Author: jgordon@unitedmediaguild.org

A great news-gathering operation is immersed in its community, providing a public service by chronicling key events and exploring critical issues. But layoffs have cut the State Journal-Register staff to a fraction of its former size. The company’s 8 1/2-year pay freeze has prompted quality journalists to move on to other jobs. The scope and depth of the newspaper’s coverage has suffered. Springfield deserves better from the SJ-R’s New York-based owner.

WALL STREET AND THE SJ-R

New Media Investment Group is the parent company of GateHouse Media, which operates the State Journal-Register and hundreds of other newspapers. Fortress Investment Group launched New Media, along with other private equity vehicles in businesses like sub-prime lending and golf course management. Fortress collects hefty management fees for overseeing them. According to the New York Times in a recent article, “Last year, Fortress received more than $200 million in revenue from these companies, about a 50 percent jump from the year before.”

BUY AND CUT, BUY AND CUT

Fortress entered the newspaper industry in 2005 by buying the Liberty Publishing Group. Re-branded as GateHouse Media, the company went on a spending/slashing spree. It bought newspaper after newspaper, cutting staff each time. Gatehouse landed the SJ-R in 2007 and began chopping reporters, editors and photographers. Over time the printing operation moved to Peoria, allowing the company to sell off the Springfield presses. The design desk eventually ended up in Austin, Texas. Despite the profitability of its pared-down properties, GateHouse fell into prepackaged bankruptcy in 2013 due to its excessive acquisitions debt.

MORE PLUNDERING IN SPRINGFIELD

Fortress doubled down on its newspaper bet, re-launching GateHouse as part of the larger New Media Investment Group. The new company emerged from bankruptcy, went public and vowed to spend up to $1 billion in new acquisitions. Yet the newsroom cuts and the wage freeze continued at the SJ-R. The company siphoned off profits to underwrite acquisitions and to pay hefty stock dividends — totaling $224.6 million after three years. It bought more newspapers, cut more jobs, added more cash flow, paid more dividends, bought more newspapers and so forth. The bigger the company gets, the more management fees Fortress collects. And if the company collapses again, Fortress will come out fine. It has already collected $45 million in management fees and incentive compensation on this gambit.

OUR FIGHT TO SAVE THE SJ-R

Newsroom employees voted 26-4 to join the United Media Guild and gain a collective voice in the operation. They love their craft and their community. They want keep experienced journalists in this newsroom, doing good work for the people of Springfield. They are fighting imposed conditions that would extend their wage freeze to nearly 12 years. They are fighting the employee churn that extends to upper management. Since unionizing, our members have worked for four different SJ-R publishers. Top GateHouse news executives Brad Dennison and David Arkin have moved on as well. They cared about journalism. But New Media isn’t about journalism, it’s all about cash flow, acquisitions, hefty management fees and big dividends (while they last) for Wall Street investors.

During our battle for a first contract in Springfield, Ill., GateHouse Media has absolutely, positively refused to negotiate raises.

The company took this hard line even though GateHouse emerged from bankruptcy flush with capital as part of its new parent company, New Media Investment Group.

The company took this draconian stance despite the positive cash flow generated at the State Journal-Register and the company overall.

GateHouse maintained its abusive pay freeze despite massive newsroom cuts that forced surviving journalists to shoulder greater workloads while trying to stem the eroding quality of the SJ-R.

Company negotiator Ali Zoibi even refused to offer bonuses tied to newsroom performance, though our members have done an outstanding job driving digital traffic and fulfilling other company initiatives under increasingly difficult conditions.

His “last, best and final” offer amounted to a pay cut for our members — many of whom had gone 8 1/2 years without a raise. Not surprisingly, our members voted down that offer.

So the company declared impasse and imposed conditions on our members, essentially extending its wage freeze for another three years. The imposition of these conditions could result in some members going 11 1/2 years without a raise.

That’s eleven and one-half years.

While these imposed conditions includes annual bonuses, the company is jacking up medical premiums from nearly 15 percent to 27 percent, depending on the employee’s plan. This will result in an imposed pay cut for many of our members.

Meanwhile GateHouse media is vacuuming cash out of Springfield to fund New Media Investment Group dividend payments and acquisitions. By buying more properties, the company is creating greater cash flow — and masking the damage that excessive cost-cutting has done to its existing properties. Readers and advertisers have grown weary of paying more for less.

As a result of all this, the United Media Guild has no choice but to escalate its public campaign in Springfield. It will also join other NewsGuild locals across the country in a concerted corporate campaign against the vulture capitalists at GateHouse/New Media.

We’re hearing lots of happy talk out of New York about New Media Investment Group, the parent company of GateHouse Media and the State Journal-Register.

The company has plowed forth on a buying spree, becoming one of the few big players left in the newspaper industry. On his fourth quarter earnings call with analysts, New Media CEO Michael Reed said the company could spend up another $360 million on acquisitions this year.

Even after giving a glowing earning report and paying another healthy dividend, though, New Media stock dipped to $15.26 per share Friday — well below its 52-week high of $25.62 and about one-third of the long-term price some analysts predicted the stock should reach.

What’s up with that? Writing for Poynter.org, Rick Edmonds observed:

Some commentators have doubted whether New Media’s strategy will work as well at bigger papers it bought in Columbus and Providence as it has with earlier additions of smaller papers.

In the conference call with analysts, Reed argued that the market undervalues New Media. The newspaper sector, he said, is “out-of-favor and fragmented,” and that leads to New Media being “misunderstood.”

But is it really misunderstood? Or is the market wary of a newspaper company that buys and plunders properties, seeking maximum quarter-to-quarter cash flow while risking accelerated erosion of readership and advertising revenues? At some point, doesn’t the company have to grow the bottom line?

New Media puffed up its fourth quarter numbers with a $54 million cash infusion from flipping the Las Vegas Review-Journal to casino magnate Sheldon Adelson, who bought the newspaper to pursue a personal agenda.

That was a nice windfall for the company, but raised serious questions about its commitment to credible journalism. First it tried to get reporters at the Review-Journal to do Adelson’s bidding by investigating Las Vegas judges. Then GateHouse executive David Arkin tried to get journalists at its Sarasota newspaper to investigate the judges.

New Media has since scaled back its management agreement in Las Vegas and backed away from the mess, but not before its egregious ethical lapses drew extensive national coverage in both the industry and the mainstream media. The controversy triggered rumblings of an unhealthy rift between Reed and Kirk Davis, the New Media COO and GateHouse CEO.

It’s no wonder the company feels compelled to assemble its editors for an April meeting in Chicago for a journalism refresher course. Clearly upper management needs it.

Of course, New Media/GateHouse management is creating even greater concerns of interest. Let’s run down the list:

Core product deterioration. New Media/GateHouse has cut newsroom operations to a fraction of their former size. Even after emerging from bankruptcy flush with cash, it continued running off veteran reporters, photographers and editors and hiring entry level replacements — often at less than a living wage. The constant cutting and churning keeps diminishing the “strong and trusted local brands” the company touts to investors. Outsourcing copy editing functions to its Austin design center has further diminished content quality, since ever-changing workforce there is far removed from the communities New Media/GateHouse newspapers serve. In many cases editors have little knowledge of the people, places and issues in the stories they process. As a result, more obvious errors end up in print.

Gouging subscribers. While circulation is plummeting at many properties, the company offset that decline by raising subscription and newsstand prices and making subscribers pay extra for “premium sections” that are essentially advertorial fluff.

Employee abuse. Even while spiraling into bankruptcy in its earlier incarnation, GateHouse Media maintained reasonable relationships with its unions. After its rebirth as the cash-flush New Media Investment Group, the company has established a more strident tone toward its employees, many of whom have endured wage freezes of eight or more years. The company is steadfastly refusing to offer raises during its ongoing negotiations with various unions. At the SJ-R, for instance, the loss of just one key advertiser would cost the company far more money than settling with United Media Guild on a fair contract for its members. That market is well aware of the UMG’s years-long fight for a first contract, thanks to a radio commercial blitz, outreach to community and labor leaders, public demonstrations and direct meetings with some of the SJ-R’s biggest advertisers. But the company simply doesn’t care about public perception. It is too busy vacuuming every last nickel and dime out of cities like Springfield.

Vulture capitalism. John Levin, chairman and chief executive of Levin Capital Strategies L.P.,  called for more independent directors for the companies spun out of Newcastle Investment Corp. to reduce the obvious conflicts of interest. The external management structure of these spin-offs reward the money guys backing the enterprise, Wes Edens and the Fortress Investment Group LLC, while putting shareholders in some peril. Levin notes that Fortress gets paid to build size, not to necessarily create better performance. As Levin noted about another Fortress property, New Senior Investment Group, perhaps a buyer will come along and save the company for the long haul. The same could occur for New Media. Readers of newspapers like the SJ-R could only hope so.

GateHouse Media is still refusing to offer raises to hard-working journalists at the State Journal-Register. Its last contract offer did not include pay increases, so, not surprisingly, the Springfield unit of the United Media Guild rejected it unanimously.

Negotiations are on hold while the Springfield unit of the United Media Guild gathers additional public support

Writing for the Illinois Times, here is how reporter Bruce Rushton described the contract rejection:

Newsroom employees at the State Journal-Register tonight rejected a final contract offer from GateHouse Media, the company that owns Springfield’s daily newspaper.

The vote was unanimous, according to Shannon Duffy, administrative officer for the United Media Guild, which represents newsroom workers. There are approximately 25 workers in the bargaining unit.

Reporters and other newsroom employees have gone without raises since GateHouse purchased the paper eight years ago, and pay increases had been a sticking point in contract negotiations between the company and the union. Employees voted to form a union in 2012.

Management offered $600 annual bonuses for the life of a three-year deal, Duffy said, but that was contingent on an open shop, meaning that employees would not be compelled to join the union or pay union dues. Management and the union had tentatively agreed to a number of working conditions, including rules governing transfers and promotions, leaves of absence, holidays and rules governing discharge and discipline, according to the union.

Clarissa Williams, SJ-R publisher, declined comment.

Union leadership had recommended that the bargaining unit reject management’s latest proposal, which Duffy said was a “last, best and final offer.”

“It (the offer) would not create a better workplace,” union leaders wrote in a Jan. 27 memo to union members. “It would simply codify the one you are trying to change. GateHouse has been buying up properties like it is the Golden Arches of journalism. That doesn’t mean newsroom staffers should be tied to a McDonald’s pay scale.”

The McDonald’s comparison was an obvious reference to the plight of Dean Olsen, an SJ-R reporter and union organizer who took a job at the fast-food chain to make ends meet. Olsen’s moonlighting at McDonald’s, first reported by Illinois Times, received national attention on websites and blogs devoted to journalism.

“How crazy is it that just as the $15 an hour minimum wage movement is building steam for fast food workers, GateHouse insists on a minimum rate of $13 an hour for fulltime journalists and $11 for part-timers?” union leadership wrote in the memo. “Will there be fries with that?”

Union leaders in the memo said that GateHouse was too quick to present a final offer.

“(F)or some reason, this company seems to have given up trying to work out differences on the remaining issues,” union leadership wrote. “Instead, it presented – in our view very prematurely – a final offer, insisting that it get its way on all unresolved issues.”

Although the offer presented by management was a final one, Duffy said that another negotiating session is scheduled for Feb. 11. Presuming no accord is reached, management could declare an impasse and install all or part of the conditions in the final contract offer, Duffy and Olsen said. The union could appeal a declaration of impasse to the National Labor Relations Board, asking for a ruling that no impasse exists, they said. If the NLRB rules that there is no impasse exists, negotiations would continue, they said.

“The ball truly is in their court right now,” Duffy said. “We remain committed to getting a contract.”

If an impasse is declared and the company installs provisions in its final offer that have been rejected by employees, options for the union range from going out on strike to organizing a boycott of subscribers or advertisers or both, Duffy said.

“It gets really interesting from this point forward,” he said.

When our members in the State Journal-Register newsroom joined their public supporters for informational picketing outside of the newspaper building, a member of the GateHouse management team videotaped this protest.

Such surveillance can intimate union members and discourage them from exercising their rights under the National Labor Relations Act. For that reason, such surveillance is prohibited under the act.

So the United Media Guild filed another Unfair Labor Practice charge against GateHouse Media, this time at the SJ-R. The NLRB found merit in our claim and GateHouse declined to appeal the ruling.

The company will display copies of the ruling in the workplace.

Earlier we filed two separate charges at the Rockford Register Star after the company clearly violated the National Labor Relations Act. We negotiated a favorable outcome to those charges.