By: E&P Staff
Proving that local owners are under the same pressure that big newspaper chains face, one of the new owners of The Philadelphia Inquirer and Daily News told employees this morning the papers are set to report one of the worst declines in ad revenue in its history.
Brian Tierney, publisher of both papers, issued a memo to employees outlining the tough environment facing newspapers after meeting with several union representatives yesterday. The guild and management are currently negotiating new contracts.
In the memo, Tierney explained that advertising revenue for July and August was down compared to the same months last year and the trend is only getting worse. September dropped 10.2% and Tierney warned that October and November is looking bleaker. Those results will ?likely be the largest two month revenue drop in our history.?
Tierney disclosed that in 2004, both papers generated over $100 million in cash for Knight Ridder, falling to $76 million in 2005. The forecast for this year: $50 million.
?Simply put, this dramatic revenue decline will prevent us from meeting our bank obligations if we don?t take absolutely critical actions on the cost side,? he wrote.
He explained that while the company can make its interest payments on loans in 2006 they are expected to maintain a benchmark performance levels. Without cuts the company may not even make it?s interest payments, Tierney alleged.
?Many of you are asking — did you and the PMH [Philadelphia Media Holdings] investors see this coming? The answer is yes and no. While our forecasts did expect reduced revenue due to the loss of big Philadelphia retailers … and continued reductions in our classified business, we didn?t foresee the spend and extent of the decline, and didn?t anticipate the huge falloff in the national advertising category.?
Tierney suggested another cut in the workforce — after the papers bled roughly 17% of each newsroom this time last year — and a restructuring in contracts.
?This is not a message I thought I would be sending you when we bought these two great newspapers almost four months ago,? he wrote. ?But it is our reality.?