Tough Times at a North County Newspaper

Tough Times at a North County Newspaper

The North County Times has cut its staff three times this year. In the latest round, the paper reduced its newsroom staff by about 25 percent. Photo: Sam Hodgson

Monday, Nov. 24, 2008 | Three years ago, Lee Enterprises enjoyed what it called a landmark year.

The Iowa-based newspaper company that owns the North County Times had just agreed to shell out $1.4 billion to buy the storied Pulitzer newspaper chain. Its 58 daily newspapers reached almost two million subscribers. Revenue growth was outpacing other newspaper chains. The publicly traded company had almost tripled the number of papers it owned from a few years earlier.

But cracks in the veneer were starting to show. There it is, on the second page of the company CEO’s annual note to stockholders. Amid a letter filled with glowing words — “rapidly growing,” “highly successful,” “high internal goals” — CEO Mary Junck noted one negative trend.

“[L]et me acknowledge that newspaper paid circulation has slipped for Lee in the past year after three years of growth,” she wrote, assuring investors that a plan was in place to stop the decline.

Today, Lee Enterprises is struggling. While Sunday readership has stayed steady, its newspapers have lost some 200,000 daily subscribers. At its peak in 2004, the company’s combined stock value was more than $2 billion. On Friday, Lee’s combined stock value was $64 million — teetering on the brink of being de-listed from the New York Stock Exchange. The exchange de-lists if a company’s value drops below $25 million or if its stock value stays below $1 for a month. Lee’s stock closed Friday at $1.42 and has dipped as low as $1.07 this year.

If you invested $1,000 in Lee shares at the peak, that original investment, excluding dividends, would be worth $29 today.

Locally, the North County Times has cut its staff three times this year. Last week, it cut 25 newsroom employees, about a 25 percent reduction in newsroom staff. The cost-cutting move was a significant blow to a newspaper that once appeared to be weathering the tough times facing its industry. The Times, which covers territory from Del Mar to southern Riverside County, cut staff days after its parent company also made cost-saving moves. Lee eliminated its shareholder dividend, trimmed its contribution to employee 401(k) programs and suspended an employee profit-sharing program. The company told investors it would cut costs 6 to 7 percent in the coming year.

“It’s a tough time for newspapers, it’s a tough time for a lot of companies,” said Dan Hayes, a Lee vice president. “The economy is driving problems for all of us — and all of us are dependent on each other. The result is tough times for everybody.”

The newspaper industry has always coped with the economy’s cyclical rise-and-fall nature. In good times, advertisers plumped up the pages. In bad times, they slimmed down. But as the latest downturn whacks company profits, newspapers everywhere are confronted with an added pressure: Many were already struggling, losing readers and advertisers at a steady clip.

Lee’s problems are emblematic of the economic calamity currently plaguing the nation, said Dean Nelson, director of Point Loma Nazarene University’s journalism program. By borrowing to buy the Pulitzer chain, the company overextended. The company must still shoulder its debt while dealing with a revenue decline. It reported a 12 percent drop in fourth quarter advertising revenue Nov. 13.

“They obviously blew it by spending beyond their means with the feeling that cheap credit was going to be there forever,” Nelson said. “If you live beyond your means you will eventually have to pay for it. That’s true if you’re a family living on credit cards or a corporation living on debt.”

The finances of the North County Times’ parent, a public company, offer a window into the struggling newspaper industry. The San Diego Union-Tribune, which is up for sale, has continually cut its staff since 2006 while coping with a steady circulation drop. But the privately owned Union-Tribune’s finances remain secret. Lee’s do not.

Until recently, the North County Times had offered reason for optimism when compared to the Union-Tribune. While the Union-Tribune lost 100,000 of its 442,000 Sunday subscribers since 2004, the Times’ circulation remained relatively steady. It has lost 9,000 subscribers in that time; its daily and Sunday circulation now stand at 85,000.

Media analysts say significant differences still exist between papers like the North County Times and the Union-Tribune. David Clark, a Deutsche Bank newspaper analyst, recently described it this way in Media Life Magazine: “Small papers are much more nimble and can implement changes in strategy much more quickly. Big markets institutionally resist change, and it’s very hard to turn the battleship around.”

Clark concluded that Lee had a better chance of survival than some other newspaper companies. While the company’s revenue has fallen, he said, “they’ve got an aggressive sales culture, which is fairly unique for a newspaper company, that has remained on the offensive against other media.”

While the Union-Tribune has let go of some of its most notable reporters, North County Times Publisher Peter York said he has tried to keep the paper’s local reporting staff in tact. Last week’s layoffs included two reporters out of the 25 newsroom positions eliminated; the paper also lost five reporters to buyouts in February. Instead, York said the paper has tried to cut columnists, editorial writers and copy editors, hoping those changes will be less visible to readers.

The paper will rely more heavily on freelancers, who cost less than full-time writers, in an attempt to maintain the amount of news in the paper. “I don’t know if we’ll be able to or not,” York said. “The product will be different for sure. You can’t lose that many employees and not have it be different.”

The newspaper’s fate appears to rest in the economy’s hands. Whether more cuts happen depends on an economic recovery. “If the economy improves, we’ll be fine,” York said.

Hayes, the Lee spokesman, said the economic downtown in Southern California was more severe than what some of the company’s other markets faced. Lee prints papers in 23 states, including its flagship, the St. Louis Post-Dispatch. Workforce cuts are local decisions, Hayes said.

Nelson, the Point Loma professor, said if the parent company is in financial trouble so are its individual papers. But without Lee’s corporate debt, he said, the Times would be better positioned than the Union-Tribune to withstand the economic contraction.

“In the North County, the Times is the table everybody comes to,” Nelson said. “If advertising or classifieds are down they’re still going to be able to recover because the community sees the value of it.”

Nelson noted the Times’ investment in covering the military — a core component for a newspaper that covers Marine Corps Base Camp Pendleton. Times reporter Mark Walker just returned from Afghanistan, the fifth time the newspaper has sent a staffer to the Middle East since 2001. The Union-Tribune hasn’t sent a reporter abroad to cover either war since 2004.

“You don’t have that same community newspaper with a large metropolitan paper like the Union-Tribune, which serves a county of three million people,” Nelson said. “There isn’t the same sense of local ownership. There is a commitment to the community that the North County Times has really made. And I think the community will honor that.”

Please contact Rob Davis directly at rob.davis@voiceofsandiego.org with your thoughts, ideas, personal stories or tips. Or set the tone of the debate with a letter to the editor.

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