Battling enormous advertising losses in automotive and other industries, the Gannett Co. Inc.'s 23-station TV broadcasting division has just announced a sweeping wage reduction, with some of the 2,700 employees getting pay cuts as much as 6%.
In a just-distributed memo to employees, division President Dave Lougee (left) said: "The decline in the auto industry alone -- once about 30% of our division’s ad business -- is a major challenge for us. And that’s just one example of the changes we are seeing."The memo continues: "I believe it's clear there will be a permanent reset of the American economy on the other side of the economic storm. On top of that, our industry has been impacted by the revolution in the way people consume media and the way advertisers try to reach them."
Wall Street's reaction, if any, is hard to gauge, because I don't know when news reached major investors. Gannett shares closed moments ago at $3.53 a share, up fractionally. The Dow Jones industrials and the broader S&P-500 index closed down a bit. Update: In after-hours trading, the company's stock appears to be drifting down.
My quick analysis: The reference to auto advertising weakness suggests Gannett flagship USA Today may be vulnerable to further cuts, given its past dependence on car advertising. Also, clearly, the Detroit Free Press and the other four Michigan newspapers are at risk -- a possibility discussed by Gannett Blog posters in recent weeks amid growing speculation about broad layoffs in the U.S. Community Publishing newspaper division. Those rumors have focused on a July 8 date.
My quick analysis: The reference to auto advertising weakness suggests Gannett flagship USA Today may be vulnerable to further cuts, given its past dependence on car advertising. Also, clearly, the Detroit Free Press and the other four Michigan newspapers are at risk -- a possibility discussed by Gannett Blog posters in recent weeks amid growing speculation about broad layoffs in the U.S. Community Publishing newspaper division. Those rumors have focused on a July 8 date.
Earlier: Why Lougee's letter suggests other moves afoot. Plus: How viral videos are killing television advertising
Please post your replies in the comments section, below. To e-mail confidentially, write gannettblog[at]gmail[dot-com]; see Tipsters Anonymous Policy in the green rail, upper right.
This is the beginning of what will most likely be a sad couple weeks for employees leading to the quarterly report July 15. Pay cuts, layoffs and such are intended to make the numbers look better for Wall Street. Wow, management's really getting a handle on this! Unfortunately, these changes will dramatically and probably irreparably change the quality of the respective products. I understand the reason for cuts and layoffs when the boat's taking on water but is someone directing the boat or just busy throwing people overboard?
ReplyDeleteThrowing them overboard.
ReplyDeleteIf you've listened to the last few earnings conference calls, Gannett has repeatedly said that its workforce will match its earnings. Gannett has forever tied people to other operating metrics.
ReplyDeleteFor example, newspapers might have to calculate full time employees per pound of newsprint used, or lbs. of ink used per pressroom employee. Even something like advertising rate per inch per full time employee... or things like that. These metrics help Gannett decide which papers are operating in the accepted profit range and which are not.
When the foundation in the metrics change (usage, ad spending, consumables changes), the company has to go back to cutting FTEs in order to keep the profit margins real. Whether this affects the product has never really been too big of a concern.
It might be interesting, however, if Gannett would throw a ton of resources at a particular market... the best people, best writers, huge editorial product, large news hole, etc. to see if that would increase circulation.
Wait... they did that in Montgomery 12 years ago. Didn't work.
In the Q & A it is stated that these paycuts should reduce the need for layoffs. Don't you think that it would be pretty low even for gannett to say the need for layoffs has been reduced and the economy is stabilizing, if they already planned to cut 4500 jobs in 2 weeks? Makes me think that perhaps the magnitude of the cuts may not be as large as reported.
ReplyDelete