“Clustering” Wins Some Ground in the Bay Area
Important Details: The newspaper industry approaches 2007, staring down unusually unpleasant budget numbers. Flat-lining print advertising revenues have produced some of the tightest expense budgets in recent history, on top of this year’s staff and newsprint cutbacks. Against that background, one major news company settlement with the Newspaper Guild was announced Monday as several other tense labor situations play out. In Philadelphia, staffers are on verge of a strike. In Saint Paul, 21 newsroom staffers (10% of the total) just took a buyout, taking 502 years of experience with them. In Rochester, the union and Gannett have come to loggerheads. All tell the story of an industry trying to come to grips with hard times.
It was the settlement between the San Jose Mercury News and the Guild that was announced Monday, narrowly averted a major layoff at the paper.
The San Jose agreement resulted in a cutback of 35 jobs, about 16 of those in the newsroom. In total, the Mercury News would begin 2007 with an editorial staff of about 265, a cut of almost 35% from the halcyon days of 2000 when the newspaper counted 400 newsroom staffers.
As has been common in recent labor negotiations, the company was able to get concessions on increasing health insurance shared payments, freezing pension programs and limiting wage increases to inflation or less. MediaNews, new owner of the Mercury News, was also able to achieve one of its key goals. Going forward, the company will be able to assign some work that has been done by higher-paid Mercury News staffers to lower-paid staff at its other operations, mainly in the East Bay area of Northern California.
Key to MediaNews’ plans as it purchased the Mercury News, the Contra Costa Times and the Monterey Herald, out of the Knight Ridder sale, is cost efficiency gained by "clustering." That clustering notion, widely shared throughout the industry, is that expenses can most easily be saved by owning multiple properties in one larger metro area. Then, the basic costs of publishing — from printing and production to delivery trucks to ad selling to call centers and finally to news gathering and production — can be shared most efficiently. So for MediaNews, gaining the right to use more work by non-Mercury News staffers is key.
MediaNews and its would-be partner, Hearst, are also in the midst of another clustering battle. This one’s in court. A federal judge has issued a restraining order preventing MediaNews and Hearst from finalizing their partnership around ownership of a number of newspaper properties. The judge raised concerns that the business partnership may result in anti-competitive business cooperation between the two, which control the region’s daily press, given Hearst’s ownership of the San Francisco Chronicle. This week, both companies disputed that such cooperation was really planned. That case will play out in the coming weeks and months.
In Outsell’s Opinion: Cost efficiencies are key to newspaper companies’ immediate future. Our Outsell report, "Deadline with Destiny" detailed a $20 billion revenue gap facing the industry over the next five years. Prudent cost cuts — those that cut legacy costs as deeply as possible without deeply damaging news companies’ ability to create useful print and digital products — are essential. Clustering is one vital tool in cutting those costs.
Outsell believes it is the details of that clustering that much will be won or lost. Certainly, companies need to cut as many production- and distribution-related costs as possible, cuts that shouldn’t have much impact on product quality and service. Clustering applied to newsgathering, writing and presentation is trickier. It’s not difficult to hire lesser experienced journalists, but the readers notice when the quality of their paper declines. In the Internet age, when many sources are available, those troublesome readers will just migrate more quickly away from the local paper.