It's time for second-quarter newspaper earnings reports, with Gannett leading off Wednesday, with the long tale of woe to follow. Given the many newspaper staff cutbacks, which I thought might include the investor relations people, I've put together a few boilerplate remarks that I hope are helpful.
Good morning. Let me say I’m glad that the few remaining financial analysts covering the industry want to hear about our second quarter results. Our CFO will be giving you the details on those in a few moments. But let me make a few introductory remarks first.
Frankly, visibility has gotten worse. We told you in the last quarter that it was limited. Well, now – did you see that George Clooney movie “The Perfect Storm” -- we’re smack in the middle of the biggest fogbank you’ve ever seen. Some of you have asked why print revenues have fallen off the table. Frankly, I don’t even see the table anymore. What I see though, I don’t like. Some of you have asked to see what I see, and I’ve got to tell you, it’s better not to.
Excuse, me, I think I’m being Twitterized, isn’t that what you call it? Rupert keeps buzzing, like I’m media so I can be in Sun Valley and you newspaper rats are stuck in your hot, brick buildings. But back to the subject at hand.
First, let’s address costs.
We’re having our people talk to Dean Singleton’s people – I’m not talking to Dean directly; I think that’s how Ganzi got in trouble – about centralized printing. Frankly, Dean’s better than us at thinking outside the box, and we’re talking about one large printing plant, somewhere in the low-wage rural West, and then distributing the papers almost instantaneously, through some kind of system of high-tech pneumatic tubes. Apparently, it’s part of that Google Print deal, involving Google Flux technology. Sounds almost like back-to-the-future, but my people tell me it’s got potential.
You all know that Goldman Sachs is now predicting 30% year over year increases in newsprint pricing for the second half of the year. For some reason, all those Indians and Chinese are buying up newspapers like there is no tomorrow, driving up paper usage and pricing; I’d like to know their secret sauce.
As you know, our biggest cost is people.
On staffing, some of you have asked why we don’t cut more, and some of you have asked why we cut so much. Which proves I think that we’re taking the right, down-the-middle approach. To tell you the truth, it’s a whole new world out there. Journalism schools seem to be stealing away our most experienced talent. Then there’s ProPublica, which considers itself some kind of high-minded, non-profit, picking off our highly prized investigative reporters. Then there’s the allure of these pajama blogger start-ups; did you see that Rafat Ali guy just got a big payday selling his site to the Brits? I always wondered if his work permit was in order.
We do realize that we need reporters, but frankly, they are a pain in the ass to deal with in good times. And, now, always in a bad mood. I’m told all the so-called “content” they create will prove very valuable online, even if we have to shrink the paper to the size of a menu. I just keep asking how soon?
Now let’s talk about revenues.
On ad sales, we’re thinking of adopting more self-service techniques. Hey, if you haven’t seen that YouTube video on how publishers can make more money using Google’s system, you should.
Our big initiative, of course, has been our work with Yahoo through the consortium. We’ve bet most of our 2009 growth on using its AMP system – or whatever they call, seems they have some legal problem on that, but they’ve got enough lawyers to work it out. Frankly, we love it. They do all the technology hocus-pocus, and our sales people just sell more stuff. You know, when they are over there golfing in Scotland with the car dealers and all, they just ladle on some more online products, and we can make some new revenue.
Some of you have asked what if Yahoo gets sold or split up like an estate. To tell you the truth, we haven’t a clue. Frankly, we don’t think it’s fair. We finally get our, excuse me, stuff together with the consortium, and then Steve Ballmer and Carl Icahn have to spoil the whole thing. We can’t seem to catch a break. We try not to think about how we’ve placed the continued viability of the American newspaper industry on the fortunes of Yahoo. I, for one, sleep better, not thinking too much about it, after 9 p.m. Anyways we have the firm assurances of Hilary Schneider that one way or another, it will work out okay, and my people say her track record certainly bears that out.
On content, you’ve asked what we’re doing in video. Lots, I’m told, though it’s not easy getting those union photographers to deal with things that move, my people tell me. Anyhow, AP’s on top of it, I hear; and yes, we plan to stay part of the AP. We’re now paying on a month-to-month basis, though I think we discontinued the use of the IndyMac card on that one.
Now, let me talk about the company overall.
We’ve previously announced that we’ve engaged strategic consultants, which – I won’t be fancy about it – is a way to say we’re offering for sale anything anyone would like to buy. Sam’s running a seminar on selling the real estate out from under each of us; my people are going, and I told them to watch their wallets. Craig still seem to have some cash – I want you to know that while I’m sure he earned every penny of that $7.9 million last year – we’re a tad more prudent than Gannett, and my compensation shows it.
Anyhow, Craig just bought out Gary and Sam in the ShopLocal deal. Couldn’t believe McClatchy could only clear about 8 million, as much as Craig pulled down in a year. Are we talking with Gannett on deals; would we like to talk with Gannett on deals? Sorry I can’t comment, but our phone number will be at the bottom of the transcript of this call.
There’s been some speculation about splitting up our company. We’ve asked our strategic review team to take a look, though I’ve got to tell you I can’t figure out what those guys at Scripps and Belo are all thinking. One is splitting up their fast-growing cable assets from their mature ones, putting TV and newspapers together. The other is splitting up newspapers and TV. I remember the good, old days when we all we split was the stock.
We’d talked with our fellow companies about a mutual aid society, but then Dean had to remind us that 19 of the top 50 papers are already unprofitable. I don’t know my board wants to hear the details. I do feel particularly bad for the new guys. Hey, Chris Harte and Brian Tierney got their fraternity pins in good faith – we really didn’t know how bad it would get how fast. Funny, those rich guys – Welch, Burkle, Broad, Geffen – we don’t hear from them much anymore; they’re probably on to the McCain and Obama campaigns for now. Still, we don’t like to hear that word that starts with a “d” and gets into the blame game. That’s not necessary.
As you know, we’re trying to do the impossible: increase dividends, buy back stock and retire debt. I don’t need a CFO – just kidding – I need Houdini. On stock buybacks, let me say this. We’d do it, except for two things. We don’t have the cash, and we expect the share price to be lower, so that if we do get the cash, we’ll get a better deal. Wait a minute, we’ll strike that last comment from the transcript.
We do have one unusual initiative we’re looking at. You’ve all heard of reverse publishing, I believe, you know taking that web mumbo-jumbo, best written for free by some unemployed suburbanite, putting into a “community” section and selling ads around it? Well, this is a variation on that I’ve got to admit it comes from that analyst that bugs the hell out of me. He suggested leveraging this new green revolution hullabaloo and getting paid not to print papers. You know like the farmers get paid not to plant crops? Well, it runs against my grain, but my people and our few remaining friends in Washington – what is it with the Republicans anyhow – are looking into it.
Sorry, Rupert’s all a-twitter again. So we’ll have to cut it off without questions this quarter. One last point though.
At the end of the day, I’ve got to tell you these are the toughest times we’ve ever faced. Only thing that gives me some comfort is that we’re not Tribune.