Sacrebleu, Le Monde Journalists Strike To Protest Proposed Job Losses, But Do They Really Believe, Given Huge Losses, They Can Attract New Investment Without Giving Up Control?

Philip M. Stone April 15, 2008

There’s a conflict in basic economics going on at Le Monde. The journalists went on strike for 24 hours Monday to protest recommended job losses that would stem the flow of red ink and make the company profitable in a couple of years; they have rejected increased investment that would mean losing their financial control, but more new money with the inmates still running the asylum is just fine. Désolé mesdames et messieurs, but newspaper economics just don’t work that way anymore.

Journalists showed the significance of the financial calamity facing the most prestigious of French newspapers when on Monday for just the second time  in the newspaper’s  64-year-old history they refused to produce an edition. Le Monde’s journalists (Society of Editors) hold shareholder voting control of the newspaper and they don’t like one bit management’s recommendation that to stem losses about 130 jobs must go, some 87 in the newsroom – about 25% of editorial staff.

Just two years ago and it seemed the newspaper’s financial future was secure. Lagardère, the French media and industrial conglomerate, bought a 17% stake and Prisa, the Spanish media group whose flagship is El Pais, took a 15% stake for a combined investment of around €50 million plus another €15 million came from assorted investors with the journalists still retaining overall control, so it seemed like one big happy family.

But the red ink kept flowing, the newspaper is in dire straits again, and the outside investors are basically saying that if they are being asked to invest more then they want control. The union says “non” to that, so management has little choice but to come up with severe cost-cutting plans that eliminates 130 jobs but the union says “non” to that, too, and reinforces that view with a one-day strike.

It all brings up memories of a couple of years back with the financial hemorrhaging of the Libération newspaper. Riding to the rescue was French banker Édouard de Rothschild, but without gaining financial control. After the newspaper dispensed easily and quickly his initial investment it then asked for more but this time the banker played real hardball, changing management  (kicking out co-founder Serge July), seeing many of the newspaper’s leading journalists resign, and the newspaper itself dismissed around 150 staff. But at the end of the day, it was a needed economics lesson for the far left daily that today is said to be near break-even.

Le Monde needs the same medicine, but the journalists are still at the stage of wanting solutions where investors pour more good money after bad and still not have any financial control, Yes, it is very prestigious to say one has a holding in one of the world’s most most-appreciated newspapers, but in this day and age money speaks louder than words. The journalists may not like that, they may well fight tooth and nail, but at the end of the day they either take the hard decisions themselves and reduce costs as much as they need to be reduced, or they attract additional investment which most likely means giving up control.

Just as the journalists at Libération didn’t like what happened there, the fact remains the newspaper is still with us, it has still kept its reputation intact by bullying right of center President Nicolas Sarkozy as much as it can, and its financial books are in much better order.  

Le Monde’s financial losses are on the increase. In 2007 the newspaper lost €20 million ($31.2 million) compared to the year before loss of €14.3 million ($22.3 million). And, oh yes, it carries about €150 million ($234 million) in debt. It has taken steps to reduce debt by selling its Midi Libre in Montpellier, and management has proposed selling another four entities including a famed movie magazine, a dance publication, a publishing house and a bookshop chain that sells mostly religious publications. Circulation has remained steady over the past couple of years around 320,000.

Since management understands the journalists don’t want to give up control then big internal cost savings have to be made. Director Eric Fottorino recommends that 130 staff go, that’s about two-thirds newsroom and one-third administrative. With the sale of the four publications and the staffing cutback then Fottorino believes the newspaper can become profitable  within a couple of years.

The union isn’t against voluntary job cuts but objects strongly to compulsory ones. The journalists unanimously voted to instruct the union to negotiate a new deal with management that calls for only voluntary redundancies and that the newspaper should not sell the additional assets.  Fottorino told Germany’s Spiegel Online, “Our situation is that of a doctor. Sometimes, like during an operation, you have to sacrifice a limb to save a life.” He would also like to attract more outside investment, “But we will never allow another owner to acquire a majority of the company, or to stand up and say, ‘I am Le Monde.’ No, Le Monde’s Society of Editors will in the future still hold over 50% of the shares.”

The two largest outside shareholders, Lagardère and Prisa, seem willing to invest more, but they want more say over how their money is spent. Prisa chairman Ignacio Polanco said in January, “Le Monde’s ownership structure is very complicated, but if it wants to remain independent it is of fundamental importance that it starts making money.”  Lagardère and Prisa have put forward a plan to control Le Monde’s capital by paying €35 million each to buy convertible bonds that expire in 2012.  Apart from the control issue there is also some question whether the combined €70 million is low-balling the company that is thought to be worth €650 – 800 million.

The two companies say that if the deal goes through then Lagardère would handle the company’s operating activities while Prisa would guarantee the newspaper’s editorial independence.

One thing for sure, things needs to get worked out and in a hurry. A couple of weeks ago Fottorino said, “To reject it (the layoffs) would surely deny us any chance of success and would put the future of the group in danger. The particularly gloomy outlook for the world economy, the weakness of French growth and the slowdown … in the advertising market gives us no room for maneuver.”