After negotiations appeared to stall last night and into today, the New York Times will give notice to federal authorities under the Worker Adjustment and Retraining Notification law (WARN) that it will close the Boston Globe’s plants. Under law, this notice is required and will last 60-days before any action is taken. In the meantime, the Globe will continue to operate.
The decision by the Times does not prevent both sides from reaching an agreement, and is being described by many in media circles as a tough negotiation tactic designed to push the unions to meet Times management demands. According to the AP both sides have agreed to return to the table for talks in about 2 days.
But the bad blood between both sides that I talked about during yesterday’s radio program and that has been published widely in different reports is only growing worse. The Globe unions have called the approach by the Times as “bullying” while others have openly questioned both the management skills of their parent company and their own level of sacrifice. Not exactly the building blocks to a long-term future.
With that said, no one should forget that the NY Times is in a world of financial hurt themselves. Not only have they cut salaries and reduced staff, they have mortgaged their property, borrowed over $200 million, and are believed to have over $1 billion in debt. With diminishing circulations and ad revenues, there is not a lot of positive news in the short term for the newspaper industry as a whole, but especially for the Times and Globe.
The best advice for the Times still remains to either consolidate operations with the Globe, adopt a more defined multi-platform strategy, or to dump the Globe as soon as possible and try and stop the bleeding. In either case, the road is not an easy one – but one has to question the business logic of keeping a division that stands to lose over $85 million this year and will certainly lose money for the foreseeable future.
The Boston Globe got a little more time to find $20 million, but the bad-blood between the Globe staffers and the New York Times appears to be reaching new levels. According to published reports there is a lot of anger amongst the Globbies that the Times has not been totally accurate on its estimates of Globe losses this year, as well as some of the cuts they are requiring the Globe to make. Globe staffers feel as if the executives and managers at the Times are not making enough sacrifices on their end.
This kind of bad blood could be the kind of thing that destroys a corporation’s unity and damages its ability to succeed over the long haul. That, of course, would assume that such unity existed previously and that success was something probable in the foreseeable future for either side. In both cases – neither appears true.
Never the less, with this recent extension to Sunday at midnight, it appears that the Globe unions are very close to striking a deal, which will help in the short term, but do nothing to address the structural challenges facing both the Globe and the Times in the long term (if we can call a year to a year and a half long term).
The clock is ticking on the Boston Globe’s future. After the last several days of closed-door negotiations and union disagreements, there does not appear to much consensus on what the main unions for the Globe will do. The same is true for the New York Times, which continues a free-fall of its own.
The Globe lost around $50 million a year ago, and was on pace to lose roughly $85 million this year. But with circulation and advertising in a downward spiral (The Globe’s average weekday circulation, for example, fell 14 percent to 302,638 for the six months to March 31 from a year earlier, according to the Audit Bureau of Circulations), as more and more people cut costs and get their news and information from other sources – the unions should consider the $20 million to be a gift.
The truth is really stacked in favor of the Globe being shut-down.
For starters, the New York Times cannot find potential buyers (apparently local Massachusetts politicians have struck out as well) because no one sees value in the Globe. Even local patriots to the area (pun intended to the Kraft family) ran away after reviewing the balance sheets.
Another possibility, consolidating newsrooms and resources to help streamline the operations of both the New York Times and the Globe, has been rejected by Times management.
This means the options are few. Either, find some ways to cut costs now and keep the paper on life-support for another year, or shut it down now and stop the bleeding.
Of course, the obvious pinch for the NY Times is that if the unions stand firm and refuse to find $20 million and they do not shut down the Globe, they will look weak to investors. And if they do shut down the Globe? They are admitting a $1.1 billion purchase (The Globe’s sale price a few years ago) of the historic Boston rag was a colossal bust.
At the end of the day, the worst possible outcome for the Globe and the NY Times is if the Boston unions pull their heads together and find the $20 million in cost savings. It does not take a rocket scientists to realize that if you lose $50 million and then lost $65 million (instead of $85 million), you are still… losing money at an unsustainable rate. The question the Times has to ask itself is, regardless of what the Boston unions do – why are they doing this to themselves?
As a Bostonian, I have followed the negotiations between the Globe unions and the New York Times with a lot of interest. I grew up reading the Boston Globe, and a few of my good friends served as paper boys, waking up at obscene hours to bike or have their parents drive them around to deliver papers.
Of course, if you have tuned into my radio show over the last few weeks or talked with me about the situation, you will know that for once in my life I am actually rooting for NY to take it to Boston. This is not an easy thing for me to admit, because when you grow up in the Boston area, everything that is New York is despised.
Never the less, the Boston Globe has until Friday, May 1, 2009, to slash $20 million or it faces closure. I am hoping they do not find the money and the New York Times management decides to close them down. But part of me really wonders if the NYT has the guts to go through with it.
For starters, the Globe lost about $50 million a year ago. This year it is reportedly on pace to lose around $85 million. The very idea that $20 million in cost cuts is going to help save the paper or keep it running for more than another year or two seems ridiculous.
To add insult to injury, the union is refusing to eliminate benefits to reach the $20 million figure, including lifetime employment guarantees to a large number of people in the Globe’s workforce. The NYT is refusing to simply integrate newsrooms between the two papers or find other ways to reduce expenses.
For a company that was remored to have only $30 some-odd million in the bank to $1.1 billion in debt (enough cash analysts predict to last 4 more quarters), one would think the New York Times would cut its losses and let the Boston Globe turn into dust.