Of Brotherly Love and Layoffs

Philadelphia Media Holdings has struck again.

After last week’s layoff of 71 newsroom employees at The Philadelphia Inquirer (17% of the editorial staff) in an attempt to save money and restructure the editorial focus, the company has now reduced the size of its advertising team.

Philadelphia Media Holdings, which owns both The Inquirer and Philadelphia Daily News, will eliminate at least 34 advertising positions — including 16 part-time positions, at both newspapers.

The company said the editorial cutbacks alone would save about $6.8 million a year in salaries and benefits. The editorial and advertising layoffs take effect at the end of this month.

Knight Ridder sold both papers to The Inquirer and the Philadelphia Daily News in March to McClatchy Co., who sold the papers three months later for $562 million to Philadelphia Media Holdings.

This investment group, led by Brian Tierney, has since claimed declining national advertising and slumping circulation, according to the Associated Press. (In October, Monster merged its career sections with Philadelphia Media Holdings.)

Feeling Shell-Shocked

Joe Grimm, recruiting and development editor at the Detroit Free Press, knows a few of the affected reporters and says they are having a rough time accepting the news. He says the Inquirer is a very solid newspaper, so it left the reporters feeling shell-shocked that a layoff could affect them.

Still, Grimm contends that the layoff is not a complete surprise. “We saw over the years the Inquirer become the largest staff in Knight Ridder — they had a much larger staff than compared to the [Detroit] Free Press,” he says.

“So, it had been built up beyond the norm for its circulation size. They had been reducing staff, and with its transfer to McClatchy, the question was whether this would save newspapers or result in something else. We aren’t seeing yet they have a remarkably different answer than anyone else,” says Grimm.

Grimm, who also writes the recruiting column for the Poynter Institute, says the reporters are left grappling with the idea of whether to remain in newspapers or head off in a different direction, such as teaching, corporate communications, public relations, or think-tanks.

“These are people who are adept at gathering a lot of information, synthesizing that material, and know how to write. The question is, do they want to work in another field? Because of journalism’s involvement with the First Amendment, it makes many think they are doing something noble, and now they are faced with working with places they used to deride,” he says.

Grimm, who will serve as a panelist at ERE Expo 2007 in San Diego, recommends that recruiters who reach out to the editorial staff “focus on candidate skills: you’re a good writer and understand the industry; you have the contacts to find out the landscape with our industry. I wouldn’t do a hard sell; that is too defensive. I would say, ‘You have the skills we need, and we have positions available. Do you want to come in and talk to us?’ “

The advertising staff should pose less of a problem for recruiters, since “ad people are aware of historic First Amendment issues that go along with being at a newspaper, but frankly, I think newsroom people have an arrogance that they are doing more worthy work,” he says.

“I think ad people won’t have as much of a problem coming around and doing work for another company,” he adds.

A Smaller Fourth Estate

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Late last month, McClatchy also sold its Minneapolis daily, the Star-Tribune, to Avista Capital Partners, a private equity firm, for $530 million. (Earlier in 2006, Avista unsuccessfully bid for The Inquirer and Daily News.)

The paper’s 2,400 employees, after watching what is happening in Philadelphia, may be starting this year with less-than-confident expectations.

There have been roughly 72,000 people affected by U.S. media layoffs since June 2000. However, not every newspaper is laying off staff.

In fact, David Dunn-Rankin, columnist for the Charlotte Sun-Herald in Charlotte, Florida, just posted a column in which he notes, “In our 30-year history we’ve never had a layoff, and a growing business allows us to try to keep that tradition.” He lauds the paper’s employees, whom he credits with creating “the value we’ve added to readers, advertisers, and communities. We have an incredibly gifted group, which I don’t thank often enough.”

Are Newspapers the New Railroads?

Still, newspaper publishers expect high revenues in addition to solid reporting. AOL Money & Finance writer Zac Bissonnette contends that Avista is purchasing the Star-Tribune for 6.5 times its cash flow.

“Newspapers don’t have the large capital expenditure requirements that many more booming businesses do. The industry is in decline, but it’s still making money,” he writes in his blog.

“Are newspapers the new railroads?” he asks.

“There are numerous similarities. Railroads were replaced by airplanes and trucks, but the railroad stocks were the better investment. Newspapers are being replaced by the Internet, but that in no way means that Internet stocks are better buys,” he adds.

Bissonnette points out some of the bigger newspaper stocks:

  • Gannett. Owner of 91 daily newspapers, including USA Today and 1,000 non-daily publications. Trades at around 11 times cash flow.
  • E.W. Scripps. Owns some newspapers, but also television stations, including HGTV and the Food Network. Also owns Shopzilla.
  • Tribune. Trades at around 8 times cash flow. Owns 11 daily newspapers, the Chicago Cubs, television stations, and other media interests.

Elaine Rigoli has nearly 15 years of experience managing content and community for various B2B and consumer websites. Elaine has written thousands of business and technology articles and has been quoted in The Wall Street Journal and eWeek, among other publications.

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