Old Reliable 

After years of downsizing and cost-cutting, can a leaner Commercial Appeal hang on as Memphis' daily newspaper of record?

The Commercial Appeal has a rich history. It has earned bragging rights for publishing a newspaper through good times and bad — even when the odds were stacked hard against that prospect. In the 167 years since its founding, the Mid-South's only surviving daily newspaper has endured floods, a variety of wars, a plague, the Great Depression — and the death of Charles Schulz.

During the Civil War, the CA's press earned the nickname "Old Reliable," because the Confederate broadsheet never stopped publishing, even when it was in exile. The CA survived and thrived as radio matured and as television sucked away advertising dollars. But recent layoffs, suspension of corporate dividend payments, and scaling back regional home delivery have the newspaper's subscribers, stockholders, and employees wondering how reliable Old Reliable really is these days.

The Commercial Appeal is not unique. All around the country, newspapers are experiencing similar problems. Publishers are laying off and buying out employees, reducing page sizes, printing fewer pages, running five days a week instead of seven — trimming costs at all costs.

The CA has been quietly but steadily scaling back its home deliveries since March. In September, an article in the Northwest Arkansas Business Journal reported that the CA would significantly reduce home deliveries, noting that readers could still access "a replica" of the paper's content online.

Shortly thereafter, a letter to subscribers announcing additional delivery cutbacks and an increase in subscription rates was issued by CA circulation manager Karl D. Wurzbach.

"We've seen newsprint increase by over 30 percent, while health-care expenses grew by over 21 percent in 2008 and will go up another 20 percent in 2009," the letter began. Wurzbach did not mention the impact an economic recession might have had on readers trying to squeeze a newspaper subscription into their budget.

Wurzbach's letter was blunt and specific. Paper carriers — private contractors who are responsible for their own vehicle maintenance — now require fuel subsidies, he wrote, adding that delivery costs were up by as much as $75,000. "[It's] costing us more money to print and deliver than we earned in revenue. No company can survive using that business model," he continued.

"We will cease deliveries to another 5,600 subscribers in areas that have been receiving The Commercial Appeal for over 100 years ... . Simply put, we are making very difficult decisions to help our business survive."

But the model Wurzbach describes isn't a complete one for the newspaper business. Newspapers make most of their money from advertising, not circulation through single sales or home delivery. And advertising prices are determined by the size of a publication's readership. The more readers a paper has, the more it charges for advertising. Considering that the CA has experienced steadily declining circulation for years, the decision to cease home delivery to nearly 10,000 readers seems puzzling.

"In many cases, rural delivery or distribution outside the newspaper's primary market has little value to advertisers," says John P. Murray, vice president of audience metrics for the Newspaper Association of America. "Home delivery may be for true believers, but single-copy sales demographics are essential to advertisers, as is readership from other newspaper sales channels," he says. "Newspapers will continue to make economic decisions and discontinue distribution where it doesn't make sense."

Murray manages "Circulation Facts, Figures and Logic," an industry survey, and conducts research projects that include studies of single-copy buyer behavior. He works primarily to provide marketing support for circulation executives and publishers.

According to Murray, the circulation metric for newspapers has changed over the last 10 years. These days, its value to advertisers isn't judged only in terms of paid circulation. The question, he says, is "whether or not a newspaper can deliver an advertiser's targeted audience cost-effectively and whether the advertiser gets results.

"In many cases, a newspaper's total audience that it can deliver to an advertiser is larger than it was five or 10 years ago," Murray says. He factors in a publication's online traffic and the readership of auxiliary publications, such as Skirt, the women's lifestyle magazine the CA brought to the Memphis market in 2007.

November brought more discouraging news for Cincinnati-based E.W. Scripps Co., The Commercial Appeal's parent company. Echoing a pattern among big-legacy media companies that have seen stock values wither, Scripps' board voted to eliminate dividend payments to shareholders.

The dividend suspension and the halting of stock share buy-backs come on the heels of the company's long-expected unbundling of its lucrative cable and digital media properties from its struggling newspaper division. However, since E.W. Scripps and Scripps Networks Interactive Inc. split in June, both properties have taken significant hits, with the cable division losing 26 percent of its share value, according to a recent article in The New York Times. The newspaper division fared even worse, losing 51 percent of its share value.

A spokesperson for Scripps declined to comment, referring inquiries to CA publisher Joseph Pepe and editor Chris Peck. Pepe did not respond to repeated requests for comment. Peck said he could not comment about anything at this time.

On November 6th, Editor & Publisher, a newspaper industry trade journal, reported that E.W. Scripps was cutting 400 jobs companywide as part of a restructuring effort to weather "rapidly changing business condition[s]" and to save the company $15 million.

click to enlarge p._19_cover_story_1.jpg

The company's third-quarter report was not encouraging, citing local advertising down 16 percent, classified advertising down 28 percent, national advertising down 31 percent, and online advertising down 12 percent.

"The picture we've been given is bleak," says Mark Watson, past president of the Memphis Newspaper Guild and current president of the Tricouncil, a coalition of the newspaper's three unions. "Car sales are down. Real estate is down. ... You've probably heard radio ads from car-dealer associations letting people know that there's money out there available for car loans. We called Scripps' papers in Florida the Gold Coast papers, because they brought in so much revenue from real estate advertising. Now that's all gone."

Two days after the E&P article, the CA published a story explaining that the company had no choice but to eliminate 57 employees — 9 percent of its total workforce. According to a statement issued by Pepe, the "painful" restructuring would help the CA to "survive the current downturn in the Greater Memphis economy, then prosper when the economy improves." The article said the CA would focus more of its resources on "building digital media products, advertising, and content."

The most recent departures from 495 Union Avenue include employees from every part of the newspaper's operation: editorial, advertising, and even management. Not officially counted among the missing are newspaper carriers — private contractors who lost their jobs when the CA cut home delivery to rural areas in Tennessee and Arkansas. It's all part of a slow, steady layoff that began in earnest six years ago, when the newspaper entered into protracted and, as of yet unresolved, contract negotiations with all three of its labor unions.

"I'm happy with the progress we made during negotiations last Tuesday and Wednesday," says Watson, who acknowledges that there's still quite a bit of unrest among CA employees. For all of the recent bad news, it's the most upbeat report Watson has delivered to the Flyer since the negotiations started. "We made real progress on grievance and arbitration issues, which are technical and probably not very interesting to readers," he says.

The sticking point for Watson and the unions is management's desire to eliminate language in the contract protecting employees from outsourcing, which has become prevalent in the newspaper industry. While there is nothing preventing the CA from outsourcing jobs — as evidenced by the year-old decision to outsource certain functions of the advertising layout department to a company in India — the guild's current contract prevents the CA from eliminating employees in order to privately contract or ship their jobs overseas.

"There have been good developments," Watson says, noting that a 4 percent raise was put on the table. For employees who haven't seen a raise in six years, this is not insignificant. "The problem," Watson says, "is that all the other stuff they want to have as conditions is intolerable."

Watson understands how rapidly the economic landscape has changed since negotiations began.

"It's been a dismal year for the news media generally," he says. "But we've been told that The Commercial Appeal is still making money. Not as much as it has in the past, but it's still profitable."

Watson says that although the recent round of layoffs is disappointing, the restructuring process has generated some excitement in the newsroom — as well as new concerns for the bargaining unit.

Union contracts previously separated employees into categories such as A-1 journalist for reporters and A-2 journalist for employees whose primary functions were more clerical in nature. New media (online and Internet) was a separate category altogether. According to Watson, these distinctions will be blurred in the future, creating new opportunities and new pitfalls. The guild now has to fight to ensure that employees hired as writers and editors aren't subject to punitive actions if they fail to excel in new media positions far removed from their original field of expertise.

"For example, I wouldn't make very good on-air talent on Appeal TV, which is a feature on our websites," says Watson, a soft-spoken reporter and copy editor.

But despite these lingering labor-management disputes, Watson seems more optimistic than in recent years. His hopefulness is somewhat tied to the election of Barack Obama, who supports Employee Free Choice Act legislation, which would amend the National Labor Relations Act, making it easier for employees to join unions.

"I've always liked John McCain, but if there was ever a year when I was going to be a single-issue voter, this was it," Watson says. "The labor movement has taken such a terrible beating over the last eight years.

"I think there may be a way that we can reach an agreement within the next year," he concludes, hopefully.

In 2003, as staff reductions at the CA began in earnest, with a mix of layoffs, early retirements, planned attritions, and contract buyouts, editor Peck drafted and published a "blueprint" for what it means to be a major metropolitan newspaper in the 21st century. It wasn't so much a blueprint as it was a series of questions:

"How can we shift to a more Web-centric news operation, where more of our work is designed to maximize the strengths of the Internet even as we feed the print side of our newspaper?" he asked.

"This work will be difficult, chaotic, and frightening on some days ... and we're going to have to do it all with a talented, if smaller, workforce. ... The tough nut of the newspaper's challenge looks like this: Do more with less, even as we build a more interesting, relevant Memphis newspaper."

Today, those questions — or challenges — remain largely the same. In the past five years, page size has shrunk in an effort to cut costs, and the number of pages has dropped along with advertising dollars. The staff has been steadily downsized. And now, with cuts in home delivery, the paper's geographic footprint also has shrunk.

Just how much "less" can the CA hope to make "more" with?

In recent weeks, rumors have circulated that the next step in the CA's shift to a web-based business model will be to cut publication from seven to five days a week.

That's news to Watson. "There hasn't been any talk about cutting back the number of days we publish," he says.

But anything is possible, says Murray, citing an article about Arizona's Green Valley News and Sun announcing plans to eliminate its Friday print edition in October. "So far, only a few newspapers have reduced frequency, and they are smaller newspapers. There's no indication that any larger newspapers have plans to do so."

In this case, no news is good news. Old Reliable is still hanging in there, seven days a week.

click to enlarge Joseph Pepe
  • Joseph Pepe

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