By: The owner of New Jersey's largest newspaper said Wednesday that coming operational changes and payroll cuts, including concessions approved by two unions, should return the paper to profitability even if the advertising outlook doesn't improve.
The catch is that analysts don't expect the advertising market to stabilize in light of the current economic woes , meaning the latest restructuring might be inadequate.
The Star-Ledger in Newark, N.J., with daily circulation of about 350,000, has posted losses for at least three straight years and was on pace to lose between $30 million and $40 million in 2008 if it had not made the changes.
"If they are saying that based on current cash flow, these changes will return the paper to profitability, that would be great, but it's going to be very close to the line and very hard to bank on current cash flow continuing," Ken Doctor, media analyst with Outsell Inc., said Wednesday.
Advance Publications Inc.'s much smaller Trenton, N.J., daily, The Times, also is losing money as a worsening economy puts additional pressure on an ad market already weak from the flight of readers and advertisers to the Internet.
Over the past few months, revenue has been dropping even faster than anticipated at newspapers across the country. The recent bank failures will cause consumers to buy even less and companies to revise ad budgets even further, a leading forecaster, ZenithOptimedia, said Tuesday in sharply reducing expectations for ad growth through next year.
Donald Newhouse, president of Advance, remained optimistic in an interview Wednesday.
He said managers at the two papers, which both had received far more buyout requests than their targets, still have much work ahead to determine which ones to grant.
Even though the buyout will carry "substantial" severance costs, Newhouse said, continuing expenses will be in line with expected revenue moving forward.
Newhouse would not say how much savings the union concessions and buyouts are expected to generate, but he said that "if the revenue situation does not deteriorate materially, the papers should be operating in the black."
On Tuesday, a union representing about 90 drivers at the Star-Ledger overwhelmingly approved replacing a contract that was to run through 2015 with one that includes a wage freeze through 2017 and buyouts of 20 employees. That satisfied the final condition of three that the newspaper's executives have said repeatedly since July that it must meet to avoid a closure or sale by January.
Last month, the paper's mailers union agreed to similar concessions, including buyouts of about 100 of its 400 members. "Far more" than 230 full-time nonunion employees agreed to a separate buyout offer, publisher George Arwady said. The Star-Ledger had been seeking at least 200 but was willing to accept 230.
With 230 nonunion buyouts and 120 union buyouts, the Star-Ledger is eliminating about 350 jobs, or more than a quarter of its roughly 1,250 eligible union and nonunion employees.
The Times, meanwhile, received 77 buyout applications , far more than the 25 the Trenton paper was seeking among about 100 full-time nonunion employees.
Publishers of both papers say they expect to decide by the end of October whom they'll let go. Newhouse said other changes will be ongoing.
Newhouse said he is confident enough staff will remain to produce quality papers that continue to appeal to readers and advertisers.
Few papers have managed to win significant concessions from their unions or have done so this publicly. Employees are recognizing now that their options are limited, said Rick Edmonds, media business analyst with the journalism think tank Poynter Institute.
"These times are different from other hard times," Edmonds said.
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