Media Watch

Local weekly owner cuts salaries 7.5%,10.5% of workforce let go

GateHouse announces pay cuts at Mass. newspapers
Chain includes 8 Cape and Islands weeklies

by Dan Kennedy, Medianation.

GateHouse email to employees
A MESSAGE FROM RICK DANIELS, CEO/PRESIDENT GHMNE

As we all know too well, the road out of the horrendous economic and advertising slump has been extremely difficult, and yet we have a lot to be proud of on how we have responded. We are still bringing valuable and unique local news, information and advertising to our huge print and digital audiences. Together, we have taken many tough actions that have preserved - and often enhanced - our capabilities, while substantially decreasing GHMNE's structural costs.
   Regrettably, we need to share some tough news: Beginning June 1, we will implement a temporary reduction of our salaries and wages. The average GateHouse Massachusetts employee will see a reduction of about 7.75%. If this were to last through the remainder of 2009, the effect would be to reduce 2009 salaries by about 4% - given it is not starting until June. Rates will vary, and will be "progressive" - meaning that higher earnings will be reduced at higher rates. Your supervisor will share your amount with you. All publications and units in Massachusetts are affected by this step. We are sitting down - today - with representatives of our unionized colleagues to start negotiations on this issue. We expect participation from all - fully and soon.
   Why are we taking this step? Why now? It's really pretty simple: As much as we have done everything in our collective power to blunt the negative effects the economic crisis has had on advertising, virtually ALL major metropolitan markets have been hit by advertising declines that have soared to the mid-twenties to mid-thirties percent (compared to prior year months) since early January. These revenue declines have dramatically hit the cash flows of most publishers.
We are NOT - thankfully - in the kind of trouble that we never want to be in - producing lots of red ink, HOWEVER, if we don't act soon, and decisively, we could see advertising trends reduce our revenues to a point where we could no longer cover our cash expenses with any margin of safety. Common sense tells us that when companies start suffering from negative cash flow, there is NOTHING good that happens, and these days, with lenders and vendors on short strings themselves, the "bad stuff" happens quickly. We seriously considered a wage reduction earlier this year, but given the obvious difficulties a pay cut creates for each of our family's finances, we decided to make sure we were not going to see an advertising rebound that could allow us to avoid this painful step. We also considered the possible use of additional staff reductions to generate the almost $2.5 Million of savings this pay cut will generate for the remainder of 2009. Such cuts would have to be about 100 positions, and we did not believe we could continue to operate and deliver the high levels customers value were we to quickly cut this many positions.
   We are hardly alone in taking this step. In fact, a great many publishing companies have already taken steps to reduce their single biggest expense - compensation, using furloughs, pay cuts, or even both. While we might be a bit "late" vs. our peers, it's not too late for us given the many aggressive cost reductions we have already made. At this point, GateHouse Massachusetts is the only GateHouse region that is implementing pay reductions, because we, being in a major metro market, have seen substantially greater losses in advertising expenditures. Because no one can predict the economic future, we can't reasonably predict when revenues and cash flows will strengthen to the point where there is little concern about cash flows being stable and safe (i.e. positive) levels. Obviously, the sooner we can end this temporary reduction, the better - for all.
   Some might ask: Aren't newspapers dead anyway? Are we just prolonging the inevitable? As a consumer and advertising medium, newspapers that deliver truly unique news and information are still very much in demand, although some very important parts of the business model, including the need to be fluently digital, are changing. One of the largest advertising agencies in the country visited us recently with a very simple message: Large local newspaper companies, with some changes, will be the major beneficiaries of the newspaper industry restructuring. Our industry IS going through wrenching changes, but a great many of the changes that are bedeviling major Metro papers are poised to benefit us - as long as we remain economically sound in the near term. We will keep you informed about our challenges, AND our victories.
   The senior management team and I will be conducting employee information sessions at a great many of our locations in early to mid June, we look forward to updating you further at these meetings. Thank you - in advance - for your willingness to support personally difficult steps during these times that WILL allow us to grab the opportunities that arise out of adversity.
Richard Daniels
President and Chief Executive Officer
GateHouse Media New England
Publisher, The Patriot Ledger and the Enterprise

The Boston Globe isn't the only newspaper in Massachusetts fighting for its economic survival. Earlier today, GateHouse Media New England, which publishes more than 100 community newspapers in Eastern Massachusetts, announced a "temporary" pay cut.

According to an account by Jon Chesto in the Patriot Ledger of Quincy, a GateHouse paper, salaries will be reduced by an average of 7.75 percent, with the lowest-paid employees receiving a 7 percent cut and the highest-paid getting whacked by as much as 15 percent.

The goal is to save $2.5 million this year. The pay cuts would be reversed if and when the recession-battered advertising market recovers.

100 workers lose jobs

In addition, we learn from Chesto's story that GateHouse has reduced its full-time workforce in Massachusetts by about 10.5 percent since the beginning of the year, and currently employs about 1,100.

(NOTE: GateHouse's Cape Cod weeklies only lost two positions which comes to 3.6% of its 55 employees.)

In a company-wide e-mail, a copy of which I obtained shortly after it was sent out and it reprinted on theright, GateHouse Media New England president and chief executive Rick Daniels explains what's behind the pay reductions:

Why are we taking this step? Why now? It's really pretty simple: As much as we have done everything in our collective power to blunt the negative effects the economic crisis has had on advertising, virtually ALL major metropolitan markets have been hit by advertising declines that have soared to the mid-twenties to mid-thirties percent (compared to prior year months) since early January. These revenue declines have dramatically hit the cash flows of most publishers.

The pay cuts will take effect next week except at three unionized papers, where GateHouse executives will seek to negotiate reductions: the Ledger, the Enterprise of Brockton and the Herald News of Fall River.

In a telephone interview after the cuts were announced, Daniels told me that - barring an unexpected further deterioration in the economy - he doesn't expect any further dramatic cuts.

"Anything else we would do would be more in the manner of pruning and trimming," he said. He would not, however, rule out cutting back on the publication frequency of some papers or even closing a few, noting that there are regions that are served by multiple GateHouse papers. The company has closed a handful of papers over the past year.

And though Daniels declined to predict when GateHouse would be able to reverse the pay cuts, he said he hopes to be able to evaluate at the end of 2009 when he would be able to "mitigate or eliminate" them.

"It's an imposition and a hardship for any long-term employee to say, 'Here's a cut in your pay,'" Daniels said.

GateHouse publishes some of the best-known papers in Massachusetts, including dailies such as the MetroWest Daily News of Framingham as well as the Ledger, the Enterprise and the Herald News. Its larger weeklies include the Cambridge Chronicle, the Somerville Journal and the Newton Tab; smaller papers extend well into the exurbs and on Cape Cod.

The New England unit is part of a national chain of about 400 newspapers based in Fairport, N.Y. Like many newspaper companies, GateHouse is struggling with debt that it took on during more prosperous times. Last fall, its stock price fell to such a low level that it was delisted by the New York Stock Exchange.

In late 2008 I wrote a story for CommonWealth Magazine that examines GateHouse and the future of community journalism in some detail. Beat The Press.

GateHouse newspapers on Cape Cod

The chain is easily the largest in the United States with the lion's share of weeklies here on Cape Cod and the Islands. All except three were once owned by a local Cape Cod publisher.

The weeklies here were mostly spared from the recent lay-offs with only one journalist let go and one advertising sale position not replaced, a 3.6% reduction as compared with the compay-wide cut of 10.5%

Here's the list as of May, 2008: