American Culture

LA Times: Another editor out for refusing to make budget cuts

Today I’d hate to be the managing editor of The Los Angeles Times, John M. Arthur, 60, or its innovation editor, Russ Stanton, 49. That’s because rumor has it they’re on the short list to be the next top editor at one of the nation’s finest newspapers.

If named, this is what publisher David Hiller will expect of either: Cut The Times’ approximately $120 million budget by 1 percent. That would mean firing people. If either wishes to keep that job, they’d better do it — because Hiller fired the previous two editors who refused to make cuts he demanded.

Hiller told editor James E. O’Shea to make that cut. O’Shea instead requested a $3 million increase due to anticipated coverage needs of the China Olympics and the presidential election. Hiller says O’Shea quit; O’Shea says he was fired for that refusal. In 2006, editor Dean Baquet was forced to resign for refusing to make budget cuts demanded by the paper’s owner, Tribune Co.

As of last week, the Tribune Co. has a new owner, billionaire Sam Zell. In a prepared statement, Mr. Zell said:

We have a tremendous opportunity to take the great brands of Tribune Company, and the enormous talent within the company, to a new level. Tribune, along with the newspaper industry, has been mired in its monopolistic origins, and we intend to create a fresh, entrepreneurial culture that is fast and nimble, and which rewards innovation.

That’s sufficiently vague to mean just about anything. But for a new owner to mention “rewards innovation” and immediately fall back on the same old business model — reduce expenses to maintain investor income — says the LA Times is in for an increasingly rough ride.

That’s because, from the other side of Mr. Zell’s mouth, came this in a Monday e-mail to Tribune employees:

I’ve said loud and clear that I am returning control of our businesses to the people who run them. That means David Hiller has my full support. He carries direct responsibility for the staffing and financial success of the L.A. Times. [emphasis added]

Mr. Hiller’s record says he will cut costs to maintain profit levels. But financial success of a newspaper these days will no longer come from continual cuts that diminish the value of the product.

The push and pull over budgeting is a long-running story at The Times, which has seen its editorial staff shrink in the last eight years to less than 900 from about 1,200. At the same time, the paper’s weekday circulation has dropped to about 800,000 from more than 1 million.

Is The Times losing money? No. But its profit margin is decreasing, and Tribune’s sale to Mr. Zell has played a role in that:

Through three quarters last year, the company had an operating profit margin of 16 percent, down from 19 percent the year earlier. But with sharply higher debt service costs because of the takeover, net income fell by more than half, to 4 percent.

I’d take 16 cents on the dollar any day before the sale. But, apparently, large institutional investors will not. They want large profits over short times. As I’ve written earlier, that has played havoc with the newspaper industry.

I wish luck and a hefty 401k to the next editor of the LA Times. He or she will likely have to take a big ax to the resources available to one of the nation’s best papers, further diminishing the ability of The Times to do its job — hold governments and corporations accountable for their actions.

Here are Mr. O’Shea’s parting comments:

I disagree completely with the way that this company allocates resources to its newsrooms, not just here but at Tribune newspapers all around the country. … Even in hard times, wise investment — not retraction — is the long-term answer to the industry’s troubles. … Journalists and not accountants should seize responsibility for the financial health of our newspapers, so journalists can make decisions about the size of our staffs and how much news remains in our papers and Web sites.

So, Mr. Arthur or Mr. Stanton or whomever: Make the cuts, keep the job, reign over the demise of a newspaper. Refuse the cuts, and join Mr. Baquet and Mr. O’Shea as former editors of an increasingly once-great newspaper.

4 replies »

  1. The two words in that statement that told me all I need to know were “entrepreneurial” and “nimble.” This is code, of course. “Innovation” is problematic, as well (as you note) – this is definition of an industry that isn’t even a little bit interested in real innovation. They like the idea of it, but when it comes to DOING something about innovation they can be counted on to wet their pants.

    How do we know? Well, these aren’t new problems. They’ve had YEARS to recognize, diagnose, and respond, and they’ve had all the budgets in the world. Seriously, if Craig’s List starts with zip and you start with billions and he beats you anyway, you’re too stupid to live.

    The idea of the Zells of the world losing their asses is actually an entertaining thought. Sadly, they’re still going to be filthy rich after all those hard-working employees go bankrupt.

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  3. Saw a great discussion of this on the NewsHour (PBS) last night, Denny. I was interested in what one of the participants said that another disagreed violently with: that newspapers must accept that diminished capacity is all they can expect as they slowly decline to irrelevancy. The guy was even dismissive of on-line possibilities – he seemed determined to bury newspapers, not to praise them.

    I thought of many of the points you’ve made about the business in this forum and wondered why you weren’t there to discuss them instead of him.

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