Seattle
Times publisher Frank Blethen's memo to staff
To:
The Seattle Times Family of Employees
From: Frank A. Blethen
Date :
April 30, 2001
Subject : Message from the Publisher
The
past three weeks have been difficult for all of us. Yet the
response from virtually everyone in The Seattle Times
family has been immensely gratifying. It's this collective
response that is our silver lining in a very tough situation.
It's this silver lining that renews my belief that we can
continue to be the exception in the newspaper business and
that we can preserve both our independence and our commitment
to journalism and community service.
First,
I'd like to share with you the internal response that I have
seen. Then I'll share with you highlights from our April 18
Seattle Times Board Meeting. Followed by insights into what
The Seattle Times world will become if we don't maintain
our independence.
Internal
Response
My
starting point is to acknowledge the selfless and professional
work of our Leadership Council in quickly downsizing the company
in response to the steep economic deterioration.
When
it comes to budget specifics, I do not participate. The Executive
Council and I set broad parameters, but how we arrive at our
budget is a collegial, team effort of the Leadership Council.
To
diverge slightly, I note here that this is a completely different
process than what is happening in the public companies and
chains. Their decisions are made by the publisher based on
instructions from a distant corporate office. Widespread,
across-the-board layoffs are mandated in every department,
as are arbitrary cuts in newsprint and newshole.
In
our case, in February we had no sooner put together a very
tight post-strike budget than the economic slump hit us and
the industry. We knew we had been far too optimistic and had
to substantially downsize quickly.
We
needed to accomplish this downsizing immediately to try to
financially stabilize the company by getting our expenses
under control in relation to decreased revenue. We also knew
we had to have a credible budget for the April 18 Board meeting.
The harsh reality is that if senior management didn't get
the company downsized and under control by April 18, we would
be in serious risk of losing Board confidence and, for the
first time on Mason's and my watch, having the Board begin
to mandate operating priorities and budget cuts.
At
that point, I had personally come to the reluctant conclusion
that we could not reduce the budget enough without getting
into widespread, across-the-board layoffs and significant
core content cuts. I shared this with you in my last message.
However,
in a remarkable example of urgency, collegiality and compassion,
our Leadership Council, in a two-week period at the beginning
of April, produced a budget that took a whopping $15 million
out of an already tight expense budget and still avoided widespread
layoffs and significant core content cuts. To be sure, they
made many painful cuts. For example, even though we were down
over 200 positions from pre-strike, hiring freezes and some
narrow job reductions will soon have us down well over 300
positions. Another example was taking the return of our critical
zoned editions out of the budget.
Most
impressive was the Leadership Council's willingness to suspend
all management and unaffiliated salary increases.
The
next gratifying reaction was that of mid-level managers and
supervisors throughout the company. From the feedback I have
been receiving, this selfless and dedicated group has embraced
a downsized budget and personal financial sacrifice as a way
to try to avoid more layoffs and content reduction.
Finally,
feedback from non-management employees, both affiliated and
unaffiliated, has been very positive. In some ways, it has
a feeling of unification to it. A very appropriate sense that
we are all in this together and that everybody is using his
or her own sphere of influence to ensure the company's collective
success in these difficult times.
We
aren't out of the woods yet by a long shot and things will
continue to be uncertain and unsettled, but if this collective
coming together continues, we have a chance of getting through
this without further cuts.
Seattle
Times Board Meeting
If
I needed validation to the urgency of the downsizing, I got
it at the April 18 Board meeting.
Over
the past 25 years, we have recruited outside, non-family directors
with excellent business acumen who know the Seattle business
climate and who value an independent, locally-owned newspaper.
We look to them to validate our budgets, business plans and
professional management. It's difficult times like this when
they are most valuable to us.
We
knew they would be very challenging, but in a constructive
fashion. We knew we had to satisfy them. And for the most
part, we did. Like senior management, they are still concerned
about the precipitous drop in newspaper industry advertising
revenue and whether that will get worse. They have challenged
us to consider whether we have been too optimistic in the
revenue budget.
By
contrast, our minority-shareholder inside directors from Knight
Ridder made it clear that they believe we are unrealistically
optimistic and we should make immediate layoffs and cuts equal
to and even deeper than the $15 million cuts we just made.
We
are not certain that we won't have to make more cuts. But
we are certain that we are not going to make those cuts until
it's absolutely necessary and we will then make them as selectively
as we can, rather than the kind of across-the-board cuts we
see elsewhere in the industry and which our minority directors
encourage.
What
Would Life Be Like if We Were Part of a Publicly Traded or
Large Chain Company?
As
difficult as these times are for us, they are certainly much
worse for our brethren in public and large chain newspaper
companies.
I'm
sure you have followed the recent situation in San Jose, California,
where respected publisher Jay Harris quit in protest over
Knight Ridder's insistence that he downsize the company to
not only maintain its 21% margins, but to achieve even higher
margins. (Remember, our margins are half or less than the
average for public newspaper companies.)
You
have probably also seen the disparaging comments that Knight
Ridder senior executives have been making about The Seattle
Times over the past six months in every possible forum,
from financial analysts to media publications. These comments
consistently claim we are not a well-run company and they
could run us much better (meaning higher margins, fewer people
and less newshole). It's hard to understand what they believe
they will accomplish by making these inappropriate public
comments. But it does give us a clear contrast in what life
as an independent, family-owned newspaper would be like versus
Knight Ridder or another large chain or publicly traded company.
In
fact, our minority shareholders seem so obsessed with our
"poor performance" they even singled us out in their recent
annual report. I've repeated that reference below for you.
Knight
Ridder Annual Report -- Excerpt from the Chairman's Personal
Message:
"On
the other side of the ledger, I would cite these 'minuses':
Our unsuccessful effort to acquire the 50.5% of Seattle Times
Company that we do not already own. This bid represented a
focused effort to acquire an asset of unique benefit to Knight
Ridder shareholders inasmuch as we are certain we could manage
the assets far more productively. That the current owners
did not want to sell was disappointing, but not altogether
surprising. Should their circumstances change, we remain interested
in the acquisition."
Moment
in Time/Future
One
of the wonderful things about being an employee of an independent
newspaper is that we all have some bearing on our future and
our ability to stay independent. Unlike the public companies
and what our peers are going through, we actually have some
control over our destiny.
If
the reaction from The Seattle Times family of employees
-- from the Leadership Council through management/supervisors
and all employees -- over the last two weeks is any indication,
we will get through this and maintain our independence.
I want
to both thank each and every one of you and I also want to
remind you that what you do every day does matter. The better
each one of us does our job, the less chance we'll have to
downsize further and the stronger a platform we'll have when
the economy eventually turns around.
FRANK
Seattle
Times publisher Frank Blethen's downsizing memo
To:
The Seattle Times Family of Employees
From:
Frank A. Blethen
Date : April 12, 2001
Of all
the messages I have shared with you during the past five months,
this has been the toughest one to write. It is a message I
have tried to avoid, but can't duck any longer.
In
short, the extensive damage from the strike, combined with
the rapidly deteriorating economy, has forced us to accept
a new reality: We no longer have the revenue base to support
the current level of jobs, infrastructure and programs we
all enjoyed pre-strike. Knowing that the strike put us in
a precarious position financially, your Leadership Council
did an amazing job creating a post-strike budget for 2001
that sought to minimize job, content and service cuts and
to protect our competitive position. Unfortunately, the March
revenue drop of almost 20% from last year is an urgent and
sober wake-up call. We now know that the remaining year's
budget revenue forecasts are far too optimistic, and with
the economic deterioration continuing, we must immediately
downsize the company to what revenues can sustain.
This
won't be easy and it won't feel good to any of us. But it
is a critical necessity to ensure we stabilize the business
and protect our independence.
There
are no sacred cows or protected programs in this process.
We must challenge everything and eliminate anything that is
not essential. We have to become a smaller company, quickly.
We will look at layoffs, program cuts, newshole reductions
and service cuts that had been untouchable prior to this.
Only three things are not under consideration: (1) core content
that drives reader loyalty; (2) 5:30 a.m. and porch home delivery;
and (3) $0.25 single copy. These three items are essential
for success in a downsized environment and they are the foundation
for our future.
Until
now, we have been optimistically characterizing the post-strike
environment as "stabilizing and rebuilding." Now it is clear
that our mission is not to rebuild, but to "stabilize and
reinvent" ourselves into a smaller company.
I worry
about our competitiveness and our marketplace position. We
will do everything we can to be smart about newspaper content
as we go forward. We know we can't do everything we did in
the past. So what we do must preserve and nurture the connection
with our most loyal readers.
As
difficult and unpleasant as this will be for all of us, we
are still better off than the rest of the industry. Knight-Ridder,
for instance, is laying off people and cutting content simply
to maintain their 21%-plus profit margins.
The
significant loss of circulation and advertising revenue because
of the strike is what makes this economic downturn so much
more difficult to deal with than ones experienced in the past.
In a few days, we must publicly report our audited circulation
results for the six-month period ending March 30. This report
underscores why downsizing is so important. It represents
significant circulation revenue losses and erodes our ability
to support advertising volume and rates.
Our
combined (Times and P-I) daily circulation will be down 9,761,
or 2.4%, at 394,159. That's well below our minimum target
of 400,000 necessary to sustain the business at prior levels.
Sunday is worse. It is down 18,088, or 3.6%, at 482,828, well
below the 500,000 figure necessary to sustain prior advertising
levels.
As
bad as this looks, it becomes worse later. These figures do
not include the lowest months during the strike. Unfortunately,
when we reach the September six-month circulation report,
it will reflect the strike losses and the numbers will be
much lower.
History
History
is instructive at a time like this. Our Seattle Times history
reminds us that there are critical points in time when changes
in our external and internal environments force us to downsize
and reinvent ourselves to survive. When these critical moments
occur, they are a crisis for the company and its employees.
Either the company makes necessary and dramatic changes, which
usually include downsizing, or it doesn't survive. Our most
critical points were around 1930, 1953, 1972, 1980, the early
1990s and now 2001.
Many
of you will remember the advertising recession of the early
'90s. Some of you will even remember the early '70s when the
famous "Will the last person leaving SEATTLE -- Turn out the
lights" billboard appeared. Like those past crises, we have
always done what is necessary to downsize and preserve the
business. The new reinvented company has always become a new
foundation for a successful future. This will be the same.
One
element that makes this more difficult is that, in the past,
it was a matter of downsizing because revenue wasn't growing.
Now, for the first time, we actually have to cope with a dramatic
reduction in revenue.
DOWNSIZE
IMPERATIVE
The
critical imperative is to downsize the company as quickly
and smartly as we can so that we may stabilize ourselves,
albeit as a smaller company.
The
Leadership Council and Executive Council have been meeting
for several days to determine how we proceed and where we
cut. Over the next several days, we will share with you the
decision and cuts as quickly as we can. Alayne Fardella will
also follow up this message with a summary of what has already
been cut or eliminated. Unfortunately, this will prolong the
uncertainty, change and disruption we have been dealing with
for several months. The best way for us to achieve stability
quickly and to minimize the amount of downsizing is for each
of us to zealously protect the company resources we have control
over and to maximize any revenue or customer relations opportunities
at this critical time.
Rumors
There
are two rumors out there that seem to be gaining prominence
and that people are frequently asking me about. They involve
the ability of the Seattle-area and the JOA to sustain two
newspapers, and the continuance of independent ownership.
Let me briefly address them.
Can
Two Metropolitan Newspapers Survive in this Marketplace?
This
is the most frequently asked question I get, both inside and
outside the company. It is an important question that has
many ramifications for employees and our community.
Operating
under the inefficiency of a JOA and supporting two newspapers
is much more expensive than a single-paper operation. The
complexity and expense hinders the ability of an organization
to effectively compete in today's very difficult competitive
world. If the agency loses 15% of our classified revenue to
the internet as predicted, this problem becomes even worse.
Moving The Seattle Times to the morning was a bold
and untried JOA experiment. The choice was to watch our afternoon
newspaper slowly and painfully die or try a model not done
elsewhere -- with both newspapers in the only timeframe the
market wants.
Since
no one had done this, none of us knew how the market would
respond. While the reaction to the Times' move was very positive,
the early circulation trends indicated Seattle was not an
exception and the market would select its preferred newspaper.
In short, the market would pick a winner and a loser just
like it always has elsewhere. The strike accelerated this
trend and damaged overall circulation.
In
the March circulation audit figures I referred to earlier,
I mentioned that combined daily (Times and P-I) circulation
will be down 9,761 or 2.4%. This deterioration is not even
between the two newspapers. The Seattle Times is up
7,240, or 3.3%, and the P-I is down 17,001, or 9.1%. We have
moved from a gap of 32,000 to 56,000. While this type of market
choice and trend is no different than what would be expected
from industry experience, we had hoped it might be different
here with two good newspapers and with equal marketing and
promotion, instead of the usual model where one paper has
a significant business advantage.
There
is no JOA in the country where the two newspaper owners have
invested more lavishly in trying to prove that this marketplace
might be different. This is a catch 22 as it will erode the
agency's overall resources in trying to market and distribute
two news products. Typically, the agency will suffer further
as the marketplace continues to widen the gap between the
two products over time. These are ominous implications for
our competitiveness.
Will
Independent Ownership of The Seattle Times Survive?
Ever
since the public chains started aggressively buying family,
independent newspapers 25 years ago, I have been asked this
question. With only a handful of independent newspapers left
-- and us being the largest -- it gets asked more frequently
now. Knight-Ridder's substantial unsolicited offer to buy
the Blethens out last fall and Hearst's insistence during
JOA renegotiations of a First Right of Refusal if the Blethens
ever sell have fueled speculation. Now the financial damage
of the strike and the deteriorating economy seem to have kicked
off a new wave of questions about whether or not the Blethen
family has the interest and resolve to maintain independent
ownership.
The
loss of independent ownership is the most remote consequence
you can imagine. But I also have to tell you something I would
not have told you in the past: as remote as this is, it is
a possible consequence if we don't quickly get the company
downsized and stabilized. The best way to put this to rest
is to stabilize the company and then get back to pursuing
the journalistic, community service and workplace aspirations
of the past.
FRANK
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