Posted on 07/27/2006 6:24:35 AM PDT by abb
“That’s not what I was trying to signal,” says publisher Joe Natoli
by Steve Volk
Philadelphia Inquirer and Daily News publisher Joe Natoli sent out one of his monthly memos yesterday, 24 hours before the start of negotiations with the newspapers’ unions on a new contract.
The missive runs on for roughly five pages (see full text below), and includes news that the newspaper company’s iconic white tower offices at 400 N. Broad St. might end up for sale.
“Our building is under-utilized,” says Natoli. “Options include leasing open space to others, selling the building in a sale/lease-back (which could generate cash to pay down debt, without requiring a move) or selling the building and leasing space in another facility.”
Reached by phone, Natoli seems to regard the spectre of a potential move as an opportunity. “It’s a hot real-estate market,” he says. “You can see things happening here in the street.”
Natoli’s memo specifically cites the school board’s recent move to North Broad Street, CBS’ plans to “become our neighbor” and the proposed sale of the state office building to the newspapers’ north.
“A decision on the building is probably months away,” reads the memo. “Having said that, we would always expect to maintain a significant presence in Philadelphia.”
That Natoli felt the need to assure people the newly founded Philadelphia Media Holdings Co. would maintain a “significant presence” in the city might cause some to wonder if some operations could be headed for the suburbs.
“Not really,” Natoli responds. “That’s not what I was trying to signal. The starting expectation is that the physical allocation of people would be about the same in Philadelphia that it is today. The only discussion is how to maximize the value of building.”
Columnists Stu Bykofsky at the Daily News and Tom Ferrick at the Inquirer both remember a time when the possibility of a move was raised by Knight Ridder. “Imagine if the place went condo,” jokes Bykofsky. “The prestige! The publisher’s office is small, but it’s very elite.”
“When you add up all the square-footage in this place,” notes Ferrick, “it probably does exceed their needs. I think they’re just looking at all their options in a hot market.”
As the rest of Natoli’s memo makes clear, the company needs whatever advantages it can get. In many ways, local ownership is a grand experiment—the sort of exercise that could provide a model for how to save newspapers or lead the whole enterprise of daily print journalism further down the rabbit hole.
Business, says Natoli’s memo, is “Not so good. Ad revenues increased by 1 percent in May, but June and July combined will be down 7-8 percent.”
Given that new CEO Brian Tierney wants to put millions into long-neglected color printing capabilities and marketing, the new management team will embark upon negotiating its first labor contract with the goal of finding some money. And Natoli admits concessions will be asked for.
“That’s true,” he says by phone, “and we all have to work together to make that happen.”
-----Original Message----- From: Natoli, Joe (PNI) Sent: Tuesday, July 25, 2006 5:28 PM To: PNI Weekly Update - All Cc: BSCN; Philly.com - All Subject: July 2006 July 25, 2006 TO: PNI Employees FROM: Joe Natoli
We have entered a new chapter in the lives of our newspapers, Web sites and other businesses. The change to local ownership has given us a unique opportunity to secure and strengthen our future. Now, we need to come together to take maximum advantage of this special time.
It’s no secret that our industry faces significant challenges. It’s abundantly clear that staying the course will not lead to future success.
Growth will require investments in things like online and promotion, product improvements and innovation. Brian Tierney has talked repeatedly (and accurately) about the need to spend a minimum of $5 million promoting our newspapers and web sites, compared to the $300 thousand we spent last year. We need to work together to find that money and more to invest in growing our business.
I will continue to provide regular updates on the status of our business and future direction. Feel free to email questions. Responses to commonly asked questions will be included in future notes and posted on our Intranet site. In the next few weeks, Brian and I will also host a series of employee meetings.
Q: How goes the conversion to local ownership?
A: Very well. There’s a buzz about our new owners Bringing Home The News in our industry, local community and within the confines of our buildings. That’s good for business. We need to keep the positive momentum going.
Q: Are there a lot of transition issues?
A: Tons. Payroll has already been converted from Fidelity to ADP (great job by the conversion team in completing a four month project in four weeks). We have an agreement with a local vendor, SAP, for the software to handle financial systems – general ledger, accounts payable, procurement and fixed assets. We have purchased our own insurance for everything from property, to autos to libel. We now contract directly for healthcare for non-union employees and workers comp for everyone. A host of other changes are still to come.
Q: What about online, isn’t there a lot of change occurring with philly.com and CareerBuilder?
A: There is. Creating an ambitious vision for online, rather than simply implementing a corporate plan, is one of the most exciting opportunities we have. And we get to decide it all right here in Philadelphia. In fact, earlier today we announced an exciting new relationship with Monster for recruitment advertising. We are the first newspaper in the United States to do this.
We will also select new software to power philly.com and consider alternatives for providing online auto and real estate ads since we no longer have an equity stake in Classified Ventures. In each case, our intention is to offer consumers and advertisers a richer online experience.
We are already deep into the analysis of many of these matters and like what we see so far. We are very serious about being an industry leader in online, which represents the fastest growing part of our business.
Q: How is business?
A: Not so good. Ad revenues increased 1% in May, but June and July combined will be down 7-8%. We continue to be hurt by losses from large advertisers. Strawbridge’s is gone as a stand-alone brand. General Motors and Ford have been quiet. Telecom consolidations have resulted in reduced spending. Real estate is the only category that has consistently shown growth. We are up in areas where we have invested additional resources like preprints and local retail territories, but that growth has not been enough to offset the larger losses. That is why it is so important that we be able to invest back into the business so we can turn this situation around.
Q: How are other newspapers doing?
A: It’s a mixed bag. Newspapers in fast-growing markets like Phoenix or Tampa are growing. Major Northeast metros like the Boston Globe, Newsday and our newspapers that have not benefited from new advertisers moving to town, are not. We have to work harder for our growth. Fortunately, we operate in the fourth largest DMA in the country. There are plenty of ad dollars available in the market that are being spent with our competitors. We need to do what is necessary to get that money.
Q: What are we doing to turn around our revenue performance?
A: We have launched many initiatives. So far we’ve added staff in retail and recruitment advertising; reduced the size of preprint zones to allow advertisers to target more effectively; realigned auto territories to reduce drive times; added resources in research and marketing; and focused on sales rep training. Brian and I have been meeting with large advertisers both here and in other parts of the country making the case for investment in our products. The response has been encouraging. We hope to see the results of these calls and other efforts in the numbers. But the fact remains that there is more to be done, and we will continue to work hard to turn things around.
Q: Where are we with labor negotiations?
A: Our contracts expire on Aug. 31. Last week, we kicked off negotiations in a meeting with the council of unions. I reviewed business results for the last several years, which as you know, reflected a steady decline in advertising revenue, circulation and operating profit. Brian talked about the local investors’ vision for the future and the need to reduce costs significantly in some areas to provide money to invest in promotion, product improvement, color capacity and other initiatives that will help to build a better future for all of us. We also talked about work rules that make it hard for us to compete and restrict our ability to grow. Overall, both sides understand that we have a historical opportunity to build a platform for long-term growth.
Q: Why do we have to reduce costs? I thought there would be less financial pressure now that we are privately held?
A: Unlike any of the other would-be buyers or Knight Ridder, our new owners are focused on long-term growth (no investor can sell for the first five years) though they do expect a fair return over time. Over the short term, they plan to reinvest excess cash flow back into the business to help make it grow. This increased investment will only be achievable if we generate cash flow beyond what is needed to meet our obligations for interest, capital expenditures, taxes and debt reduction. These are fixed obligations that must be taken care of first.
Q: Will we be able to reach agreements on new labor contracts when the current ones expire on August 31?
A: We are certainly going to do our best to reach new agreements before the expiration of the current contracts. However, it is more important to reach agreements that are fair to both sides than to rush through the negotiations to meet a deadline. We have real issues that need to be discussed and resolved, and we will work with labor leaders to try to reach agreements as quickly as possible.
Q: Who is leading the negotiations?
A: Rob Barron and Astrid Garcia will be working with Bill Sabatino. Many of you probably know Bill. He was the former PNI labor head and is now our consultant. Rob, Astrid and Bill have been hard at work talking with department heads to develop contract proposals that will better position us to meet the challenges of our industry and market.
Q: Can you tell us what the proposals will be?
A: By law we are required to first present our proposals to union representatives across the bargaining table. Once that’s done, we will keep you updated on the proposals and our efforts to reach an agreement. We are looking for contracts that will give us the flexibility to compete effectively with other newspapers and media companies in our market, while also providing competitive wages, affordable, quality healthcare and the security of retirement plans.
Q: I heard something about our downtown building being for sale. Is that true?
A: No, but that’s under review. Our building is under-utilized. Options include leasing open space to others, selling the building in a sale/lease-back (which would generate cash to pay down debt, without requiring a move), or selling the building and leasing space in another facility. The issue is how best to realize the value of our real estate. That’s made more interesting by the school board’s recent move to North Broad Street, CBS’s plans to become our neighbor and the Governor’s proposed sale of the state office building just north of us. A decision on the building is probably months away. Having said that, we would always expect to maintain a significant presence in Philadelphia.
Q: Is there a future for good newspapers – ours in particular?
A: Without a doubt, and that’s why the local investor group bought us. There will always be a need for objective and comprehensive local news and information. But the status quo is not an acceptable option for any of us. If we continue to operate the same way we have in the past, it’s unrealistic to expect that the business will not continue to decline. In order to secure our future, we need to have the courage to change our business model -- dramatically -- by finding dollars and investing in ways that will help us grow. In the past, money saved was sent to “Wall Street.” Now, it will be invested back into the business.
Q: If we do all this, can we have some fun?
A: Absolutely. We have the privilege of working in a business that makes a difference in peoples’ lives. That’s something we can be proud of and celebrate together. Our new owners have already demonstrated their interest in thanking our employees for their hard work. Many of our people attended a Riversharks game earlier this month. Hundreds saw the Phillies lose later in the week... We handed out thousands (and thousands...) of promotional materials to grateful July 4th parade celebrants. Some really exciting activities are being planned for employees and their families in the months ahead.
Let me close by thanking each of you for your efforts during an uncertain time. They have been truly impressive.
We have a unique opportunity just ahead. Let’s approach it with the same passion, energy and creativity that our new owners used to edge out their competitors in Bringing Home The News.
—Joe
Business, says Natoli’s memo, is “Not so good. Ad revenues increased by 1 percent in May, but June and July combined will be down 7-8 percent.”
Ping
'The elite owners/publishers of today's dinosaur fishwraps are the modern day, Norman Bates. They are trying to keep the corpses alive by refusing to bury them.'
Freakin' evil BIG MEDIA PIGS!! How dare they leave the inner city. What is this, white-flight? How big were their bonuses and why are they abandoning all the people?
Companies do this all the time, mostly due to property taxes, property values, or some sort of disagreement with the city. The Albany Times-Union, for example, moved out to the burbs decades ago.
I absolutely disagree. This is nothing but a ploy, one more way for these freakin' evil BIG MEDIA PIGS to stick it to the little man. All they care about it making money.
“Our building is under-utilized,” says Natoli. “Options include leasing open space to others, selling the building in a sale/lease-back (which could generate cash to pay down debt, without requiring a move) or selling the building and leasing space in another facility.”
They could open the executive gay hot tub to the gay public and charge for each 15 minutes of use.
They could rent out whores/reporters/editors for nooners.
They could sublet space to some Crack and Speed Dealers.
Al Qaeda would probably pay to sublet an office in the publisher's office.
Bookies could work in the printing room while the presses are idle.
The local DemonicRat Party could move in and to save rent money. Then they could better coordinate their latest lies about Republicans, GW and the wars in Iraq and Israel.
I never said this wasn't about making money. It absolutely is about making money. Hence my remarks about property value and property taxes.
It is less about the white flight aspect, however, that does affect property value and property taxes, so it is a secondary reason.
....whores/reporters/editors .....
A more sucinct term is "presstitute"
As in "collateral revenue can be generated from presstitute nooners."
TRANSLATION: We want to move to the suburbs and get out of this socialist, union, 50 years of democrat corruption city...
Buy the newly-available Bulletin in Philly. It's ... wait for it ... fairly conservative !
This Great! My best laugh of the morning:
"whores/reporters/editors .....
A more sucinct term is "presstitute"
"As in "collateral revenue can be generated from presstitute nooners."
bump
Our local rag would never do this . . . they hate the suburbs. To do so would be illogical and hypocritica . .
Never mind.
ok..I kinda figured you were being sarcastic but sometimes people around here actually are that uptight.
Is there ANY reason for real businesses to be in Philly?
Moving to the suburbs? sputter . . . sputter . . .Don't they know that there's Republicans there?
What can they be thinking?
</sarcasm>
Business, says Natoli’s memo, is "Not so good. Ad revenues increased by 1 percent in May, but June and July combined will be down 7-8 percent."
AKA "the nut" of the story.
"The prestige! The publisher’s office is small, but it’s very elite."
Illustrates "the nut", if you will, of Journalism'sTM megalomania.
Payroll has already been converted from Fidelity to ADP (great job by the conversion team in completing a four month project in four weeks). We have an agreement with a local vendor, SAP, for the software to handle financial systems – general ledger, accounts payable, procurement and fixed assets. We have purchased our own insurance for everything from property, to autos to libel. We now contract directly for healthcare for non-union employees and workers comp for everyone. A host of other changes are still to come.
The sneaky bastards running Inky want to try to keep rank-and-file employees in the dark about executive compensation. Apparently Inky currently offers up lots of InfoTech opportunity ($$$) to geek hustlers. Hard for a pragmatic results oriented person like me to see how spending tons of cash on pricey/Eurotrashy IT actually helps their bottom line. Instead you'll need to contact the guy at 50,000' to draw a big picture for you.
Inky's spending tens of millions on a new fishwrap press. They're heavily buying into a new IT infrastructure. Now all they need is a few good subscribers to buy their stories. BWAHAHAHAHAHAHA
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