As the Illinois Times recently reported, the beleaguered news-gathering operation at the State Journal-Register in Springfield continues to operate under adverse conditions.
When a heat wave washed over the Midwest, the air conditioning at the SJ-R building began faltering, as the Times reported:
Air conditioning at the State Journal Register went on the fritz more than a week ago, and with temperatures climbing to the high 90s in recent days, it’s still not fixed.
Fans and Popsicles have been distributed, but to little effect, according to one employee who said that the temperature in the newsroom, on the building’s top floor, is in the 80s. Some folks reportedly have been allowed to work from home.
“It’s really hard to write when you’re sweating on things,” said one scribe. The AC started acting up about two weeks ago, one source said, and while it still works, it’s a case of barely works. Employees have been told that the problem is being worked on, but have not been told when it might get fixed.
The United Media Guild’s executive board authorized the Springfield unit to rent some stand-alone air conditioning units to get the newspaper through the crisis. But SJ-R executive Angie Muhs prevented the Guild from bringing the units into the building to make the workplace more comfortable for members and managers alike.
Muhs did allow some journalists to work from home, but obviously that is not feasible for everybody in the newsroom. For those who had to stick out, the Guild supplied water and Gatorade to keep employees hydrated.
Journalists at the State Journal-Register are joining the GateHouse Media colleagues and Digital First Media employees in a day of action to protest against their asset-stripping corporate management.
Here is The NewsGuild’s news release on the national effort:
WASHINGTON, D.C. (April 28, 2017) – A broad coalition of 1,500 unionized news workers will conduct a joint day of action on May 3 – World Press Freedom Day – as part of a national campaign to protest the corporate-led assault on quality journalism. The coordinated effort by NewsGuild members will span 29 newspapers owned by GateHouse Media and Digital First Media.
It will support the fight for quality journalism at those papers and highlight the damage wrought by draconian cuts in their newsrooms and other departments. Now, union leaders say the focus on profits threatens journalism at a critical time of politicized attacks on the news media.
“Reliable information is the foundation of our democracy,” said Bernie Lunzer, president of The NewsGuild-CWA, based in Washington,D.C. “Corporate owners have a duty to invest in the essential work done by newspaper workers and not to simply strip-mine newspapers for profits.”
The joint effort by GateHouse and Digital First Media workers marks an unprecedented NewsGuild campaign to demand that corporate owners invest in quality jobs and fair contracts after years of layoffs, furloughs, pay freezes and benefit cuts. Contract negotiations are under way or expected to resume soon at both companies, but managements have shown little interest in changing course.
Workers at GateHouse and Digital First Media have endured some of the most vicious staff reductions in the news business. Alden Global Capital, a secretive New York hedge fund, owns DFM and has slashed staffing levels by more than twice the national average during the past five years, while pocketing millions by selling off the company’s real estate assets. GateHouse owns and/or manages 564 community print publications, including more than 130 daily newspapers, under the New Media Investment Group umbrella.
New Media is a publicly traded company, externally managed by Fortress Investment Group. Under New Media’s business model, the company buys newspapers, strips them down to maximize cash flow, and uses that money to pay dividends, pay bonuses to corporate officers and fund more acquisitions. As the company gets bigger, Fortress collects larger management fees – roughly $54 million the previous two years alone.
The 13 Digital First bargaining units represent workers at 12 newspapers, including the Denver Post, San Jose Mercury News, St. Paul Pioneer Press, and suburban publications in the Bay Area, Philadelphia, and Detroit markets. Last week, DFM announced that it would lay off more than 20 percent of the Guild-covered newsroom staff at the East Bay Times, just one week after it was awarded journalism’s highest honor, the Pulitzer Prize, for breaking news coverage of the deadly “Ghost Ship” warehouse fire in December.
The 15 GateHouse bargaining units represent 580 workers at 17 newspapers, including the Providence (RI) Journal, Worcester (MA) Telegram and Gazette, Erie (PA) Times-News, Peoria (IL) Journal Star, Springfield (IL) State Journal-Register, Rockford (IL) Register Star, Utica (NY) Observer Dispatch, The Herald News (Fall River, MA), The Enterprise (Brockton, MA),The Patriot Ledger (Quincy, MA), Lakeland (FL) Ledger, and the Sarasota (FL) Herald-Tribune. The staff of the Herald-Tribune, a newly organized Guild unit, shared the 2015 Pulitzer Prize for investigative reporting with the Tampa Bay Times for their five-part series “Insane. Invisible. In Danger.” That collaborative project detailed horrific conditions in Florida’s mental hospitals.
In the new campaign, the Guild is pushing back nationwide before media profiteers cause further wreckage to the communities they are supposed to serve. The May 3 World Press Freedom Day action will include the display of pro-journalism literature at desks and other work stations, and appeals for public support in local communities and online. The theme: “Democracy Depends on Journalism” and “Invest in Us.”
The action will mark the first coordinated effort by news workers at the two companies to demonstrate solidarity in the workplace and remind the public that quality journalism matters. NewsGuild members are reaching out to allies, including journalists working for other employers – both union and non-union – as well as community advocates concerned about the corporate gutting of newsrooms across the United States.
With print circulation plunging at the newspapers its owns or manages for New Media Investment Group, GateHouse Media found ways to stabilize circulation revenue from newspapers like the State Journal-Register.
It threw so-called “premium” publications into the home delivery package, making readers pay extra for advertising-driven content. So even though fewer and fewer people were subscribing to newspapers produced by fewer and fewer journalists, GateHouse kept finding ways to charge more and more.
Perhaps readers in Illinois should ponder their options. Rather than pay more and more for less and less content, they should demand more from these out-of-town owners vacuuming dollars from this region.
Kirk Davis is CEO of GateHouse Media, which owns and/or manages newspapers like the State Journal-Register for the parent New Media Investment Group.
And when we say manage, we mean “suck as much cash from each newspaper as possible” while diminishing its ability to perform quality journalism and serve its community.
According to New Media’s latest proxy, Davis earned $1.4 million in salary, bonus and stock awards for 2016. He got a 10 percent bump in salary, up to $550,000, and a $500 million bonus — down from his $800,000 bonus the year before, when the company sold the Las Vegas Review-Journal for a huge profit under ethically murky circumstances.
On his watch, the company has enforced a wholesale wage freeze and churned journalists, salespersons, publishers, regional executives and even national-level executives.
But he keeps generating the positive cash flow to pay dividends and fund further acquisitions. That drives up the management fees paid to Fortress Investment Group, the money guys behind this whole enterprise.
In the past three years Fortress has raked in $54 million in fees while newspapers like the State Journal-Register faced staff reductions and many journalists endured 36 more months without a raise.
“We are so proud of the role our publications play within the communities they serve as the dominant sources of comprehensive high quality local news and information,” Reed read from his script. “These local brands are the cornerstone to our organic growth strategy allowing us to leverage our strong community standing in ties, our highly recognized brands, and our large in market local sales force, which is helping us further expand our digital and service offerings for small businesses.”
Of course, Reed didn’t mention the round after round of cuts the Herald-Tribune newsroom has suffered under New Media ownership and GateHouse Media management. Nor did he mention that the Herald-Tribune was an award-winning newspaper long before New Media bought it and began the wholesale bloodletting of journalists.
Reed addressed that payroll slashing with typical CEOSpeak: “Subsequent to the quarter close, we have implemented a cost reduction program that is expected to reduce expenses over $3 million in the first quarter of 2017 and over $27 million for the full year of 2017.”
In other words, expect the layoffs to just keep coming at its newspaper like the State Journal-Register, Peoria Journal Star, Rockford Register Star and Pekin Daily Times. Expect to see fewer and fewer reporters working in the communities and less and less reporting on topics vital to the residents.
Here are some other highlights:
For a change, Reed didn’t claim that New Media stock is undervalued by Wall Street. Its share price has been hovering in the $15 to $16 range, a far cry from the $40 or more some experts predicted for the stock when it was first issued.
Reed talked up the increased New Media dividend ($0.35 this time around), which is funded by the cash flow from local newspaper properties. Rather than reinvest in its news-gathering operations and reader retention, the company bleeds profits from these properties through round after round of cost reduction.
The company is still banking heavily on circulation revenue. While print circulation continues to plummet across the chain, the company offsets that with price increases and paid digital subscriptions. That is not a sustainable model, particularly given the dramatic newsroom reductions across the chain. People won’t keep paying more for less. They just won’t. Also, newspaper reader demographics skew old. Younger people are getting the information in other places.
Reed noted the company suffered massive declines in print advertising, led by the industry-wide decline in “pre-print” advertising from major retailers and classified advertising. While that decline may slow in the years ahead, Reed admitted that it won’t reverse.
He once against talked up “organic growth” in the company, but this time he didn’t put a timeline on it. Instead Reed stressed the diversification of revenues, including growth in digital ad sales, Propel Marketing, commercial printing and event presentation.
Reed also talked up the company’s expanding BridgeTower Media group of business publications. Those properties aren’t subject to the steep retail advertising declines that imperil the newspaper business.
Fortress Investment Group, now owned by Japan’s Softbank, will continue reaping huge external management fees from New Media/GateHouse for as long as company lasts. Such is the reward for raising capital for expansion. Fortress earned $19.4 million in compensation last year from New Media after raking in $39.7 million the year before.
Fortress owns about 1 percent stake of the New Media stock, so it is not overly concerned about the stock price tanking. And yet Fortress employs Reed as the New Media CEO, raising reasonable questions about his commitment to producing shareholder value. (Although it should be noted that Reed has bought 60,000 shares of the stock the past few months at a cost of nearly $800,000)
Just when you think you’ve seen everything in contract negotiations, GateHouse Media surprises you with something even more draconian.
This week GateHouse offered its most onerous proposal to date at the Rockford Register Star: Retroactive medical and dental insurance premium increases or, if the employee chooses, a corresponding salary reduction instead.
Medical and dental insurance premiums for United Media Guild members at the Register Star have been frozen since the union was voted in, due to “status quo” labor law protections that remain in place during negotiations.
Since GateHouse steadfastly refuses to offer raises — even though some employees have endured an eight-year wage freeze — we’re still at the bargaining table.
According to company calculations, a UMG member with the Basic PPO-Family has been spared more than $5,000 in medical premiums from 2014 through 2016. An employee with family dental coverage has saved about $1,500.
(Most UMG members insured through the Register Star are on either the single or the employee-spouse plan.)
With a straight face, company negotiator Ali Zoibi said GateHouse wants that money back with “catch-up” increases. Moving forward, GateHouse also wants increases for 2017, up to nearly $2,000 for family medical and nearly $500 for family dental.
And, of course, GateHouse is offering no raises to offset any of his. As a result, several UMG members would lose between $4,000 and $9,000 in take-home pay in 2017.
Mind you, this is the same company that has slashed the newsroom operation to a fraction of its former size, making surviving journalists shoulder a much more challenging workload.
Destroying employee morale makes it easier to cut labor costs, so GateHouse works extra hard at being a terrible employer. Why else would it propose a $9,000 pay cut for veteran journalist trying to support a family?
By running off veteran journalists, it can hire younger employees at much lower pay scales. So what if the newspaper product suffered? Vulture capitalists own GateHouse Media and they are playing the asset-stripping game.
The whole point is to vacuum as much money out of each operation as possible to fund stock dividends, bankroll more newspaper purchases and keep the game going.
But GateHouse really outdid itself with this proposal.
Once again New Media Investment Group CEO Michael Reed argued that his company’s stock is undervalued.
“We believe the dividend increase speaks to our optimism around the outlook for the company,” he told analysts Thursday on his third quarter earnings call. “Obviously I think our equity is undervalued given where the share price is today and think the strategy and what we have done is currently misunderstood.”
Wall Street was unmoved by that pitch from Reed, whose company owns the State Journal-Register, Peoria Journal Star, Pekin Daily Times and other Illinois newspapers through its GateHouse Media operation. Friday afternoon the stock plunged back toward $14 per share after briefly rising past $15.60. Remember, this was a stock that drew a $42 target price from one well-respected analyst when the company initially went public back in 2014.
The company’s game plan has been well-established. The price of newspaper properties keeps falling due to the collapse of print advertising revenues. One by one, smaller operators are getting out of the business. So New Media is able to swoop in and get them for good prices.
New Media then slashes operating costs at the acquired properties, stripping them down for maximum cash flow. Some of that cash is used to fund hefty dividends and some helps fund more acquisitions — which leads to more cost-cutting, more cash flow and more money for dividends and acquisitions.
This strategy has had a debilitating effect on five Illinois newspapers represented by the United Media Guild: The Peoria Journal Star, Pekin Daily Times, State-Journal Register, Rockford Register Star and Freeport Journal Standard. We have spent a lot of time talking face-to-face with readers, civic leaders and advertisers in those communities about what this New York-based company is doing to their newspapers.
Reed ran through the his playbook for analysts Thursday, offering no surprises. New Media still hopes to:
Offset its ongoing circulation decline by jacking up prices and making diehard subscribers pay for special sections.
Replace the loss of print advertising with more digital advertising.
Keep buying properties at favorable prices to build total revenue and expand the reach of Propel Marketing.
Build Propel into a bigger piece of the revenue pie.
Invest more in the “business-to-business” properties that aren’t as vulnerable to print advertising decline.
That latter step is a wise choice, given the company’s history of accelerating the erosion of local newspapers. Revenues at those operations will continue diminishing as increased digital advertising fails to offset the losses on the print side.
It is worth nothing that GateHouse Media leadership, working under the New Media umbrella, finally improved the look and functionality of the previously dreadful newspaper websites. So there’s that.
Reed keeps promising to turn the corner and generate actual growth, but there is no sign of that at its properties — which limp along with smaller and smaller news-gathering operations and disillusioned sales forces, offering readers and advertisers less while charging them more.
Morale is worsening across the chain, prompting increased unionization. When newsrooms in an anti-labor state like Florida vote to join the Guild, you know employees have no faith in corporate management.
For now, anyway, the stock is paying nice dividends. The United Media Guild appreciates that, since we own New Media stock and can use that investment income to better serve our members.
But how long will that last? And what will become of the news-gathering operations and the communities they serve?
Back in October, 2014, Citi analyst Jason Bazinet was bullish on New Media Investment Group stock. The parent company of GateHouse Media and the State Journal-Register was selling at better than $18 per share at the time and Bazinet set a price target of $41.00 on the stock.
Two years later the price was down below $15, slightly more than where the stock opened as a spin-off of Newcastle Investment Group in February, 2014.
Obviously New Media operates in a distressed industry facing year-over-year revenue declines. But it exacerbates its challenge by demoralizing journalists — who create the product the company is selling — along with the sales force and managers with its quarter-to-quarter quest to maximize cash flow.
The core problems are the same as we identified back two years ago based on our on-the-ground work with employees at its properties. We made this points back in September of 2014:
Relentless cost-cutting has diminished the quality of New Media newspapers. While the company improved its cash flow by slashing newsroom staffing, it also invited readership decline.
The debilitating employee churn extends to the very top of newspaper operations. At the State Journal-Register – one of the key properties in the company – publishers have come and gone at a dizzying pace.
Aggressive circulation pricing also contributes to readership erosion.
Readership decline accelerates the migration of advertising to other media.
Digital advertising will keep growing, but not fast enough to offset print revenue declines. More robust websites could speed that growth, but New Media has stripped many of its news operations to the skeleton.
Propel Marketing might or might not become a significant revenue source.
Since we raised those issues two years ago, New Media went on a buying spree. By acquiring properties at good prices and slashing the work forces, New Media has been able to maintain strong cash flow.
By forcing salespersons to sign non-compete agreement, the company slowed the sales churn by also ran off experienced salespersons with strong client relationships.
Acquisitions have dramatically increased the company’s debt load.
The company continues to churn journalists, salespersons, publishers and national-level management as morale declines.
The company’s major investment in journalism, the GateHouse Media Center for News and Design in Austin, is a big cost-saver. But centralized editing, production and content production weakens the connection between local newspaper operations and the communities they are supposed to serve.
Increasingly hostile labor relations have prompted NewsGuild locals to rally public support in key markets like Springfield, Ill., Rockford, Providence and Erie — further impacting circulation and advertising revenue. The company is piling up Unfair Labor Practice charges across the country while galvanizing employee discontent.
That might be the ultimate vote of no-confidence of New Media Investment Group by its employees. As industry analyst Rick Edmonds told the Columbia Journalism Review after the Florida papers unionized:
“I don’t know if this is two in a series of two or two in a series of 12. But it’s not a good thing for your business if your journalists are saying, ‘We can’t really serve our community.’”
So the story is the same as it was two years ago. Every warning we raised about this company has rung true.
Wes Edens and Co. at Fortress Investment Group will keep collecting big money as the external managers of New Media. Shareholders will continue collect dividends . . . while they last.
The individual properties and their product will continue eroding and at some point the reckoning will occur — just as it did for GateHouse Media in 2013 under this same management team of Michael Reed and Kirk Davis.
The United Media Guild demands to bargain over the hiring of new journalists at the State Journal-Register in Springfield and the Rockford Register Star.
Why would we take such a direct interest in the company’s newsroom management? The short answer is we are fighting to maintain the quality of journalism at these newspapers and the long-term viability of these institutions.
The long answer is, well, pretty long so we’ll walk you through it.
GateHouse Media, which owns these newspapers under the New Media Investment Group, has slashed the news operations to a fraction of their former size. The company maximizes cash flow so it can pay quarterly dividends, buy more newspapers, slash staffing at those newspapers, maximize cash flow, pay quarterly dividends, buy more newspapers, slash staffing, maximize cash flow . . . you get the idea.
The money guys backing of all of this, Wes Edens and Co. at Fortress Investment Group, collect huge external management fees for orchestrating this plan. If New Media Investment Group eventually collapses due to shrinking paid circulation and declining advertising revenue, Fortress will be just fine. It will have is money. The newspapers and the communities they once served will NOT be just fine.
Concern over the decline of GateHouse/New Media newspapers has inspired journalists to unionize. Newsroom employees in Springfield and Rockford voted to join UMG and this local also assisted two successful organizing drives in Florida, at Lakeland and Sarasota.
To maximize cash flow, GateHouse Media has refused to bargain raises at all of their Guild-represented newspapers for last eight years. It also refuses to bargain raises in first contracts at newly organized newspapers. The company is also demanding extremely low minimum pay rates ($13 per hour, less than a living wage) for its new hires. The UMG has argued for higher minimums that would help attract better applicants, reduce turnover and protect the institutional knowledge in the newsroom.
Because the company won’t set reasonable minimums, the UMG has taken a direct interest in the hiring process. We can demand to bargain the pay rates of new hires in Springfield because GateHouse declared a bargaining impasse and imposed working conditions. By doing so, GateHouse forfeited its managerial discretion under labor law.
In Rockford, we can demand the right to bargain over changes in the workplaces, including new hires, as part of our quest for a first contract at the Register Star.
To better understand the hiring process, the UMG has requested relevant information such as candidates considered, past hiring practices and prevailing hire-in rates at similarly sized newspapers in the chain. Our goal is not to prevent the hiring of new employees, but to make sure the company is attracting quality journalists to fill these key roles in its understaffed newsrooms.
Rockford Register Star executive editor Mark Baldwin complained about this in a letter to our members. In part, it read:
It seems that the Guild’s strategy is to hurt several GateHouse locations because the union is making the same requests in Springfield and Erie. The union’s national agenda ignores the very real needs of the local properties and local communities, and this I find particularly troublesome. I know for a fact that in Springfield, the union’s stalling tactics have delayed hiring by more than six weeks. Insisting on bargaining and then refusing to meet for weeks, and drawing out the process to make it take as long as possible, is standard operating procedure for this Guild local. It defies common sense that the Guild would invoke that tactic when all the Register Star is trying to do is hire good people once we have the approval to do so. It also bothers me that members of the negotiating team, our colleagues, would want to obstruct hiring in this way — especially given the Guild’s outspokenness about the slow pace of hiring already. The union position is rank hypocrisy.
Actually, accusing the Guild of stalling is rank hypocrisy given the actions lead company negotiator, Ali Zoibi. Year after year he steadfastly refuses to bargain raises to end a pay freeze that has prompted wholesale departures. He refuses to raise minimums to the pay level the company has generally used in Springfield and Rockford. He imposed conditions in Springfield and has reiterated, again and again, that he won’t agree to a contract there that includes raises and an increased minimum.
Along the way, the company has run up legal bills while triggering one Unfair Labor Practice charge after another with the National Labor Relations Board. It chooses to fund endless negotiating stall tactics, but it won’t invest in its journalists and its newspapers through fair contracts. That is all part of the overriding goal of maximizing cash flow without regard to the impact on the news-gathering operations.
The company’s stance is absurd and insulting, even by standards in the distressed newspaper industry. But at least it is consistent. Back when Register Star employees were preparing to vote on whether to unionize, GateHouse executive Brad Dennison personally implored them to vote no. But he also admitted the company must find ways besides raises to rewards its superstars because, well, there would be no raises.
Since then Dennison has left from the company. So have many of the Register Star journalists he tried to sway. Many GateHouse publishers, newsroom managers and journalists from around the country are gone too.
The United Media Guild is still here, still fighting for journalists and journalism. We want to work with conscientious editors like Baldwin to make sure cities like Rockford still have a newspaper worth believing in. If that means will must get involved in the hiring process, so be it.
We would rather just have a fair contract, like the ones we have negotiated with other media companies, but GateHouse is having none of that.
Journalists at the State Journal-Register started something when the stood up to the asset-stripping managers at GateHouse Media and voted to join The NewsGuild.
Their colleagues at the Rockford Register Star followed that lead and also voted in the Guild. They joined the Guild-represented Peoria Journal Star and Pekin Daily Times in the battle against GateHouse.
Of course, the company is not happy about this. The organizing drive in Sarasota met with particularly heavy resistance from Herald-Tribune executive editor Bill Church.
In fact, management’s attempts to intimidate our activists there led to an Unfair Labor Practice charge against the company and strengthened the resolve of the journalists seeking representation.
Church subsequently got promoted to Senior Vice President for News at GateHouse Media. He will move to Austin to oversee the company’s Center for News & Design.
GateHouse CEO Kirk Davis trumpeted Church’s ascension as proof that the company cares about journalism.
“It is essential for GateHouse to have a corporate advocate for its news employees, enterprise-wide, who appreciates the diversity of our markets, who can engage our news leaders in the ‘conversation’ about how we evolve our news organization, and who possesses the ability to communicate effectively and consistently about our journey,” Davis said in a GateHouse memo.
Journalists across the company hope Church’s ascension will create more opportunity to do vital enterprise reporting. They hope this move is more than just a PR gesture.
But if the GateHouse reality remains the same — eternal pay freezes, staffing cuts, journalists hiring on for less than a living wage — then news-gathering operations will continue eroding and communities will keep suffering.
And more newsrooms will follow the SJ-R lead and join the Guild. As industry analysts Rick Edmonds told the Columbia Journalism Review, “I don’t know if this is two in a series of two or two in a series of 12. But it’s not a good thing for your business if your journalists are saying, ‘We can’t really serve our community.’”