Cover Story

Chain Reaction

by Leslie Turk

Corporate newspaper giant Gannett has ransacked The Daily Advertiser, one of its most lucrative newspapers. And every penny of profit squeezed out of the daily has been wired straight to its Virginia headquarters. The Lafayette City-Parish Council did not meet this week. The Daily Advertiser, the official journal of record that is paid more than $240,000 annually to publish public notices, failed to print the council’s agenda Friday, violating the Home Rule Charter that requires publication of the agenda within two working days of the meeting.

“It just didn’t get done,” says Janet Gianelloni, the city-parish council’s administrative assistant.

The public blunder is just one outward sign of the chaos taking place on Bertrand Drive and indicative of much bigger problems at Lafayette’s daily paper. The Advertiser has been undergoing cuts since 2005, massive ones in the past five months, all handed down by corporate media giant Gannett. The publicly traded entity has been sucking the life out of what has been one of its most lucrative papers to offset losses elsewhere and placate antsy short-term, profit-oriented shareholders.

In fact, the longtime legal clerk who handled public notices for the paper was among those laid off in a 50 percent reduction to the classified department, which appears to explain why the mistake was made.

Demoralized by the cuts, the local workforce has no one to complain to. Bean counters in McLean, Va. — who as a former Louisiana Gannett publisher says just happen to be in the newspaper business — are calling all the shots. By The Independent Weekly’s estimates, about 75 positions have been cut in the last year from Gannett’s local operations (The Advertiser’s Web site claims it has 277 employees but that likely hasn’t been updated), including longtime staffers like columnist Jim Bradshaw, whose forced retirement went unannounced in the paper. After 40 years of writing, Bradshaw just disappeared.

On Sunday, Jan. 4, Publisher Leslie Hurst announced changes to the Sunday and daily editions of the paper in a front page letter. “These changes are a response to difficult economic times,” she wrote, noting that while our community has been mostly spared by the national recession, “the challenges at the national level still affect us.” What she failed to say is that it’s Gannett’s challenges, not the nation’s, that are trickling down.

The following day the changes hit home. The Monday paper was a single section, with no page dedicated to national and world news and no classified section.

On top of the flimsy 16-pager, which weighed all of 2 ounces, The Advertiser recently spiked the cost of its paper from 50 cents to 75 cents ($1.25 on Sunday) even as it was slashing staff and drastically dropping coverage. That same Monday’s privately held Advocate, on the other hand, was twice the heft at still only 50 cents.

Outside of Hurst’s Sunday announcement, local management has been mum on many of the modifications and downsizing taking place.

Former employees say Gannett’s policy prohibits anyone other than the editor or marketing director, who was laid off in September, from speaking to any other press outlet, so The Independent Weekly was unable to interview any employees at the local paper. Former employees, many of whom are still owed money by Gannett as part of their departure agreements or fear the company could hurt their efforts to find a new job, asked that their names not be used in the story.

And just when it seemed as though the bleeding couldn’t get any worse, Gannett CEO Craig Dubow confirmed on Jan. 14 that the company is requiring its 40,000 employees to take a week off before the end of the quarter without pay. Speculation now has it that employees may be forced to do so each quarter.

No longer a monopoly in any of its markets, Gannett — like every other newspaper chain in the country — is scrambling to reinvent itself. How much more shakeup will take place inside the walls of its Bertrand Drive office and on the pages of Lafayette’s daily paper is anybody’s guess.

Gannett has adopted across-the-board cost-cutting measures at all of its papers, which means publications in communities like Lafayette, where a stable economy continued to fuel profits in 2008, are disproportionately affected. It’s one of the best examples in the country of the dangers of a corporate owned, publicly traded daily paper in any community. Lafayette is the poster child for this problem, as Gannett has robbed this community to pay for its errors elsewhere. For centuries locally owned papers had a different mission, but now The Advertiser’s readers are being told they must pay for Gannett’s mistakes and greed.

In these troubling economic times the daily’s new role is to send home to McLean, Va., even bigger profits to offset the measly 10-15 percent returns generated by many of its sister papers in other communities (see sidebar). So the Lafayette strategy is cut content, raise profits even higher and to hell with long-term consequences.

The newspaper giant, publisher of flagship USA Today, has also slashed jobs at The Daily World, Quik Quarter and Alexandria’s Town Talk. Gannett owns The Times of Acadiana, which has not experienced recent staff cuts because, well, it has no staff.

Why should Lafayette, where Gannett took in $7.8 million (before expenses like depreciation, interest and taxes) in the first three quarters of 2007 on The Advertiser alone — a whopping 33.52 profit margin on $23.2 million in ad sales — suffer for the chain’s problems? Even if The Advertiser’s 2008 profit is half of what it was in 2007, which judging from the strength of our local economy won’t likely be the case, the painful cuts here are still very hard for many newspaper watchers to understand or accept — especially when they’re not occurring at other papers in the state.

At the family-owned daily, The Advocate, just 50 miles east of Lafayette, not a single job has been cut. And no layoffs are planned. “Our publisher has said, emphatically, barring some catastrophe, he does not foresee laying anyone off,” says Carl Redman, The Advocate’s executive editor. “Fortunately for us we’re home-owned. We don’t have to worry about returning some profit quota handed down from corporate headquarters. We don’t have to answer to shareholders the way a corporate-owned paper does. Our owners can be more flexible about their profit expectations.”

Redman says the paper recently trimmed its news section, is cutting back on home delivery and rack sales in some outlying areas and is critically analyzing all positions as they open up. “We’re trying to hold a cap on our labor costs,” he says. “I have no doubt as the year goes along, probably positions won’t be filled. Like many newspapers we’re looking at all of our expense centers.”

The Advocate, which has an Acadiana bureau with seven full-time staffers, including three reporters and a photographer, is in a prime position to take advantage of The Advertiser’s unhappy subscribers and advertisers, but Redman’s unaware of any big backlash. “It’s really too early to tell,” he says. “But we are an alternative people should think about if they’re dissatisfied.”

Redman says The Advocate’s 2008 revenues tracked pretty evenly with 2007’s. “From what we can tell, we are doing very well compared to the industry,” he says.

“Gannett is trying to preserve monopoly profits in an environment where they don’t have a monopoly anymore,” says Martin Langeveld, who spent 30 years in the daily newspaper business, 13 as a publisher, and now has a blog called News After Newspapers. “They don’t control the market anymore. It’s kind of a downward spiral, unless they stop, change the model and reinvent.”

Gannett is far from alone in its financial troubles. Newspapers across the country have been suffering from plummeting classified revenue, declining circulation and to a lesser extent falling display ad business, most of which is attributable to the Internet and onslaught of niche publications. “There has never been a better time to be a consumer of journalism,” says Rayne native Josh Benton, founding director of the Nieman Journalism Lab at Harvard University, “but it’s a horrible time to be a producer.”

So while Gannett remains profitable, long-term secular trends for daily papers are not encouraging. About 85 percent of Gannett’s operating income stems from daily newspaper publishing — revenues composed almost entirely of advertising and circulation sales. Gannett has both newspaper and broadcasting segments. It owns 102 daily newspapers in the U.S. and the UK, about 900 nondaily publications in the U.S. and Guam, and publishes approximately 300 titles in the UK.

During eight months ended August 2008, Gannett’s classified and retail segments (which together account for 60 percent of total revenue), declined 20 percent and 8 percent, respectively, versus declines of 6 percent and 2 percent during the same period in 2007.

Weaning newspapers from high profitability is proving to be an insurmountable task — especially so for Gannett. “As an industry newspapers had some of the highest profit margins of any industry for decades,” Benton says. “Gannett went a step further and was ridiculously profitable,” he adds. “They, I think, have been the most corporate of the chains.”

Says Langeveld, “The problem is the whole model of people reading printed news to get news is not going be sustainable. The average newspaper reader in the country is 60 years old. Younger people just aren’t reading newspapers anymore. What they need to do is really exploit online. They really have to make their newsrooms online-first operations.”

With more readers moving online, Web-based advertising such as is significantly eating into mainstream newspapers’ classified ad income. So while baby boomers might still want to hold their newspaper in their hands, the popularity of Web-based advertising and the immediacy of getting the day’s news events online underscores the ongoing shift of readers from print to online. It is the most direct long-term threat to any newspaper’s revenue growth. “No one has figured it out yet,” 33-year-old Benton says.

Once viewed as the revenue stream that might begin to pull newspapers out of their slumps, however, online advertising revenue — a much cheaper buy than print — is also declining. It fell in the last two quarters of 2008, notes Benton, a newspaper veteran who left the Dallas Morning News for the Nieman post and an opportunity to study how quality journalism can survive — he prefers to say “thrive” — through the difficult transition to the Internet.

If there is a silver lining in online advertising and reason to hold out hope, it came recently from the Los Angeles Times, which reported that its online advertising revenue is now sufficient to pay its newsroom’s salaries.

Investors have taken notice of the troubling trends, delivering publicly traded newspaper chain stocks their worst nosedives in history. Gannett’s stock has fallen 85 percent in the past two years — plummeting from an average of $51.16 in January 2007 to $7.59 this January. Newspaper chain McClatchy Co.’s stock is down to 81 cents, from $9.69 in January a year ago, and AH Belo Corp.’s is trading at $2.43, falling from almost $11 a year ago.

The Minneapolis Star-Tribune filed for Chapter 11 protection last week, about a month after the unrelated Tribune Co., publisher of the Chicago Tribune, Los Angeles Times and The Baltimore Sun, asked for bankruptcy protection. Creative Loafing, the Tampa company that owns alternative newspapers across the Eastern seaboard and the Midwest, filed in September. There will be more.

“Times are ugly, and they’re ugly for every newspaper,” Benton says, emphasizing that communities with a Gannett paper are likely to suffer even more when it comes to quality journalism. “When times get tough you have to show what you care about. [Gannett] is showing in a more direct form what it’s shown for many years, that spending money on journalism is not its top priority,” he says. “It’s not good for the people of Lafayette or the people of Opelousas.”

In addition to its falling stock and declining revenues, Gannett has another nagging problem — a complex one that may soon rear its ugly head.

Although it wrote off $2.1 billion in goodwill (the intangible asset valued by the advantage or reputation a business has acquired) in March 2008, Gannett still has more goodwill, $8.4 billion, than its $6.6 billion in equity capital as of Sept. 28, 2008. This would be OK as long as the company’s cash-flow remained strong. But it has not. The company paid way too much for several print publications (including The Times, which it inherited from Thomson, the chain that bought it and the Quik Quarter from Independent Weekly publishers Steve and Cherry Fisher May and Odie Terry in 1998).

Gannett is likely to have to take more goodwill writeoffs, which are already reflected in its stock price. “While this won’t affect their cash generating ability, it would probably sink whatever options they have left in the credit markets in case they need to borrow to cover losses,” Langeveld says. This means their only real option going forward is to do whatever it takes to remain profitable.

“Newspapers and newspaper companies and Wall Street have gotten hooked on a large cash flow and huge profits because newspapers were monopolies,” Langeveld says. “Those days are over. Those profit margins won’t happen. Those cash flows won’t happen.

“If you’re losing money today — and probably most of the top 50 or 100 newspapers in the country are losing money — you have to ask how will we recast this,” he continues, suggesting most newspapers will eventually shift focus to their online sites and social networking sites with a once-a-week print edition on Friday or Sunday.

Unlike her predecessor Ted Power, who left in 2007 for a job as president and publisher of the Reno Gazette-Journal, Leslie Hurst is not engaged in the Lafayette community. She was transferred here in mid-2007 to replace Power, and apparently, her name is not widely known yet at the paper itself. When I tried to reach Hurst about a month ago for a story on the cuts, my call was inadvertently transferred to customer service. When I told the gentleman on the phone that I was trying to reach Leslie Hurst, he asked me who she was.

And Hurst has made it very clear in the pages of her paper that if anyone has questions or comments about what’s happening, she doesn’t want to hear them. In the announcement letter she penned, she suggests readers — and presumably advertisers — call the paper’s information center at 289-6397 or e-mail its executive editor, Denise Richter, at [email protected] “On one of her first days in Lafayette, she told us that she would not speak to the public, would not answer e-mails, and if called would not pick up the phone. She also will not answer voice mails,” a former employee says.

Hurst did not respond to phone and e-mail messages requesting an interview for this story. Richter also did not respond to an e-mail request.

In all likelihood Hurst will be overseeing even deeper cuts to The Advertiser, and most close observers of local media are wondering whether The Daily World or The Times of Acadiana could be on the chopping block. The newsroom at the Opelousas paper, long a staple in the St. Landry Parish community, is down to one reporter and one photographer.

Benton, however, does not see the Opelousas paper closing. “There is not a lot of competition online for The Daily World,” he says. Benton also doesn’t buy into speculation it may become a part of The Advertiser. “I would be a little bit more surprised if they just lumped it into The Advertiser, but I was also surprised when I saw there was only one reporter [in the Opelousas newsroom].”

While its page counts remain relatively stable, thanks to packaging deals too sweet for advertisers to pass on, The Times of Acadiana is but a shell of its former self in terms of news content. Its Web site still lists as managing editor Jan Risher, who left eight months ago, and other staffers who have long since moved on. Also, you probably haven’t noticed that it’s now delivered on Thursdays (by the same people who deliver the Quik Quarter).

“Most of these changes allow us to be more efficient in the use of paper and ink — two of the most expensive parts of producing a daily newspaper — while allowing us to remain your primary source of the news and information that are important to you and to Acadiana,” Hurst said when announcing the changes Jan. 4.

Former Advertiser employees believe Gannett is trying to milk every penny of profit out of the organization and ride it into the ground. “I’m not one that thinks print is about to go away,” says Benton, “[but] that is a sentiment that is out there. There is a real sense of panic among newspaper executives.”

As for whether The Advertiser — the oldest continually operating business in Lafayette Parish, beginning publication as a four-page weekly on Sept. 22, 1865 — will ever break away from the chain gang is anybody’s guess. The Moody family, owners of Louisiana State Newspapers, at one time tried to buy The Advertiser when Thomson put it up for sale. Gannett, however, got its hands on it 2000. “We had an interest back then, but I don’t know about now,” says Darrell Guillory, LSN’s chief operating officer. “If Gannett opted to sell, I think we would take a serious look at it.”

Unfortunately, that’s not the kind of local ownership that would be good for this community, as the Moody papers aren’t known for their quality journalism either. “Moody would not let us write editorials, run local stories, AP copy or letters to the editor that in any shape or form had negative content about President Bush, particularly when the war in Iraq was first going badly,” says Dominick Cross, a former editor of the Crowley Post-Signal, an LSN paper. “One of the lowest points of my newspaper career came when I had to not only run a story about New Orleans, early post-Hurricane Katrina, that basically said things weren’t that bad and that only a few residents were complaining. In the same paper, I had to run a bunch of non-local letters to the editor from around the country supporting the story. I had no idea who the writer was or where the story came from,” says Cross, now editor of the Pulitzer Prize-winning Delta Democrat Times in Greenville, Miss. “It was total propaganda, a black day for journalism. Anyway, for me, that showed the contempt LSN had for its readers because they actually thought they would not notice a story and letters about it in the same paper.”

Sources close to The Advertiser say management has been inundated with phone calls and e-mails from readers and advertisers upset about the changes. And while Hurst leaves a lot to be desired in how she delivers the bad news to employees, the reality of the situation is that all decision-making is out of local hands. (By the way, Gannett just ranked 36th on’s list of the 50 worst companies to work for, and CEO Dubow got a 19 percent approval rating from his workers.)

Out of the havoc Gannett has wreaked on Lafayette’s daily paper, however, there are stories of selflessness — poignant examples of human kindness. First, there is this one — as told to us by a former employee — involving Baton Rouge political writers John Hill and Mike Hasten, both of whom were summoned to Lafayette for a top management meeting in July 2007. Hill, Gannett Louisiana’s Baton Rouge capital bureau chief with 38 years as a reporter and columnist, was told if he did not retire Hasten would be let go. We all know how that one ended.

“The early retirement buyout came at an opportune time for me, as I had offers on the table that I was contemplating,” says Hill. “I joked with Mike that I fell on the sword for him; he shot back that it was a velvet sword.”

More recently in the classified department, which serves The Advertiser, Daily World, Times of Acadiana and Town Talk, one of two supervisors had to go. The decision was made to terminate Fils Prejean and keep longtime employee Ed Breaux. “As Fils walked around the building giving his last good-byes, Ed became upset because Fils is the sole supporter for his family [with three young children still at home], whereas Ed’s child is grown, and he only supports himself and his wife,” says an employee who witnessed the day’s events. “Before Fils could make his way to the door, Ed went to HR and volunteered to be laid off. Just that fast, Fils was back on the job, and Ed was laid off.”

Want to know what Fils Prejean got for Christmas? His walking papers.

Paper-by-Paper: Margins, Ad Sales**

Courtesy of Gannett Blog, below is a sample of the performance of some Gannett-owned U.S. newspapers over the first three quarters of 2007, ending about Sept. 30. Gannett Blog, a site run by a former Gannett editor, got its hands on the closely guarded individual performance of more than 80 newspapers. (Gannett’s 17-daily U.K. Newsquest chain and the TV division weren’t included.)Circulation revenue is not reflected in the numbers below. Circulation is a fraction of the newspaper division’s revenue: just 21 percent, according to Gannett’s third-quarter 2008 earnings report. To get a general sense of an individual paper’s profit in dollars, multiply the margin against ad sales.

• Alexandria, La.: 20.56% margin; $9.7 million in ad sales
• Asbury Park, N.J.: 19.16%; $82.3
• Asheville, N.C.: 23.49%; $20.6
• Battle Creek, Mich.: 13.05%; $6.7
• Binghamton, N.Y.: 32.64%; $18.1
• Bridgewater, N.J.: 10.04%; $13.3
• Burlington, Vt.: 36.21%; $21.3
• Clarksville, Tenn.: 26.01%; $8.9
• East Brunswick, N.J.: 16.07%; $19.6
• Elmira, N.Y.: 19.2%; $9.0
• Fort Collins, Colo.: 30.97%; $16.2
• Fort Myers, Fla.: 29.99%; $66.3
• Great Falls, Mont.: 21.18%; $9.2
• Jackson, Miss.: 25.94%; $34.5
• Lafayette, La.: 33.52%; $23.2
• Lansing, Mich.: 23.22%; $26.7
• Monroe, La.: 15.09%; $10.6
• Montgomery, Ala.: 27.83%; $22.1

Full disclosure: In the spirit of full disclosure, the locally-owned Independent Weekly has had one layoff in the past year and in recent months instituted a single digit, company-wide salary cut. The salary reductions were made primarily to bring the newspaper in line with other alternative weeklies across the nation and to prepare for what might hit locally in light of falling oil and natural gas prices. Additionally, editor Scott Jordan has not been replaced. His duties are now shared by the existing editorial staff.