Philadelphia newspapers CEO’s message to employees

Here’s what CEO Bob Hall sent to Philadelphia Inquirer and Daily News employees today:

To All employees:

This is my periodic update to keep you informed about your company and our future. As you heard me say many times, these are challenging days for the media industry, our newspapers and Philly.com. I am still optimistic about our future, but fully recognize that we will need to make substantial changes in the way we do business to succeed in a very competitive and economically challenging marketplace.

We have completed the relocation of our offices to 801 Market Street. The facilities have turned out great. We have a wonderful environment to produce outstanding products and become a more efficiently operated company. We were fortunate to be able to sell the Tower building, move to new facilities, and reduce operating costs substantially. Many people in various departments did an outstanding job in preparing and executing the move with only minimal issues. Some of your colleagues worked tirelessly around the clock in order to make the move seamless for all of us. Unfortunately, as you know, we did lose some of our employees in Security and Building Services because our landlord provides these services for all tenants. We tried to make the best of these reductions in force and offered buyouts and severance far in excess of our contractual obligations, thereby assisting these employees with their transition.

As our financial results are extremely important to all of us, let me give you an update. First, I received a number of questions about the results for 2011 that I had previously reported. The audited net loss for our company in 2011 was in excess of $17,000,000, largely due to the continuing decline in revenue. These revenue losses have continued this year for the industry (as widely reported by the media) and our company has experienced the same trend. For the first six months of 2012, our revenue is down by $16,000,000 from the same period last year. This has created a net loss, even after substantial expense savings. Throughout the industry, many newspapers have started to discontinue print editions during the week. This unfortunate trend has already impacted newspapers in New Orleans, Alabama, Detroit, Oregon and within the Gannett and Newhouse newspaper groups. We must work together to reverse this trend, making necessary and very difficult changes to insure that our newspapers and company survive./CONTINUES

Here is what you can expect in the way of future actions and changes that will need to be made as we address this serious situation:

— The extensive research project that I mentioned in a previous email to you will be completed in early September. From this information, and through an internal review, we will be making substantial changes to both our newspapers and Philly.com. We must produce products that reflect the needs of our readers, viewers, advertisers and future prospective customers. This is essential if we are to increase the total audience that we reach and to provide the consumer superior content, whenever, however (multi-products), and in whatever format desired. It is becoming even more important to be relevant, useful and timely via the applications that are utilized by our customers.

— We will continue to launch new products, both large and small to serve our market. Some of the most recent are the new Eagles App, advertising products on Philly.com, and the 30 day opportunity to run a strip ad on the front page. Within the first two days of announcing the offer to have premium advertising placement on The Inquirer front page, we sold over 10 of the 30 possible ad positions and expect to sell them all.

— We have embarked on a capital investment to modify the presses at SPP. This will enhance our opportunity to expand commercial printing and reduce newsprint costs. We are not competitively bidding on new printing opportunities as our cost structure is too high. This must change as new business is essential to our growth and improve our financial results.

— We are starting our negotiations for new labor contracts and have initial meetings scheduled for August and September. As I said previously, these talks will be the toughest challenge we have ever encountered as a company. We need to change many practices and cost structures to meet industry standards. These changes are critical if we want to survive, maintain jobs, and grow our company. This will include substantial tasks for the management of the company, leaders of the various unions, and all employees. There will also be substantial changes in management and non union employees as we restructure the entire organization.

— We are reviewing and will improve, revise, and change our focus on sales (all sources of revenue). Revenue growth is an absolute essential ingredient for our survival. Growth must come from all current and future opportunities in the marketplace.

–Our owners are willing to invest in future growth, modifying presses, technology, and marketing campaigns, but they cannot be expected to fund operating losses. To become profitable again, and begin to grow, we need to dramatically reduce costs and restructure our operations. This can only be accomplished through successful union negotiations and other changes to our organization.

Thank you for understanding our company’s situation. I hope to address these issues and make the difficult decisions with your help.

Bob

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$28 million in cuts proposed at the Philadelphia Inquirer/Daily News (phillymag.com)

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