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Media metrics at the Tribune

The new owners of the Chicago Tribune have revived a media analysis tool pioneered by the paper (and satirized by A.J. Liebling, as noted here) 60 years ago — counting pages and column inches to measure efficiency.

But there’s a more traditional metric that they are violating, as Alan D. Mutter recently pointed out on his blog Reflections of a Newsosaur.  “The unwritten but widely honored rule of thumb in the industry has always been that a newspaper should employ one journalist for every 1,000 in daily circulation.”

The Trib’s layoff of 80 journalists — reducing the staff by 25 percent below 2005 levels — will drop the ratio to 0.88 per thousand.

Eric Alterman takes note of this at the Nation, where he writes of Sam Zell:

“Leaving aside his penchant for potty-mouth rejoinders for those who question his judgment, Zell has done nothing to slow the slide in the company’s fortunes and much to accelerate it.

“Scrambling like mad for cash to service the company’s debt, Zell sold off the profitable Newsday and borrowed $300 million against future earnings, a clear sign of panic.

“To advise him on long-term strategy, he has appointed as ‘chief innovation officer’ Lee Abrams, a man who was apparently surprised to learn that reports datelined ‘Baghdad’ are actually produced by reporters in Baghdad. His suggestion: ‘photos of the reporter with Iraqi kids’ to advertise this fact.”

Mutter has since posted about the Tribune owners’  desperate, costly and “self-defeating” “pay-day loan,” borrowing against future ad revenues; and earlier this summer he wrote a devastating post about Sam Zell’s lack of a plan to revive the Tribune (in sharp contrast to Rupert Murdoch at the Wall Street Journal):

“Mr. Zell has failed to articulate, let alone implement, anything approaching a strategy for growing the company he loaded with debt at the time its primary business, newspaper publishing, has been deteriorating at an unprecedented, incalculable and so far intractable pace. Diversified as Tribune may be in broadcasting and a likely-to-be-sold baseball team, nearly three-quarters of its sales are produced by its newspapers.

“Far from leading and inspiring the employees he maneuvered into a co-ownership plan they neither wanted, approved nor can control, Mr. Zell has spent the last six months haranguing, insulting and terrifying the very people whose support he needs to salvage this troubled deal.

“The absence of an effective strategy at Tribune became manifest last week when Mr. Zell announced that, for want of better ideas, he intends to make sweeping cuts in staffing, pages and news coverage that are bound to further erode the already-tottering franchises of some of the most esteemed newspapers in the country….

“[T]hese initiatives are likely to be perversely counterproductive, because they will undercut the very reason that people buy newspapers and that advertisers advertise in them: the content.

“You can fool some of the people some of the time by slipping an ad on page one, running more wire stories, skinnying down the op-ed section or carrying recruitment ads only two days a week, but wholesale cost cutting…will diminish Tribune’s newspapers to the point that discerning readers (and most of the remaining customers indeed are discerning readers) will begin to ask themselves if the paper is worth buying.

“In a growing number of cases, the answer may be ‘no,’ potentially triggering a spiral of declining readership, falling revenues and deteriorating profits.

“While this self-defeating strategy would seem to make no sense, it appears to be the only alternative available at this point to prevent the Tribune Co. from breaching the terms of its looming debt obligations. The longer Tribune can scrape up enough cash to remain current with its creditors, the more time the company will have to grope, albeit belatedly, for a way to turn around the struggling newspapers that generated 72 percent of the company’s $5 billion in annual revenues in 2007.

“The problem is that no business can remain successful over the long term if the only way it addresses declining sales is by cutting costs. You not only begin to degrade the product but eventually run out of things to cut. Businesses must grow sales and profits to build value. If they go the other way for a sustained period, they will falter and potentially fail.

“Desperate measures would not be required today if more diligence, discipline and foresight had been brought to bear when Mr. Zell was contemplating the Tribune purchase, a process that commenced more than a year ago.

“Nothing has happened in the interim to blindside Mr. Zell. Apart from the precise velocity that advertising sales were to plunge this year, all the problems of the newspaper industry were known well before Sam inked the deal in December that saddled Tribune with a staggering $12.6 billion in debt.

“Tribune’s debt requires the company to dedicate some $1 billion of its annual operating profits to interest payments. In the 12 months ended March 30, those profits, which have been shrinking as costs rose and sales declined, amounted to $1.3 billion, leaving scant margin for backsliding at a time of double-digit drops in newspaper revenues.

“While it is unimaginable that Mr. Zell did not have a detailed and well-conceived plan to build the business when he bought it, it is even more amazing that the institutional lenders who funded this risky and highly leveraged transaction did not insist on seeing one.

“In retrospect, it seems obvious that Sam did not buy Tribune because he had a brilliant vision or burning desire to transform this tradition-bound media company into an innovative, next-generation publishing power. Rather, he seems to have been attracted by the low price for an asset no one else wanted, as well as the handsome tax advantages that the employee-ownership plan delivers to him.

“Caught flat-footed, Sam Zell and his cohorts now appear to be managing Tribune Co. by simply making things up as they go along. But they are playing with live ammo.

“They are responsible for more than $12 billion in debt, the livelihoods of some 19,000 employees and major media outlets serving tens of millions of residents in some of the biggest cities in the land. If the Zellsters don’t get this right, those constituencies will pay a staggering price.”

This was before the Trib announced plans to update the paper’s format.  But hopes for that can’t be great with Clear Channel’s Randy Michaels — who doesn’t know what bylines mean — in charge of innovation.

In his most recent post, Mutter points out that even with sharp declines in ad sales and profit margins, six major publicly-held newspapers had a profit margin over 18 percent, and well ahead of companies like Boeing (11 percent), Wal-Mart (7.7 percent) and Amazon (6 percent).

“If publishers, their shareholders and lenders were wiling to accept significantly lower levels of profitability in the future, then further cuts would not be necessary in staff, newshole, circulation and certain other variable expenses. If this were not the case, which it likely will not be, then more cuts would seem to be on the way.”

But the Trib’s massive debt trumps such considerations.

Mutter started out in the business at the Chicago Daily News (later he was city editor of the Sun-Times) — and his 2005 post on the death of that paper is not to be missed.

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Category: journalism, media

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2 Responses

  1. Mike Doyle says:

    Managing news editor Hanke Gratteau, public editor Timothy McNulty, and Washington chief Michael Tackett are out at the Trib as of yesterday (Friday, August 8th)? That’s not downsizing, that’s a death knell.

    We are going to end up with one local paper here in Chicago at this rate. It’s just a matter of time to see which daily standard drops dead first.

    It’s not a question of fixing the newspaper model anymore. The model is deceased. Long live the Internet. The only papers left standing will be the ones that finally understand their print editions are merely a secondary version of their online editions and not ever again the other way around.

  2. Curtis says:

    I must say I don’t agree with people who are gleeful at the troubles of newspapers. I think newspapers and the internet each have advantages as news delivery systems – and the main problem for newspapers is not the delivery system but the financing system. And the big question remains: what will happen to journalism?

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