and death and poverty for free people must be changed. God has given us everything we need to live in peace with all souls on this beautiful planet. We must talk to one another, to help each other rather than to fight over stuff. We must reforest our planet. The trees hold the earth in place and cause the rain to fall to grow our food. The nutrients that we need to heal are in the soil. Seek peace and prosperity for all around you. There is plenty. The military has control when we are in a permanent state of WAR. The “police state” of never ending war on “terrorism” is crap. We just have to be NOT Afraid of the person next to us and ask each one we meet to be not afraid of the next whom they meet. If we choose not to live in terror, but in happiness, we can change the world.
    alicia…

  • 17 An ex newspaper reader // Jul 1, 2009 at 4:21 pm

    I scanned over this long list of journalists and fired or laid-off journalists and couldn’t help but notice that all of you seemed to know of the outrageous profits of Gannett and Gannett’s utter disregard for its employees and local communities. Hmm…Did you not have the means or desire to reveal any of this? I have no love for big corporations abusing anybody, didn’t any editors feeling the impending doom have the courage to approve any revealing info? No first amendment rights? You have to resort to a blog? No ability to threaten to go on strike? Can it be that you are ALL silenced by threat of removal by a big megacorp? That seems to me to be a HUGE story and the kind that is normally scooped up by the media! You said it yourself; if big oil makes 10% it is headlines and criticism, if a newspaper makes 30% no one knows, this was the only place I’d heard about it. But this fits the mold of why I don’t read papers anymore. Once upon a time, a journalist could be counted on to give both sides of a story. No more. I used to read the LA Times until finally there was never a shred of conservative viewpoint to counter all the progressive viewpoint worked into all the articles. Now, all you journalists may have just become disgusted at the thought of writing impartially so that a NEWS article has no bias one way or the other. So just consider for a moment, if you are upset at what I just said, that means you DO prepare your articles as to be read by a progressive audience or put progressive ideas in a positive light. (Sometime, look at a LA Times “news” article on illegal immigrants and tell me there is equal balance). Falling profits taken into account, there is also the possibility you have written yourselves off the reading list of 50% of the American public. (Hmm…Wall Street Journal still around). Really, my heart goes out to you guys but moreso to the death of journalism in America.

  • 18 circmand // Dec 8, 2009 at 2:52 pm

    I love when journalists write about economics. Its just so cute the way they pretend to know what they are talking about. Everyone screams about the money going to corporate like its all profit. They forget about tens of millions or more invested in presses, equipment etc that has never been paid off because it was under capital and not charged to the newspaper. They forget the support and help that comes their way benefits etc. Journalists are like school teachers they want everything, yet the refuse to write without bias and when called on it say they are being censored. They want a wall between editorial and advertising but they want the revenue from advertising to pay for staff equipment etc. A wall blocks going in both directions.

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