Wednesday, February 25, 2009

SF Chron plan: Web fees, job cuts, givebacks

Higher subscription prices for the print product, pay-per-view sections on the website, scores of job cuts and sweeping union givebacks are included in management’s plan to eliminate the operating loss threatening the San Francisco Chronicle.

These steps – and others – were discussed in emergency meetings today between management and union representatives after Hearst Corp. threatened on Tuesday to close the paper if it cannot reverse an operating loss that otherwise would surpass $1 million a week in 2009. The company, which has plowed more than $1 billion into the newspaper in the last eight years without earning a dime of profit, said it lost more than $50 million in 2008.

Management did not reveal the precise number of jobs targeted for elimination, according to sources familiar with the discussions with the California Media Workers Guild and the local Teamsters chapter. In keeping the with the federal law that requires employers to alert workers to any plans to reduce the force by more than 50 employees, the unions were told only that “more than 50 positions” would be scrapped.

As reported here, it would require the elimination of nearly half of the 1,500 employees of the newspaper to wipe out the operating deficit.

To avoid cutting that deeply into the staff, the Chronicle plans to boost revenues by increasing subscription prices for the newspaper and to begin charging consumers for access to certain features and sections at its website. The site, SFGate.Com, now is entirely free.

The pain in San Francisco will be felt throughout the building. Union reps were told that the management ranks will be thinned through layoffs and that a pay freeze for exempt personnel already has been instituted.

A major concession sought from the Guild is the removal of most of the newspaper’s advertising sales staff from union jurisdiction. The move presumably would make it possible to convert the ad staff from hourly wages to a commission-oriented system that would award high producers and weed out low-grossing reps. The company proposes to de-unionize ad reps hired after 2006.

Other givebacks requested by the company would lengthen working hours; trim vacation, sick pay and maternity leave; permit layoffs without regard to seniority; roll back pension contributions; permit the hiring of occasional employees, and suspend a $30-per-week raise scheduled for most Guild workers in January, 2010.

Union sources said they believe management will sell or close the paper if major concessions are not achieved in a “matter of weeks.” Further negotiations are planned on an expedited schedule and the Guild pledged on its website “to do all we can to reach an agreement that will keep the Chronicle open and return it to profitability.”

Among the budget-balancing initiatives, the Chronicle wants the right to outsource certain duties now under Guild jurisdiction, such as the composition of advertising. The ads for the neighboring newspapers operated by MediaNews Group are created in India, achieving a savings of nearly 50% of the cost of producing them in Northern California.

The Chronicle already is well on the way to implementing a plan to print the paper in a non-union plant in suburban San Francisco that will be operated by a Canadian company. When the highly automated plant opens this summer, the members of the paper’s pressmen’s union will be out of thier jobs.

There are potential outsourcing opportunities for the newsroom, as well. One possibility would be to send copyediting, headline writing and page layout to India.

Alternatively, according to one rumor making the rounds today, those duties could be handled at the Chronicle’s sister paper in Houston. Not only would labor costs be lower in Houston than San Francisco, but the difference in time zones would keep the Texas editors busy in the slack time between editions of their own publication.


Blogger DigiDave said...


This is crazy interesting stuff. Excellent reporting. I'm curious what your personal thoughts are?

12:27 AM  
Anonymous Anonymous said...

This plan is akin to GM raising vehicle prices in the midst of the huge sales downturn - this plan is going to be a disaster. Newspapers just absolutely do not get it - they make the music industry look savvy.

5:31 AM  
Anonymous Anonymous said...

Not good news. Especially that India's being considered for the outsourcing. If the outsourcing could at least be kept in the U.S., that would be something. But I suppose we're going to here more and more such stories. And I can't see but that the quality of our publications will suffer.

6:51 AM  
Blogger tom said...

Just a note on outsourcing the copy desk overseas: MediaNews looked into it and found it wanting.

Only way this works in a real-time news environment is if everybody is on common publishing systems ... to get up and running overseas you have to pay U.S. prices to install U.S. (or European) software over there, so your cost savings are out the window because it'll cost millions to put your system in place in India. Presumably the technology needed to bridge this gap could become available, but who's going to invest in developing it for a doomed industry?

Also, the idea that the copy desk in Houston could just take on another paper the size of the Chronicle in between editions is laughable. It's only a two-hour time difference.

Besides, copy desks across the country have been so thoroughly gutted in the past five years to save reporting jobs that there's very little savings to be had by merging desks. At the Merc we used to have 40 copy editors; now we have 13. Say the Chron has a desk in the mid-20s. If they fire them all they save $2 million a year out of the $50 mil they need to cut.

Cutting quality control on top of raising prices also seems like a dubious prospect from a business standpoint.

7:39 AM  
Blogger Unknown said...

I would not pay for a newspaper that outsources jobs to India. A newspaper is part of a community, and if it's not willing to support the members of that community by employing them, the community should not support it.

7:59 AM  
Anonymous Anonymous said...

Hi Alan,

Great blog, interesting post and very good reporting. I recently interviewed a former newspaper editor who also once served as national president of the SPJ, and she had some interesting thoughts on some of these very same topics. I'll be posting part two of the interview tomorrow where she talks about Web fees and what's going to happen with that. If you're interested, I've posted a link to part one of that interview below:

10:30 AM  
Blogger Ashwin Sodhi said...

It's hard to imagine the Bay will be the first metro area without a major newspaper. (Opens all sorts of doors for, eh Dave?)

I believe things could have been different if they didn't half-heartedly over-extend themselves (1,500 employees is a lot for a paper that doesn't do much of anything but local news right). May not be the most popular place to quote him, but Jeff Jarvis' words ring particularly true in light of this story: "Do what you do best and link to the rest."

11:42 AM  
Blogger Unknown said...

How is this for a radical idea - instead of trying to charge for SF Gate, why not just shut it down?

12:25 PM  
Anonymous Anonymous said...

You say that Heart hasn't made any profit in the last 8 years, since it bought the Chronicle. Was the Chronicle profitable before then?

1:30 PM  
Blogger Greg said...

Clearly these American MBA types don't know how to make a business competitive or profitable, they only know how to cut salaries and benefits and jobs.

There is little left of the Chronicle as is, and the paper is shrinking. Why would I want to pay more to get much less than I already do (which is not much to begin with)? They keep cutting out the people who actually produce the paper and write the articles that theoretically they want people to read.

Why don't they just pull a MediaNews and just fire everyone, put only wire service copy and reprints from other dying papers and charge a ton of money for it? Heck it might work for a few months to pay off some golden parachutes.

6:17 PM  
Blogger Banjo Jones said...

The Houston paper is facing a 10% or more layoff itself in less than two months.

8:12 PM  
Anonymous Anonymous said...

"India" and "outsourcing" have been conflated by interest groups. The fact is that newsroom inefficiencies are already being confronted successfully by domestic players in the outsourced editorial-services space. Check out Canada, the U.K. and Australasia – they are already way ahead in extracting value by helping publishers free journalists to do journalism.

What publishers need to do is put more resources, not less, into creating content. Revenues won't support new hires to do this, not for a while at least. So where to find that talent? Folks, it's already right there in the newsroom. Up to a fifth of the typical newsroom's staff has been trapped by desktop publishing's task compression in roles that benefit little from the qualities that got them hired in the first place. Think about it. What j-school graduate dreams of drawing boxes on pages? Yet there's a good chance that this will become a significant part of their job if they become involved in the production area of their newspaper.

Using technology to hive off the humdrum and let layout editors be restored to the practice of content creation comes at a fraction of the cost that orthodox assumptions require.

It is just plain strange that newspapers are capable of reporting on their pages about innovation in other industries, yet struggle to build the consensus and authority required to bring about change in their own companies. Many are asking anew whether the move two to three decades ago to take back-shop functions into the newsroom created short-term gains that are only now being seen as having exacted a price of their own.

Today's economic crisis will hasten transformation and allow the bravest players in the industry to avert collapse. Wise publishers will keep their minds open to any possibility that respects the end user, i.e., readers.

It is simply not the case that newsrooms have to be on common content-management systems with their external service centers in a real-time news environment in order to show efficiencies. Sure, it is nice wherever possible and would be a rational end state for any outsourcing concept. Yet even the flashiest CMS is merely a bundling of strands. As long as appropriate strands are matched with appropriate skill levels supported by communication and accountability, the job can get done. As for the cost of fonts and software, it is definitely the case that innovation requires investment. Any business case that doesn't consider start-up costs is susceptible to failure.

There is no silver bullet that will all by itself solve the industry's problems. Outsourcing is not the single solution any more than software that reduces ink usage. A range of programs is needed and most or all publishers understand this. Onshore editorial outsourcing is but one of the measures that will make the industry fit to keep supplying its desirable and desired product for this generation and beyond.

9:38 PM  
Blogger ....J.Michael Robertson said...

Here's an unpleasant thought. If you assume that what is precious and must be preserved is the paper's content -- and thus its content makers -- the Guild members who take this sacred trust seriously now have a responsibility to throw all the other newspaper unions under the bus. Perhaps, back in the day union solidarity maintained wages and benefits for all -- though during my time at the Chronicle the Teamsters were really the only union that mattered and when they cut their own separate deals we all fell in line. But today under the theory that any and all must be sacrificed to the preservation of editors and reporters .... You remember the movie Lifeboat. Put the weak over the side and let them drift away.

Has it come to this? It really is a question of where the greater loyalty lies, and how serious you think the loss to the community will be if the Chron dies or shrinks back into only an online presence.

3:44 PM  
Anonymous Anonymous said...

Outsourcing of ad building has been going on for some time at most papers and speaking from personal experience I can say it's a DISASTER. Our ads are built in Manila by a major ad outsourcing company and it's a bad situation to say the least. We still have nearly as many employees at the paper only now their jobs suck b/c instead of getting to actually design something they spend all day uploading, scanning and dumbing-down instructions so that they can be understood by people that can barely speak English well enough to be coherent. When mgt bought into the system we were told the artist would be educated, skilled ad designers. Some are skilled, few speak/understand English & few were designers a few months ago. I can't FATHOM them editing news copy. They can't even write ad copy. We have to write it and if there are any errors they're not capable of finding/fixing them. God help us all if copy editing gets outsourced anywhere! I am not being overly harsh, just honest and realistic.

4:42 PM  
Anonymous Anonymous said...

A major flaw in this plan is the Houston Chronicle has only one edition these days -- there's no gap for editing another paper!

10:34 AM  

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