Friday, March 06, 2009

SF Chron loss closer to $70M per year

The San Francisco Chronicle evidently is losing some $70 million a year, far beyond the “more than $50 million” it claimed when demanding sweeping concessions from its unions under the threat of closing the paper.

Based on statements from company negotiators reported by the California Media Workers Guild, the newspaper’s losses in 2008 were approximately 45% greater than previously reported.

After plunging more than $1 billion into the newspaper without seeing a dime of profit since 2000, the Hearst Corp. last week threatened to sell or close the Chronicle if sufficient savings were not identified.

Updating its members this week on a series of grim bargaining sessions since the ultimatum was issued, the Guild reported that the company threatened to eliminate up to 225 jobs unless its unions agreed to a variety of concessions, including the loss of 150 jobs under Guild jurisdiction.

Further savings would come from far-reaching cuts in the pay and benefits of remaining Guild employees, as well as so-far unspecified layoffs and concessions from the production and circulation positions covered by the Teamsters.

“Even under the company’s plan,” the Guild reported, “management expects at least $50 million will be lost this year by the Chronicle due to recession and the collapse of the ad market in print media.”

Assuming average annual pay and benefits of $90,000 per each severed employee, the company would save some $20 million by unilaterally eliminating 225 positions. If the company would still be losing $50 million after cutting expenses by $20 million, then its actual losses can be no less than $70 million.

(Careful readers will note that I previously estimated an average annual cost of $80,000 per employee at the Chronicle. However, knowledgeable sources have told me that number was too low.)

Assuming aggressive cost cutting succeeded in trimming the annual deficit to $50 million, a question remains as to how long Hearst will continue to suffer such losses.

The alternatives are closing the paper – as is evidently about to happen at the company’s Seattle Post Intelligencer – or merging the Chronicle into the surrounding cluster of newspapers owned by MediaNews Group.

14 Comments:

Anonymous Anonymous said...

How have these companies allowed themselves to get so out of balance? How did they dream that their staff levels and union contracts were going to work out eventually?

I have always admired the Chronicle.

This industry is going to have to start acknowleding that deep staff cuts are just a start.

Unfortunately the union contracts are an impediment to company survival. Why does it always turn out that way? Because unions are short-sighted?

If advertising supports 100 newsroom positions, a company needs to figure out a way to operate with that level of journalism.

8:47 AM  
Anonymous Anonymous said...

$90k is a lot of money if that's what the average workers are making, which means some are making way more and some way less. So aside from the problems of the web and their political agenda that have turned people off, they have mismanagement. Sorry, but that is way too much money for that kind of work.

10:14 AM  
Blogger Zuri said...

If these guys are making an average of $90K, I'm thinking they could at least talk pay cuts first to save jobs. But I doubt anybody wants to make less in this economic climate. Worst of all, they shouldn't have let the average get that high in the first place.

10:59 AM  
Anonymous Anonymous said...

Is 90K a year a lot in the Bay area? I know it's an expensive place to live, but I have no idea how far $90K goes there. Also - does that figure include the cost of benefits? If so, I can see $90K as a realistic figure.

11:38 AM  
Anonymous Anonymous said...

I'm fairly sure Alan said these figures of $80k or $90k are TOTAL costs per employee: not just cash salaries, but their benefits, the cost of their computer, phone, Internet access, reimbursed expenses for mileage and etc.

Few if any non-executive-suite types are pulling $80k in salary. Maybe a few star columnists or key editors, but no one else.

12:51 PM  
Anonymous Anonymous said...

90K is the salary AND benefit expense per employee, if I read the column correctly. And, even if it were just salary, that is not a lot to live on in San Fran.

Billy Dean is licking his chops, even if Hearst has been good to him.

1:53 PM  
Blogger garsky said...

Folks, read the words before you post. The $90K number is salary AND benefits, and lest you think that's still high, try buying decent health insurance. I'd bet at least $30,000 of that number is health insurance and other benefits, like pension/401(k) contributions.

And don't forget the SF area has one of the highest costs of living in the country.

4:18 PM  
Anonymous Anonymous said...

The first commented asked how these companies managed to get this way. Easy: Kicking the can down the road, the same way GM did with its unions and the federal government does with its entitlements. They gave everyone what they wanted at the time, knowing full well it would not be infinitely sustainable. It didn't matter to them, because by the time it all started to fall apart, they'd be long since retired or dead.

Well, now they are retired or dead, and the deals they made have pushed the companies to the brink of collapse. But it's our problem, not the problem of those who created it.

9:32 AM  
Blogger Philip said...

When considering how things got this way, it is important to remember that until quite recently, owning a newspaper was enormously profitable. The owner of a business with such margins does not bargain hard for tough work rules and wages; he just wants to keep the presses rolling, especially if there is competition. The unions took the attitude that Santa Claus would always be comin' to town, and gave nothing.
In the Chronicle's case, the journalistic and editorial standards have been so poor for so long that it seems unfair to blame the unions. I would not take the paper if they gave it away.

2:00 PM  
Anonymous Anonymous said...

Over the years I have heard rumors about what the meaning of losses is. Have heard that if in one year a profit of 8 million is made and ,in the next only 6 million is made, it is claimed that in that second year there is a 2 million $ loss. Is there anytinig to this? If so. What is the difference between not breaking even and a loss?

2:29 AM  
Blogger Newsosaur said...

In re the above question:

A profit means that you made more money than you spent. If you sold $20 in advertising and it cost only $15 to produce a newspaepr, the profit would be $5.

If it costs $17 to produce the paper the next year, then your profit falls to $3 but it is still a profit, not a loss.

If it costs $25 to print the paper the third year and you sell only $20 in ads, then you have a loss of $5.

7:58 AM  
Anonymous Anonymous said...

For those commenters wringing their hands and asking how management let costs get so out of hand: A few years ago, when profits were at record highs, how many of you would have jumped to the company's defense if it had played hardball in its union negotiations?

8:13 AM  
Anonymous Anonymous said...

The Chronicle's problems are far worse than other newspapers. In order for Hearst to purchase the Chronicle, they were required to keep the combined newsrooms of the Examiner (already owned by Hearst but would have had to close down in four or five years when the Joint Operating Agreement with the Chron expired). Hearst was so anxious to buy the Chron that they also agreed to multi-million dollar shakedown demands from local politicians, most notably then mayor Willie Brown.

In addition, the Chronicle had the ill fortune to be located at ground zero for the Craigslist phenomenon.

Alan's point that $20 MM does not begin to cover the operating loss is sobering. Maybe Hearst is trying to get their losses down to a level bearable enough so that Media News can go bankrupt first.

5:36 PM  
Anonymous Anonymous said...

Even if $90K does represent wages + benefits, and even considering the cost of living in the Bay Area, it's still far too high.

The problems with paying reporters and editors that kind of money go beyond the financial drag on their employers, although that's certainly a factor. Reporters start identifying with a moneyed elite and stop writing stories that are of interest to the middle class. They also become lazy and stuck in their ways, preferring to spend their days planning their European vacations rather than hunting for corruption.

The Chronicle would do well to cut average wages to around $30K, which would get rid of the cobwebs and encourage young, hungry journalists again.

6:02 PM  

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