Deja Vu for Our of Work Journalists - Newsroom Confidential

Media Strategies Workshops and Dean Rotbart's Newsroom Confidential Column or CLASSROOM Edition.

It's DŽjˆ vu Again For Out of Work Journalists

By Dean Rotbart

A lot of very good journalists are out of work. Others have returned to new newsrooms in lesser positions for less money. Times are hard.

But they are not new.

When advertising sags, as it has done in the wake of the dot.com bust and the post September 11th recession, journalism heads roll. While journalists cover business and economic issues on a daily basis, many are left dumbfounded when they find themselves walking in the shoes of the unemployed.

Flash back just a couple years and business magazines catering the high tech and Internet industries were causing hernias they were so fat with advertisements.

Good, solid journalists were offered ungodly sums and titles to leave their safe, stoic news organizations to ride the dot.com juggernaut. Many saw their net worths soar. A few, on paper at least, became overnight millionaires.

Well the juggernaut has crashed. Large startup organizations such as The Industry Standard and Business 2.0 have gone out of business or been acquired by long-established news organizations. (Business 2.0 was purchased by AOL Time Warner and merged with its own startup, eCompany Now.)

I'm sure we've all noticed that our favorite business magazines have lost a lot of weight lately Ð a clear sign that advertising revenues are down. The number of unemployed journalists is likely to grow before it begins to shrink again.

The causes were different, but the situation was quite similar in November 1990 when my company, TJFR Group, probed the economics of newsroom layoffs. The article that follows was written by TJFR's Alan Tannenbaum and appeared in our twice-monthly newsletter, the TJFR Business News Reporter.

Why Journalists Are The First To Get Axed

Many publishing expenses, such as postage, printing and paper, are relatively fixed. Known in the industry as the "Three P's," they eat up the lion's share of corporate spending and their budgets dwarf those of the newsroom. Yet publishers almost always look first to reporters and editors to put their necks on the chopping block when it's time to cut spending. Why? Because editorial expenses are considered discretionary.

Business Week's Cleveland bureau is a good example. Over the past decade, while many other business news organizations withdrew from the city altogether, Business Week maintained a two-to-three person bureau there. Late this past summer, when correspondent Maria Mallory left the magazine to join the business news staff at the Baltimore Sun, Zachary Schiller, BW's Cleveland bureau manager, said she likely wouldn't be replaced.

"Obviously we can't do as much with two as we could with three," Mr. Schiller told this newsletter in September, but he added that two staffers in the bureau was still an appropriate level. Less than two months later, as part of a 10-person reduction in Business Week's overall editorial force, Stephen Phillips, a three-year veteran in the bureau, was let go. Now Cleveland is a one-person bureau and is likely to stay that way.

"I told Zack that I don't expect the Cleveland bureau to do as much with one person as it did with two," says Mr. Shepard, the magazine's editor. "Some things," he explains, "we might have to pass on."

While Cleveland lost half its staff, Mr. Shepard felt economic times compelled him to shutter the magazine's Denver and Sao Paulo bureaus entirely. Likewise, The Wall Street Journal announced it will close its Philadelphia bureau at the end of this year and dismiss most of the bureau's staff. (One or more additional Journal bureaus may yet be closed.) The Journal is also calling home most of the "backfield" staffers who edit and help produce its two overseas editions.

From how much reporters can spend on business lunches to how often they can travel to how many reporters get to keep their jobs, business editors are being asked to exercise their discretion with increasing frequency. "Obviously, all publishing companies, when ad budgets are restrained, have to take a close look at expenses," says Marshall Loeb, managing editor of Fortune. "Any prudent manager is re-examining his or her cost structure."

Where Does The Money Go?

Newsroom budgets aren't difficult to understand. They are, understandably, directly related to circulation and advertising revenues, and account for only 15% to 20% of a publisher's total budget. The bulk of a publisher's monies are spent on the Three P's, as well as plant, marketing, and administration.

Within the newsroom, the biggest outlay is for salaries, benefits and payroll taxes. At the national publications, these items eat up roughly 60% to 70% of the entire news budget. The next largest outlay is typically for travel and entertainment, which makes up about 10% to 15% of the newsroom budget.

At metropolitan newspapers, personnel expenses may run as high as 90% of the business section budget, reflecting the fact that local reporters don't travel as frequently as their national counterparts.

Research costs, including phones, maintenance of a library and access to computerized data retrieval services add an additional 10% to 15% to a business editor's budget. Kick in another 5% to 10% for miscellaneous items, such as office supplies and messenger services, and you've pretty well hit the major newsroom expenses.

It doesn't take a mathematician to realize that to accumulate any ignificant newsroom savings, and still maintain a credible product, the most productive cuts an editor can make are in personnel.

Who And What Goes

Determining which reporters will be cut, and which bureaus or beats eliminated, falls to the shoulders of editors. The process is more art than science and often union rules or employee contracts limit the freedom with which editors may reduce their staffs.

The easiest and least painful way to trim one's staff is through attrition. And, indeed, some publications have quietly been cutting their numbers over the past year by simply not replacing reporters and editors when they retire or leave to take different jobs.

But clearly the depth of the current industry recession requires more cuts than attrition alone can accommodate. Most newsroom managers turn next to offering their more senior members early retirement. Such buyouts, although expensive, allow news managers to replace tenured reporters and their tenured salaries, with younger, less expensive journalists.

Indeed, one of the sad parts of this current round of buyouts is that many of the best-known and liked reporters at major publications, such as The Wall Street Journal, are being quietly encouraged to pack it in. The offers can be very attractive, especially for loyal employees who get the feeling their services and experience may no onger be appreciated.

At the Journal, employees whose age, when added to the number of years they worked for the paper, equals or tops 80, are being invited to apply for early retirement. Members of the "Over 80 Club," will receive 2.5 weeks pay for every year they worked at the paper if they are currently managers and 2.3 weeks for each year if they are still reporters, up to 60 weeks total. In addition, Over 80 Club members will get to keep their full health benefits for life. For a senior editor who has been with the paper 24 years or more, the offer is likely to have a cash value of as much as $140,000. Because the Journal used to hire its staff right out of college, some of those men now eligible for early retirement are still in their early 50s.

Many reporters who were hired more recently, won't do nearly as well. The typical severance packages for an editorial employee who has worked for a news organization less than ten years is relatively altry. Moreover, whenever they can, some news organizations are looking to fire people for cause, or shame them into leaving voluntarily, in which case they have to pay little if any severance.

Getting Rid Of "Dead Wood"

Though no editor would dare confess it publicly, the current industry slump has provided some news organizations with a golden opportunity to rid themselves of underachievers and problem staffers. Rather than nasty confrontations that may lead to wrongful dismissal suits, some editors have chosen to emphasize the economic reasoning behind their dismissals.

Yet recent firings at Business Week were clearly not based upon any apparent objective criteria, such as seniority. And while dismissals at The Wall Street Journal, particularly in the Philadelphia bureau, might technically meet the union contract's definition of seniority- elated, the paper used loopholes to keep some reporters and let others go.

Among recently fired Business Week reporters, only two, Denver correspondent, Sandra D. Atchison and its Sao Paulo correspondent, Jeffrey Ryser, were specifically not performance related. In discussing their dismissal, Mr. Shepard, the editor, told this newsletter:

"We closed two bureaus which were not the least bit performance related. I'm not saying the others all were performance related. I'm just saying those [were] specifically not."

Mr. Shepard explained that once the need for firings is determined by economic conditions, the decision on who gets his or her walking papers is related to the work they've done. "Does performance come into it? Damn right," Mr. Shepard says.

When The Wall Street Journal announced on November 13 that it would close its bureau in Philadelphia, effective January 1, the paper fired five reporters and one news assistant. Four other editorial staffers, including deposed bureau chief Frank E. Allen, were offered reassignment. When asked whether the distinction between those Philadelphia staffers who were let go and those who were offered news jobs was based on individual performance, Roger B. May, a spokesman for the paper, declined to comment, saying "this is an internal matter."

Mr. Allen, the bureau chief, said the decision of who would stay and who would be dismissed was made by senior editors in New York. "These are all good, solid people and I'm proud to have hired them. I don't hire people I don't believe in."

Asked whether any of his former charges would fall under the definition of "dead wood," Mr. Allen said he would strongly disagree with any such characterization. "Some people might say that they are B-plus and not A-minus, which is a judgment call. But they are certainly not C or C-minuses, which is what dead wood is to me," he explained.

Based on interviews with multiple editorial and union employees at the Journal, including those with direct knowledge of reporters' salaries, this newsletter estimates that the paper will save at least $500,000 annually by closing the bureau and letting go the affected staffers.

Mr. Allen declined to discuss the bureau's budget or the paper's likely savings as a result of closing it. In a telephone interview, Mr. Allen also denied any suggestion that his bureau was singled out because, on the whole, it had under performed. The closure is "really not a performance question at all," he explained. Mr. Allen contends that based on Philadelphia's proximity to the Journal's New York headquarters, it made sense to close the bureau and allow area companies to be covered from New York. He notes that Philadelphia has declined as an industrial and commercial force in recent years, which in turn eroded the need for an on-site bureau.

Changing Tastes In Business News

Business journalists are a product of their environment. Anyone who has been in the profession a long time knows that editors decide on which stories to chase and which to pass upon based upon highly subjective judgments of what they think their readers want to read or should read. An important element in that news judgment is what the editors, themselves, are currently interested in.

As such, it's not too soon to forecast that business readers will be offered a growing menu of stories in the weeks and months to come on topics such as effective fiscal management, management-employee relations, unions, personnel strategists and personal finance. It may only be coincidence, but less than two weeks before it announced its first layoffs in modern times, The Wall Street Journal ran a major feature titled: Layoffs Take Careful Planning to Avoid Losing the uits That Are Apt to Follow. The story incidentally, is part of an ongoing Journal series, called Managing in Hard Times.

These will be hard times, too, for the corporations and public relations agencies that deal regularly with the business and financial news media. Once again, the rules of the game are changing and with those changes come manifold risks and opportunities. The biggest opportunities in the months ahead will be for communications executives to stay tuned to the journalists' new realities and find ways to exploit them in mutually beneficial ways. The biggest risk faces those companies and individuals who fail to spot the trend and continue to believe it is business as usual in the financial news business.

January 21, 2002