It's Our City is a project that uses TV, Radio and Web
to promote civic engagement in the Philadelphia region.A Sad Day at the White Tower
Monday, February 23rd, 2009 at 10:47 am - by Tom Ferrick. Filed under: Community, Economy.
By Tom Ferrick
The bankruptcy of Philadelphia Media Holdings, announced late Sunday, isn’t a surprise. The company had already missed several payments on its $390-million debt owed to several banks. All newspapers generally have been hit hard by the downturn in advertising that has come with the recession.
What is a surprise - at least to me - is the timing of the Chapter 11 filing. I thought PMH might be able to hobble through 2009 and hope for an up tick in the economy in the final quarter. But, it was not to be.
According to a sketchy story in The Inquirer, the company had already been assessed $13.4 million in penalties and interest for missing payments in 2007. Those things have a way of compounding - and adding to the burden of PMH’s annual loan payments, which are estimated at $40-$42 million a year.
As most folks now know (with so many bankruptcies happening in this recession) Chapter 11 does not mean liquidation. It means reorganization.
The Inquirer and the Daily news will keep publishing. Pay checks will continue to be cut. The company will continue to take in revenue from coin drops, home delivery and advertising.
What Chapter 11 means is that companies - under the supervision of a bankruptcy judge - can “restructure” their debt, i.e. reduce it so that creditors must settle for a portion owed so that it can escape its debt burden and re-emerge as a for-profit company.
In other words, the banks that financed the $560-million deal in 2006 are going to have to take a bath. Whether they will get pennies, nickels, dimes or quarters on the dollars loaned remains to be seen.
What does it mean for the readers of The Inquirer, Daily News and philly.com? Not much, not in the short run. The companies, as publisher Brian Tierney put it, are still “sound and profitable” - though that statement requires some parsing.
My reading is that the company is “profitable” is you take its gross revenue and subtract all costs - except its debt to the banks. When you add in its debt payments as a cost, it is losing money. Its net profit is below the $40-42 million in debt payments owed. (This is a property that had a profit of about $115 million eight years ago.)
In short, the moguls who bought the papers are in much the same position as those poor schlumps who bought houses during the real estate boom.
They paid a very high price for the property and piled on the debt in the belief that its value would continue to rise. Instead, the market tanked. They were saddled with debt in excess of the value of the property and weren’t able - with declining income - to make timely payments.
The bankruptcy filing obviously was done reluctantly. No one - certainly not Brian Tierney, with his, um, healthy and sizeable ego - wants to be associated with a failure. But, it does offer major tactical advantages to the owners.
They can use the bankruptcy as a cudgel to force concessions from its unions. PMH has many unions; they can be divided into three main ones: The Newspaper Guild, which represents the newsrooms, the sales force and most of the company’s white-collar workers; the Teamsters, who drive the delivery trucks, and various crafts unions - principally the printers and mailers - who produce and package the papers.
All of them have contracts that expire this year.
(Full disclosure: During my years at the Inquirer I was active in the Guild and also represented the Inquirer Newsroom as a chief steward.)
In recent years, the internal dynamic of union politics was this: the crafts and Teamsters often teamed up to isolate the Guild so that it ended up eating the cuts and layoffs the company demanded as its revenues began to decline. They were very good at it. It is one reason the Inquirer Newsroom is about half the size it was when this decade began.
When it comes to the Guild, management’s main goal probably will be to end or cripple the seniority system so it can lay off senior staffers (many of whom make between $70,000-$80,000 a year) and replace them with cheaper labor (at $26,000-$46,000 a year). They tried hard in the last contract talks to do it. Under Chapter 11, they have a new chance.
But, it also may be the turn of the crafts unions and the Teamsters to spend time in the barrel, taking whacks. When it comes to the crafts, there are restrictive work rules management would love to sweep away. And, the company may wonder, why pay newspaper delivery drivers 20 to 25 percent above market rates when there are so many people without jobs who would do it cheaper?
And if the workers refuse to make these additional concessions? Well, here is one card the owners will probably lay on the table: liquidation. The papers cease operation. The company closes down.
I don’t think that will be the outcome. More likely, PMH will emerge from this time of trial as a much smaller, leaner operation — with diminished products and less capacity to perform what its audience sees as it principal task - intelligent, timely and accurate coverage of the news.
It is going to be a hard year at the white tower at 400 North Broad Street.
February 23rd, 2009 at 10:38 am
And Tom, might it be such a hard year that it doesn’t even happen at “the white tower” any more?
February 23rd, 2009 at 11:13 am
This is indeed a sad day, seemingly another step toward the inevitable march of traditional newspapers to the ol’ bonepile of history.
As we look to the days just down the road when most of our printed news will come to us over the web, should I anticipate curling up on my sofa every Sunday morning, reading an Inquirer book review on my trusty PDA?
Or will there still be a place for good old papyrus in our lives? I’m just old enough to hope there is.
February 23rd, 2009 at 11:27 am
Well I offer a ray of hope for printed news. Since we moved to Falmouth, MA on Cape Cod from Philadelphia (where I wrote a column for a while) I started working as a freelance photographer and videographer for Enterprise Publishing which produces weekly and bi-weekly papers for Falmouth, Mashpee, Bourne and Sandwich.
Just last week they expanded to the town of Barnstable with a new weekly paper and new office in Hyannis. The Enterprise has been owned by the same family for three generations.
Take a look at the Enterprise paper online (and my videos) - http://www.capecodnow.net. The first edition on the Barnstable Enterprise is there for download in PDF form.
Print is not dead - small local papers are easier to manage than larger city papers I think.
February 23rd, 2009 at 12:17 pm
I seriously doubt that Tierney, Toll, and the rest of the investors are poor. They’re just cheap. The newsroom has been a target in cuts because the newspaper guild is the weakest union at the paper. The seniority system at the Inquirer is already crippled. Remember the suburban staff? The reporters and photographers who were paid half of the downtown staff and fought for equal pay? The company and the guild cut a deal to get around seniority and they were laid off two years ago. Some had twenty years there.
What goes around comes around.
February 23rd, 2009 at 2:54 pm
Thanks for this, Tom. As usual, your insight provides clarity to a dark & tangled situation. It truly is a sad day, even for those of us who were deemed expendable by Tierney & Co.
February 23rd, 2009 at 4:51 pm
A very sad day came when Mr Tierney purchased the newspaper and then embarked on his savage newsroom cuts. These cuts began with laying off all the suburban staff. I was always pleased to read their stories. But Mr Tierney was the animal chewing off his foot to escape the trap, and he lost his suburban readers like me anyway. It is sad because it seems that nobody, not Tom Ferrick or WHYY, questioned the morality of having such a caste system in a newspaper. The march to a bonepile begins always when people are silent.
February 23rd, 2009 at 5:27 pm
What’s sad is that Tierney’s media management expertise wasn’t equal to his heroic dream of saving Philadelphia’s newspapers. His appetite for power and prestige was no match for the required boldness, creativity and financial resources necessary to make Philadelphia Newspapers work. What’s needed now? 1. Compress the Inquirer/Daily News into one paper, preferably a tabloid to save printing and distribution costs. 2. Institute an e-bay like classified ad system that eats e-bay’s lunch instead of the other way around. 3. Hire young energetic creative voices to run and put out the paper and get rid of dead wood. 4. Make the paper indispensible to both advertisers and readers.
February 23rd, 2009 at 7:32 pm
If this just doesn’t beat all. It’s just plain outragous.
I lost my job (company policy) when I went out on disability two years ago after an accident. I can’t tell you how many people have said to me since then, “Aren’t you glad you aren’t there for all this turmoil????” And the answer is no, I’m not. I will never get over being terminated, never, never.
February 23rd, 2009 at 9:53 pm
Tierney never was interested in newspapers. Not then and not now. He is interested in Tierney.
The Inquirer lost its way and its vision several years ago, even before Tierney. The paper has been nothing more than a series of “My Weekly Reader” columns for awhile. Subscribe to the NY Times. Listen to the radio.. This may be a surprise but Tierney will still have his boat, and the staff that’s left will still see themselves as the best of the lot.
February 23rd, 2009 at 10:22 pm
He can certainly afford the gas for the boat:
http://www.forbes.com/2009/02/23/pay-newspapers-philadelphia-personal-finance_tierney.html
April 6th, 2009 at 5:28 pm
Hey Tom, you helped kill the Inquirer and Daily News with not only your bias, but your blind refusal to admit it.
One way or the other, liberal bias cures itself. Save the crocidile tears for something else.