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Owner praises Pioneer Press, but cuts still loom

Like employees throughout Denver-based MediaNews Group, Pioneer Press staffers received a cheery end-of-year memo from CEO Dean Singleton and President Jody Lodovic. The big news: Debt-racked MNG pledges a late-winter 2010 financial restructuring. The local angle: New web toys for the PiPress that could herald new sites and a new design, plus a specific shout-out for St. Paul’s performance versus the Star Tribune.

But ownership pom-pom waving does collide head-on with PiPress concession talks. In November, the PP’s Newspaper Guild agreed to management demands for such talks, which have not yet begun. As of late October, they included a 7 percent wage cut, then a freeze, plus no merit pay or late-shift wages.

Here’s the memo with some of my annotations in italics:

TO: MNG/MNGi Employees
FROM: Dean Singleton and Jody Lodovic
SUBJECT: 2009 is almost gone. Thanks for getting us through it!

First and foremost, let us thank you for your hard work and dedication during this difficult economic period, a time particularly hard for the newspaper industry. You have been asked to do more with less, and we truly appreciate your efforts and sacrifices.

While the past three years have been particularly challenging (especially 2009) for MediaNews Group and the newspaper industry, we are proud of your performance and many accomplishments, and we are confident that our strategies will lead us and the industry into a bright future. Let us highlight just a few of your/our accomplishments during this challenging period:

  • Advertising - While advertising revenue has been severely challenged, your performance has been near the top of the industry throughout 2009. For the three-month period ended September, for example, your advertising revenue declined 24% as compared to the industry decline of 28.2%. This performance was consistent with the first two quarters. Furthermore, in markets such as St. Paul, the Bay Area, and Los Angeles, we significantly outperformed other newspapers in the regions.

I guess “24 percent down” is the new up, but it could be worse. Major-market publishers do share revenue information among themselves, so this is probably an accurate comparison if “other newspapers” means the Strib. (I don’t think they’re referring to the Sun papers!) Of course, "signficiantly outperformed" isn't defined.

We have made significant progress in transforming our sales organization and have invested in new tools, such as iShare, training and laptops, to position us to meet the ever changing needs of our advertisers. Your success has been noted and is appreciated.

  • Circulation - Your circulation performance is second to none. In the September ABC 6-month report, MediaNews Group had circulation growth even as the industry lost 10.6%. That increase included The Denver Post growth which came after the demise of its primary competitor, The Rocky Mountain News. However, not including Denver, the company's loss was 4.8%, still the best performance in the industry by far. This performance moved the company from number 4 to number 2, as measured by circulation.

    The Pioneer Press is among the gainers, albeit at a less-than-1-percent rate. The paper says it has not sacrificed overall revenue or profit to show the gains, for which e-subscriptions are increasingly responsible.

  • News - Our circulation performance would be impossible if not for the excellent news products each of your newspapers produce. There is not enough space here to comment on all the awards your newsrooms have won this year. While we, like others, have had no choice but to trim news staffs, we have tried to consolidate infrastructure to preserve reporting staff when possible. And with hard work and creativity, your newsrooms have re-invented themselves and continue to do excellent journalism. We are so proud of our outstanding editors and their dedicated staffs. And speaking of creativity, we are awed by the outstanding work you are doing online. As our traffic continues to soar, our audiences between print and online have never been larger.

According to Quantcast, which directly measures the PP’s twincities.com, traffic is indeed up for the year. Like many sites (including ours) twincities.com took a hit after the U.S. Senate recount, but recovered and had some kind of epochal event between Dec. 10 and 12.

  • Operations - The year has brought major plant consolidation for many of our newspapers. Added to creative circulation and route consolidation and new ways of doing production, you have achieved efficiencies we never would have dreamed possible while improving the service you provide.

Most MediaNews papers are clustered in regional markets such as northern California; St. Paul is a true outlier in this regard. But one of my 2010 predictions is that the PiPress and Strib will be printed in the same place, most likely Minneapolis. The two papers consolidated some distribution and delivery functions in ’09.

  • Denver - We completed a significant restructuring in Denver after the closing of the Rocky Mountain News. While we were sad to see the Rocky go, we are excited about our future in Denver. The performance of the Denver Post during this transition has been nothing short of remarkable as we held most of the Rocky unduplicated circulation and operating performance continues to improve each month.
  • Internet Strategy - A group from your newspapers met offsite last April to chart our digital course for the future. Since that time, several task forces have been working to put more meat on the bones. We are now in position to start implementing the strategies we developed. Step one is to install a new content management system that will serve as the foundation for our strategies. Upon completion, we will begin building new local.com and news.com websites in each of our markets. Our largest markets should be up and running by mid-2010. In addition, we are working to implement strategies to protect and monetize our content. New pay models will begin testing in some markets early next year.

“Content management system” is one of those back-end things that means a lot to insiders and zippo to readers. But CMS could enable the fairly Spartan twincities.com to be redesigned, and that would be a good thing. As for new sites, in MNG parlance, news.com equals a professionally fed news site (like twincities.com) where local.com is more directory- and user-generated content.  

  • Mobile - Mobile (and other portable reading devices) represents a significant opportunity for us. Accordingly, we have engaged outside mobile expertise to help us develop our mobile strategies. We have completed phase 1 of the process and hope to have a fully mapped out mobile strategy early in 2010.

MediaNews Group is committed to making the necessary investments to implement its strategies. However, these investments must be made prudently and cautiously given the challenges we face to improve our balance sheet. As always, we must balance the need to move quickly with resources and capital available.

MediaNews, like many other newspaper companies, entered the current downturn with a reasonable level of debt based on historical measures. However, the current newspaper industry environment bears no resemblance to any previous newspaper downturn, and the magnitude of the structural and cyclical decline was simply unimaginable just a few years ago. Consequently, we, along with much of the industry, have more debt than is comfortable.

We have been working closely with our banks to restructure our debt and position MediaNews Group to execute its strategies and lead our newspapers into a positive future. Yes, we believe newspapers have a bright future! We are near agreement on the terms of a restructuring plan which we expect will be completed toward the end of the first quarter of 2010. Upon completion, MediaNews expects to have a manageable level of debt, and we look forward to working with each of you to take your newspapers into a changing but exciting future.

Experts will definitely disagree about how overleveraged MNG was even before the Great Recession, but if the restructuring comes off, Singleton will make good on his boast to keep the company out of bankruptcy.

As we near the end of 2009, you may have questions regarding annual reviews, 401(k) contributions, health care benefits, and future furloughs, etc. While it is our hope and desire to reinstate Company-wide salary reviews and 401(k) contributions as soon as possible and avoid future furloughs, it is premature to make those decisions. The Company must see clear evidence of improving economic conditions before such decisions are made. We will keep all options open, including reinstatement on a phased approach. As you can imagine, these are not easy decisions. Our highest priority is positioning MediaNews Group for a bright future and preserving/protecting its most valuable asset ­— its employees. We will let you know as soon as those decisions are made.

Short version: We’re bullish! But not enough to pay you more, or take off that nasty hiring freeze that keeps the PiPress from replacing departing newsgatherers.

Let us say again how much we appreciate your efforts. Your contributions are vital to the future success of MediaNews Group and the newspapers it publishes. We're probably biased, but we believe you all comprise the best newspaper team in the business. We're proud to work with you. Let us wish you and your family happy and healthy holidays and a happy new year!

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