Journal Sentinel faces daunting choices

Like daily newspapers throughout the nation, the Milwaukee Journal Sentinel is struggling to survive in a digital age that is drying up its sources of revenue.

Over the past six months, newspapers across the country have seen huge losses in classified, automotive, real estate and employment advertising. Total U.S. advertising media will decrease about 13 percent to about $243 billion, according to the U.S. Media and Internet team at Barclays Capital. National advertising will fall about 11.7 percent, while local advertising will fall about 15 percent, a Barclays report states.

There have been more than 6,300 layoffs and buyouts at U.S. newspapers in 2009, according to Paper Cuts, a blog tracking problems in the newspaper industry.

Many newspapers are enacting pay cuts and furloughs for their remaining employees. Some have reduced home deliveries, switched to web-only publishing or started bankruptcy proceedings, while others have simply folded.

The Milwaukee Journal Sentinel and its parent company, Journal Communications Inc., have been subject to the same shifting market forces. Based on current economic and market conditions, it is likely only a matter of time until the company announces additional layoffs, furloughs, cuts home delivery for one or more days of the week or even switches to web-only publishing, industry experts say.

Journal Sentinel management recently told officials of Local 51, the Milwaukee chapter of The Newspaper Guild, the labor union that mostly represents employees in the media, that there will need to be additional staff cuts, said Greg Pearson, president of the Local. A voluntary buyout package was expected late last week, he said.

“They told us early in the year that furloughs were possible, and that a wage freeze was too,” Pearson said. “Furloughs are becoming a stronger possibility as we move deeper into the year. That’s part of what we are talking about now.”

Elizabeth “Betsy” Brenner, publisher of the Milwaukee Journal Sentinel, said the company does not comment about negotiations that are in process. However, she said management is negotiating with all of the labor unions within the newspaper’s operations.

“We’ve approached all seven of the unions and asked them to share in the company-wide sacrifices,” Brenner said. “Two of the seven have open contracts now, and we have to approach each of them individually. For some, this means opening their contract, and for others, that means that it is part of ongoing negotiations.”

For its newsroom employees, company management wants to have its buyouts or staff cuts resolved before it actively begins contract negotiations, Brenner said.

All of the newspapers’ labor groups understand the situation that the Journal Sentinel and industry as a whole are in, Brenner said. She said the company wants to minimize employee cuts in order to maintain the quality of its product, but that cuts may be inevitable.

“We’re considering every alternative. Our goal is to weather the really tough recession and come out of it maintaining the aspects of our company that people turn to us for, and that’s great journalism, customer service and the ability to deliver for our advertisers,” Brenner said.

Journal Communications eliminated 55 to 60 positions in 2007 and an additional 130 in 2008 with a mixture of buyouts and layoffs.

Local 51’s contract with Journal Communications expired on Dec. 31, 2008, Pearson said. The union and management are now preparing to restart contract negotiations. The union and its members are entering the negotiations with their eyes wide open, he said.

“It’s fair to say that we understand the situation industry-wide,” Pearson said.” No one is going into this contract thinking we are going to get the same kind of contracts we had in the past.”

While there is a sense of urgency to minimize costs and increase profitability at the Journal Sentinel, Brenner stressed that the Milwaukee newspaper is not in a situation as dire as those of the Seattle Post-Intelligencer, Detroit Free Press, Detroit Daily News and Rocky Mountain News.

“It’s really important to distinguish ourselves from a second newspaper in a two-newspaper town, where a competitor doesn’t have the strength to maintain itself,” she said. “None of those describers fits the Journal Sentinel. We’re strong compared to those examples.”

Milwaukee’s daily newspaper is not considering eliminating one day’s home delivery or publishing, Brenner said – especially not its Monday edition.

“When you think about this market and how people are Packers crazy, and if there was no publishing on Monday, that would just not fly,” she said.

The Journal Sentinel is now working on several new initiatives that it hopes will increase revenue, Brenner said. About two weeks ago, the newspaper began a new targeted online advertising initiative with Yahoo. 

The Journal Sentinel will soon begin delivering its weekly advertising package itself. The paper has historically used the U.S. Postal Service to deliver the materials to more than 500,000 residents in southeastern Wisconsin. The Post Office is planning rate increases and has raised the possibility of only delivering five days of the week, and Brenner said the newspaper sees an opportunity.

“We have an advantage if we can deliver cheaper than the Post Office and can guarantee delivery,” she said. “This is another way to take what we do well, which is selling and delivering a product for our advertisers, and grow even more revenue with it. Our people are focused on how to get revenue into the company and control costs, and that will preserve what we have through difficult economic times.”

Temporary solutions

Several newspaper industry analysts predict that officials at the Journal Sentinel will do what other industry players have – staff cuts, salary reductions, furloughs or elimination of one day’s home delivery during the week.

“There’s no strategy – this is panic,” said Ken Doctor, an analyst with Outsell Inc., a research and advisory firm to the publishing, information and education industries with offices in California and London. “What we’re likely to see this year (around the country) and what we’ll see in Milwaukee too is (publishers asking) how much they need to cut back and how much they can do to still hold their place in the market. For publishers, it’s about ‘How do we stay alive and stay profitable until we can get to some sort of breathing period?’ (Economic) recovery will not bring back their old business, but it will give them some breathing room.”

John Morton, a media analyst with Maryland-based Morton Research Inc., agreed.

“They’re (JRN) like the rest of the media companies. They’re all holding their breath until there’s some sort of recovery,” Morton said. “They want to see if they can recapture some of what they’ve lost. But that’s not clear at this time. There was an Internet in 2002, the last time we had a decline, but since then, it’s become more competitive for eyeballs and advertising. Some of it will have been lost forever, whether that’s 15 or 85 percent.”

Cost-cutting measures could give newspapers such as the Journal Sentinel room to breathe, Doctor said. Over the next several months, many newspapers will likely switch to some sort of hybrid model, where daily newspaper will cease home delivery on one or more days of the week, but continue publishing online on those days.

“They want to keep their print presence, but don’t want to pay for the production and print costs and for trucks and distribution,” Doctor said. “They’ll say, ‘Let’s still have a paper with our name on it but it will be slimmer and only at newsstands, so we can still say we’re a daily newspaper.’ That’s what we’re likely to see later this year, what we could see in Milwaukee too.”‘

Web-based model

It seems a matter of time before many other newspapers switch to an all Internet-based model, Doctor said, because of the difficulty in remaining profitable with large printing and distribution operations. If a newspaper is going to be profitable, Doctor said, its corporate parent may need to make decisions similar to Hearst Corp.’s approach to the Seattle Post-Intelligencer, which switched to a web-only publishing model in mid-March.

“The model is in a sense being worked out now. It’s fairly clear in its outlines in Seattle,” Doctor said. “Hearst has a question, and that’s, ‘At what level can we operate and be profitable?'”

The Seattle Post-Intelligencer now has a newsroom staff of 20, with another 20 in advertising. While the staffing is higher than a startup company would have, the newspaper has retained less than 15 percent of its staff from its print version, Doctor said.

“My rule of thumb is that it could support about 15 percent of the newsroom,” Doctor said. “It defies our understanding of what a daily newspaper does in breadth and depth, but is a key to change.”

Edward Atorino, media analyst with The Benchmark Company LLC, a New York based broker-dealer, said the American democratic society will pay a price when newspapers are reduced to smaller staffs that can no longer be a watchdog on the public sector or engage in investigative reporting.

“There is a social cost to all of this,” he said. “If we have no newspapers, some people think that the absence of that kind of news gathering service would be a damage to society. There is a balance to a government or a city when someone is saying, ‘Why is this?’ And if they’re gone, who is watching? Or who is cheering?” 

Journal Communications Inc.’s stock debuted on the New York Stock Exchange with a closing price of $16.23 per share in September 2003. The stock’s highest point came in March 2004, when it traded for $20 per share. As of March 11 this year, the stock had fallen to 39 cents per share.

The newspaper industry is struggling for survival

  • Sun-Times Media Group Inc., owner of the Chicago Sun-Times, declared bankruptcy this week after a lengthy struggle to find a buyer for the paper.
  • The New York Times Co. recently laid off 100 employees, sought 5 percent pay cuts and may seek additional job cuts at The New York Times. 
  • The Atlanta Journal-Constitution laid off 48 employees on March 24 and is seeking additional staff buyouts.
  • The Ann Arbor Daily News will cease publication in July.
  • Gannett Co. Inc., which owns several newspapers, will place employees on furlough in April, May and June, which is expected to save the company about $20 million.
  • The Charlotte Observer will cut its employment by almost 15 percent, slash pay and reduce some full-time workers to part-time status.
  • The Capitol Times in Madison switched to online news and is now published just twice per week as a tabloid-style insert in The Wisconsin State Journal.
  • The Waukesha Freeman recently announced that it will soon cease daily home distribution on Mondays.
  • The Detroit Free Press switched to weekend only home delivery.
  • Tribune Co., which publishes the Chicago Tribune, has filed for bankruptcy.
  • The Rocky Mountain News in Denver ceased publication.
  • McClatchy Co., which owns several newspapers, is cutting employment by about 1,600.
  • The Seattle Post-Intelligencer switched to an online-only format in mid March, with more than 140 newsroom employees laid off.
  • The Boston Globe laid off 32 employees in mid March.


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