LA Times: Another editor out for refusing to make budget cuts

Today I’d hate to be the managing editor of The Los Angeles Times, John M. Arthur, 60, or its innovation editor, Russ Stanton, 49. That’s because rumor has it they’re on the short list to be the next top editor at one of the nation’s finest newspapers.

If named, this is what publisher David Hiller will expect of either: Cut The Times’ approximately $120 million budget by 1 percent. That would mean firing people. If either wishes to keep that job, they’d better do it — because Hiller fired the previous two editors who refused to make cuts he demanded.

Hiller told editor James E. O’Shea to make that cut. Hiller instead requested a $3 million increase due to anticipated coverage needs of the China Olympics and the presidential election. Hiller says O’Shea quit; O’Shea says he was fired for that refusal. In 2006, editor Dean Baquet was forced to resign for refusing to make budget cuts demanded by the paper’s owner, Tribune Co.

As of last week, the Tribune Co. has a new owner, billionaire Sam Zell. In a prepared statement, Zell said:

We have a tremendous opportunity to take the great brands of Tribune Company, and the enormous talent within the company, to a new level. Tribune, along with the newspaper industry, has been mired in its monopolistic origins, and we intend to create a fresh, entrepreneurial culture that is fast and nimble, and which rewards innovation.

That’s sufficiently vague to mean just about anything. But for a new owner to mention “rewards innovation” and immediately fall back on the same old business model — reduce expenses to maintain investor income — says the LA Times is in for an increasingly rough ride.

That’s because, from the other side of Mr. Zell’s mouth, came this in a Monday e-mail to Tribune employees:

I’ve said loud and clear that I am returning control of our businesses to the people who run them. That means David Hiller has my full support. He carries direct responsibility for the staffing and financial success of the L.A. Times. [emphasis added]

Mr. Hiller’s record says he will cut costs to maintain profit levels. But financial success of a newspaper these days will no longer come from continual cuts that diminish the value of the product.

The push and pull over budgeting is a long-running story at The Times, which has seen its editorial staff shrink in the last eight years to less than 900 from about 1,200. At the same time, the paper’s weekday circulation has dropped to about 800,000 from more than 1 million.

Is The Times losing money? No. But its profit margin is decreasing, and Tribune’s sale to Zell has played a role in that:

Through three quarters last year, the company had an operating profit margin of 16 percent, down from 19 percent the year earlier. But with sharply higher debt service costs because of the takeover, net income fell by more than half, to 4 percent.

I’d take 16 cents on the dollar any day before the sale. But, apparently, large institutional investors will not. They want large profits over short times. As I’ve written earlier, that has played havoc with the newspaper industry.

I wish luck and a hefty 401k to the next editor of the LA Times. He or she will likely have to take a big ax to the resources available to one of the nation’s best papers, further diminishing the ability of The Times to do its job — hold governments and corporations accountable for their actions.

Here’s Mr. O’Shea’s parting comments:

I disagree completely with the way that this company allocates resources to its newsrooms, not just here but at Tribune newspapers all around the country. … Even in hard times, wise investment — not retraction — is the long-term answer to the industry’s troubles. … Journalists and not accountants should seize responsibility for the financial health of our newspapers, so journalists can make decisions about the size of our staffs and how much news remains in our papers and Web sites.

So, Mr. Arthur or Mr. Stanton or whomever: Make the cuts, keep the job, reign over the demise of a newspaper. Refuse the cuts, and join Mr. Baquet and Mr. O’Shea as former editors of an increasingly once-great newspaper.

xpost: Scholars & Rogues

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