What You Have To Understand About the LA Times Fiasco Is That Everyone Is Right – Zell Supporting Hiller; Hiller Getting Rid Of O’Shea, And O’Shea Protecting Editorial, But For All That Right There Is Something Very Wrong -- The Decline Of A Great American Newspaper

Philip M. Stone January 23, 2008

It is a newspaper publisher’s responsibility to shuffle declining revenues with editorial costs and deal the hand that meets margin requirements while overall serving well the daily readership. Just as an editor’s job is to provide the finest editorial product possible within given resources.

And if the editor doesn’t believe those resources are sufficient then fight the good fight but since the publisher is the boss you either get on with it or you leave.  And that’s basically what the Los Angeles Times situation is all about. But as one goes through the various strands of the happenings there it begins to look like a classic textbook on the ailments of the US newspaper business today, and the frustrations between senior management and editorial in agreeing the way forward.

Jim O'Shea says goodbye

Hiller and O’Shea had a major falling out over the editorial budget. In a report quoting Hiller in The Times, the publisher originally had asked department heads to prepare 2008 budgets having no spending increase over 2007. But advertising really weakened in the second half of 2007 because of the subprime crisis with real estate classifieds getting particularly nailed, and Hiller then changed the parameters, asking for a 1% cut.

Now for those of us who have been in senior management positions and have had to prepare budgets for our masters it comes as a natural way of life to submit a budget that exceeds requests. You make your presentation, you get creamed, maybe you get away with something, there is a thorough discussion and once the decision is made you get on with it.

So O’Shea, instead of offering a budget with a 1% decline, submitted a budget with a 3% increase. And, by golly, he was determined to stand his ground. He explained that this year there are the Beijing Olympics and the US Presidential Campaign to cover, and depending how deep that coverage was to be it could cost a bundle. He said holding the budget flat or cutting by the required 1% had to mean drastic cuts in other areas, most likely foreign news, and he was having none of it.

Hiller had to have impressed on O’Shea  he was serious; he wanted the budget  down 1% and with advertising revenue getting really socked there are those who would consider O’Shea lucky he was asked for only a 1% decline. For reasons that O’Shea best knows himself this was the ground on which he decided to fight, perhaps misreading how serious Hiller was, or not really caring -- $123 million is what he needed to run the newsroom in 2008 and that was that.

Now from afar that all sounds a little silly. Editorial operations have always had to juggle the coverage of the Olympics and the Presidential elections within normal budgets. Maybe some newsrooms got lucky and got increases for those events, but many don’t.

Years ago when this writer worked for United Press International, when it really was UPI, there were huge discussions every four years whether to pass a special additional fee to subscribers for such coverage, as did arch-rival AP with a special assessment. At the end of the day the bears won – the fear of negative reaction by subscribers for an increased charge to cover those events meant that editorial just had to grin and bear it and do more with the same. It did, usually quite superbly, while we all envied that the AP got extra money – something that stopped some years later.

And that was really what O’Shea should have done. The reason he was paid the big bucks was to work out exactly how to do that – continue great overall coverage within the budget provided. If necessary, where to cut, how to cut, how much to actually spend on Beijing or the elections – that was his province to work out. He apparently believed that to cover everything necessary was not possible without additional funding, he was not willing to make cuts, he was not willing to accept the budget – there was little choice but for he and Hiller to part ways.

Complicating the parting of the ways, however, was that if O’Shea went then that would be three editors in three years – not very good PR and how would Sam Zell feel about such an embarrassment so soon after taking over Tribune?  But Zell was unequivocal. “I’ve said loud and clear that I am returning control of our businesses to the people who run them,” he said in an email to Tribune employees. “That means David Hiller has my full support. He carries direct responsibility for the staffing and financial success of the LA Times.”

Good for Zell. It matters not what he actually thinks of O’Shea’s departure. It was all about supporting his managers. How can you tell managers they have complete control for financial success if you undercut their decisions? If Hiller gets it wrong – readers leave in droves because the lower budget means things don’t get covered – then that declining circulation and advertising revenue will mean he won’t meet his financial targets, and one gets the very real impression that with Sam Zell if you don’t make your financial targets, having been given the power and responsibility to do so, that you probably don’t get a second chance.

No manager could really ask for more. This writer had the experience at Reuters that budget decisions were made on how the media sector did globally. If one geographic area sector fell apart – such as the US when the Internet bubble burst – then all other sectors, no matter how well they were doing, had to cut back to keep global expense down because global revenue was down. Oh, to have had a manager who would have said, “Stone, do what you think right, you have the full responsibility for financial results, but if you don’t meet your financial targets then you’re gone.”  Local managers know where the money needs to be spent to bring in the biggest results and the challenge would have been instantly accepted, but that was not the way things ran then.

But one has to be grateful that there are editors like O’Shea who are willing to fall on their swords to protect the integrity of a product which they held most dear. He was only editor in Los Angeles for 14 months but he certainly caught the bug of producing a real quality product for Angelinos and he fought as best he could to protect that quality.

One cannot help but be sympathetic and agree with much of what he told his staffers in his newsroom departure speech. Much of what he said deserves to be read by editors and publishers around the world:

“One thing I want put on the record is that 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. That system is at the core of my disagreements with David. I think the current system relies too heavily on voodoo economics and not enough on the creativity and resourcefulness of journalists. We journalists have our faults, but we also have a lot to offer. Too often we’ve been dismissed as budgetary adolescents who can’t be trusted to conserve our resources. That is wrong. 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.

“The biggest challenge we face -- journalists and dedicated newspaper folks alike – is to overcome this pervasive culture of defeat, the psychology of surrender that accepts decline as inevitable. This mindset plagues our business and threatens our newspapers and livelihoods. I believe that when Sam Zell understands how asinine the current budgetary system is, he will change it for the better, because he is a smart businessman and he understands the value of wise investment. A dollar’s worth of smart investment is worth far more than a barrel of budget cuts.

“This company, indeed, this industry, must invest more in solid, relevant journalism. We must integrate the speed and agility of the Internet with the news judgment and editorial values of the newsroom, values that are more important than ever as the hunger for news continues to surge and gossip pollutes the information atmosphere. Even in hard times, wise investment — not retraction — is the long-term answer to the industry’s troubles. We must build on our core strength, which is good, accurate reporting, the backbone of solid journalism, the public service that helps people make the right decisions about their increasingly complex lives. We must tell people what they want to know and — even more important — what they might not want to know, about war, politics, economics, schools, corruption and the thoughts and deeds of those who lead us. We need to tell readers more about Barack Obama and less about Britney Spears. We must give a voice to those who can’t afford a megaphone. And we must become more than a marketing slogan. I know I can rely on this newsroom to do this.”

He then discussed what criteria an editor should use to draw that line in the sand – that line that keeps a publisher at bay, or, if crossed, makes the editor leave. “The line you draw is this: Do I believe in the course we’ve set for the future? If the answer is Yes, if I thought the LA Times could resolve its problems by getting smaller and smaller, by being gradually diminished, then I would stay. If not, (and I don’t) then I told myself to take a stand and say enough is enough. If you have to consider closing foreign bureaus and cutting back in other parts of the paper to free up the money needed to cover the Olympics and the most historic political campaign in modern times, well to me that’s no plan for the future, that is not serving the interest of readers. It is simply stupid.

“Even though we face tough and demanding times and I sympathize with those who face daunting revenue challenges, I don’t believe that we will succeed long term by giving up; by taking steps that I think will gradually diminish newspapers. I decided to take my stand and say: Change the way we do things. I made that decision and I will live with the consequences. And when I walk through the (newspaper’s) Globe Lobby for the last time, I can guarantee you that I won’t regret taking that stand. I believe history will prove me right. When this industry stops relying so much on cuts and starts investing in Journalism, it will prosper because it will be serving the best interests of our readers. That’s when we will prosper.”