More rounds of pay cuts

Gatehouse media, which included my former newspapers The (Brockton, Mass.) Enterprise and The (Fall River, Mass.) Herald News is planning pay cuts that amount to 7.75 percent.

http://www.boston.com/business/ticker/2009/05/gatehouse_plans.html

Meanwhile, 10 percent pay cuts are coming to Portland, Maine newspaper owned by the Seattle Times.

http://seattletimes.nwsource.com/html/localnews/2009277672_apmenewspapersale1stldwritethru.html

Pay cuts of this magnitude will have to start driving talent out of the newspaper business, in my opinion. If content suffers, newspaper brands will lose their value as well. If a newspaper's brand doesn't signify that it's news content quality is superior to some start-up Web-based news site then it cannot compete.

Playing with fire?

If the torches and pitchforks come out it will because of stories like this: http://obsidianwings.blogs.com/obsidian_wings/2009/03/populist-anger-made-simple.html

Sometimes you have to take things personally

In this case, the effects of the downturn and the general distress of the newspaper industry. It's hard to know how much is one, and how much is the other, until the downturn becomes an uptick. But whatever the exact breakdown the consequence has been belt-tightening all around, including at my paper. All of us are taking a week off without pay. My week is this week.

It's obviously better than the alternative, which would be layoffs. But it's also obviously just first aid or damage control. Just as a tourniquet may stop the bleeding or flooding a magazine may keep a battleship from exploding, furloughs and layoffs are temporary measures that can't lead to long-term health.

What will do that is an open question. Until the economy turns around, though, it's really hard to tell how much the business model behind newspapers has been permanently changed. People will still be buying automobiles in the future, for example, and the current very low rate of purchase is unsustainable, but whether Ford or GM or Chrysler will be making them is questionable. Likewise, people will still be getting their news from somewhere, but which somewhere is an open question.

Loan defaults in McClatchy's future?

http://www.editorandpublisher.com/eandp/news/article_display.jsp?vnu_content_id=1003939434

Probably the biggest obstacle for most of the industry surviving this downturn is the excessive debt a lot of operations are burdened with.

It doesn't get as much attention as the home loan crisis or the the excessive credit card debt most households have, but there was a lot of speculation and excessive indebtedness in commercial real estate and in the media business over the last few years. Quite a few media chains changed hands at very high prices, apparently on the theory that newspapers were a license to print money -- a theory that had a lot of evidence going for it until very recently, too.

But, like housing, there have been signs for a long time that the fundamentals of the industry were unsound. Things changed fast.

This doesn't look good at at all

A chart tracking monthly job loesses in each of thelast three downturns. Blue is 1990, red is 2001 and green is the current difficulty.