Saturday, April 04, 2009

The Genetics of Failure

Class, here's a little business math for the recession. If a company states it is losing $85 million a year, and says it must close in 30 days unless it gets $20 million in wage and benefit concessions from its unions, exactly how much time will said unions buy for their members if they accept the demand?

Let's see. Thirty days + however many days is 365 times a little less than one-fourth. Or, working without benefit of calculator here, approximately four months and change. So my former professional peers at the Globe, many of whom are my dear friends, can reasonably expect to see the New York Times Co. back with more demands by Labor Day, even if they give the company everything it's asking for today.

It's the familiar newspaper waltz of death First, it's benefit cuts and wage freezes. Then come the layoffs. Then, surprisingly enough, more customers, advertisers and readers alike, note they're getting less for their money, and leave, setting the band to playing once more.

Grow the business? Turnaround plan? Please. Don't you know the Internet makes that impossible? Having squandered the opportunity to plan for the future when times were good, newspaper owners have no strategy for bad times except destroying their enterprises in order to save them, or rather, in this case, to save the Class A stock on which their PERSONAL fortunes rest.

As some of you know, the waltz spun me off in 2005. The Herald, then and now, was a different case. Two newspaper cities were almost extinct when I went to work there in 1987. Everybody at the Herald, from publisher Pat Purcell on down, knew they were in an odds-against venture (and still are). If the odds get you, it hurts, but on a very basic level, it's no shock, and complaining seems, well, bush.

The Herald and Globe are no longer really competitors. The Herald does the best it can with a skeleton crew of news producers, but let's face it. Every Friday night in West Roxbury, the funeral homes are full of wakes, and almost every one of them is for a Herald reader. Urban tabloids aimed at the sensibilities of older white Catholics haven't got a chance, because the target audience doesn't live there anymore.

The Globe's situation is much different. Its workers are being asked to make sacrifices, no, make that extorted to make sacrifices, because the New York Times Co. is one of the most mismanaged businesses in this great land of ours. It isn't a criminal enterprise like AIG, but misjudgment has bankrupted 100,000 times more people than fraud ever will.

The Times bought the Globe for over a billion bucks in the early 1990s. Less than 20 years later, the company is willing to take a total loss on the investment? Labor's role in that disaster is that of innocent bystander. Homer Simpson at work couldn't demolish market value that thoroughly.

No, as its editorial pages are forever lecturing us, accountability starts at the top of any organization. The Times needs Globe employees to eat less because Arthur Ochs Sulzberger, Jr., a/k/a "Pinch", publisher and CEO, is a bungler.

On Sulzberger's watch, the Times had one reporter, Jayson Blair, make stories up for some time without caught, stories that got printed on the front page. It had another reporter, Judy Miller, pass on fraudulent information about Iraq's weapons program, and stamped it with the newspaper of record's seal of approval. The damage to the paper's brand identity is incalculable. People cannot expect everything in a newspaper to be correct. They damn well have the right to expect the newspaper did its utmost to make it so.

And compared to Sulzberger the CEO, Sulzberger the publisher is a titan of newspaper history. Thanks in large part to decisions like buying the Globe, and passing up the chance to get into a little Internet venture called Google, Times stock has cratered, and it making its debt service on the kindness and loans of Carlos Slim, Mexican zillionaire. Best not to ask how one accumulates a zillion in Mexico.

In a REAL public corporation, stockholders would have shoved Pinch over the side about a decade ago. But the Times isn't real. It has only one class of voting stock, and that class is firmly controlled by the Sulzberger family. Managerially speaking, this gives the company the worst of both worlds. It has the financial pressures of a large corporation AND the internal pressures of a family business. Families grow, and sooner or later, there are more members depending on the business for income than there are willing and/or able to work in it.

The macroeconomic crisis of the newspaper industry is very real. The same crisis affects ALL mass media. Radio has it even worse. Long story short, the Internet hasn't destroyed newspapers, it's destroyed the advertising-supported business model of all media, even Internet media. They're not making money at Facebook or Twitter, either, and aren't quite sure how they will.

But newspapers have another problem. Their expansion into chains was built on a mountain of debt and an assumption each paper had a monopoly. Monopoly is never a business plan that lasts very long. Using it is a textbook definition of mismanagement.

Because of its brand name, the Times Co. is in a position to attempt to break the death waltz. It, perhaps alone among newspapers, could tell its customers, "pay up, you cheap fucks," and start charging real money for access to its superb Web site. It could bundle access to the Times with telecom carriers. What with wireless, land line and cellphone service, and FiOS, my household has its own page in Verizon's annual report. Another few bucks a month would hardly be noticed.

But the Times Co. isn't trying. Its demands to the Globe unions are part of a strategy to strip its outlying assets to preserve the operations of the New York Times newspaper. Ownership is tearing off its roof to use as firewood to keep the living room warm. That'll work.

That, I think, is what saddens and angers me most about the newspaper business today. Management isn't trying. I accept my departure from the industry in somewhat better grace because I believe Purcell DID try. He made many mistakes, but lack of effort isn't one of them.

When an automobile company lays people off, it makes fewer cars. When a newspaper lays people off, it makes an inferior product, because its employees ARE the product. Information is the most labor-intensive business around (that's why good public schools equal high property taxes). It's as if GM's response to disaster was to make cars without back axles.

I never give people advice about their livelihoods. My personal financial story is hardly one of unbroken success. But it would appeal to me, Boston Globe reader, if the unions' counterproposal to the Time Co. was "we'll accept all your demands in return for Arthur "Pinch" Sulzberger's immediate resignation. And management better that story above the fold on page one, too."

I know what's going to happen to the Globe employees, my peers, my friends. It makes me sick. They can't win. So they might as well humiliate the morons who are ruining their lives.


At 8:27 PM, Blogger Rich said...

Great post, Michael.

Though I have to be honest and admit that while I'll feel bad for those losing jobs, I won't shed a tear for the institution of the Globe should it go kaput.


Post a Comment

<< Home