Newspaper Chain Reverts to Layoffs and Stock Buyback to Mask Lack of Vision

Where the name "Van Drew" once stood on a sign in Atlantic City.

There’s been a lot of reporting about the unprecedented wave of union organizing in the wake of COVID which claimed the lives of many thousands of essential workers and sickened many more.

From the Starbucks in Montclair to the Amazon warehouse in Bayonne, workers are standing up for themselves collectively putting their own situation at risk to improve the social contract they have with these corporate behemoths who for decades have been getting their way in Washington.

This multi-racial movement, that’s often led by women at the local level, is in ascendancy at the local Dollar Store in the poorest part of town and holding accountable media giants like the New York Times, so adept at delivering an audience that demands luxury while informing the world. It was on display at the June Poor People’s Campaign march in Washington where thousands and thousands of union activists who were not yet born when the Rev. Martin Luther King envisioned the first such march he would not live to see.

What’s gotten less attention from the corporate news media is just how much these publicly traded corporations like Amazon and Starbucks are doubling down on often illegal strategies to defeat these organizing efforts in ways that are not in the long term interest of workers, the nation, their brands nor investors but actually serve only to personally enrich the C-suite.

Such is the case with the Gannett newspaper chain which owns more than 250 newspapers across the country including USA Today. In New Jersey they have amassed a long list of New Jersey’s most trusted legacy local papers: the Asbury Park Press, The Bergen Record, the Courier News, The Courier Post, the Daily Record, the Home News Tribune, the Daily Journal, the New Jersey Herald and the Burlington County Times.

ESSENTIAL WORKERS REPORTING

All throughout COVID, when New Jersey had the highest per capita death rate in the world, Gannett’s local reporters and videographers were out in the field providing the essential independent situational awareness even as the government was tested to near the breaking point and the death toll mounted with basic supplies like masks and testing kits in short supply.

Jon Schleuss is the president of the News Guild CWA that has 24,000 members, including 50 Gannett newsrooms like the Bergen Record, Daily Record and Asbury Park Press. In an op-ed several months into the pandemic he described the precarious state of the already struggling for profit local news business.

“Meanwhile, the local news industry is enduring dire circumstances due to the COVID-19 pandemic,” Schleuss wrote.  “Advertising revenue has diminished as businesses are making an effort to combat the virus, leading to layoffs, furloughs, and pay cuts for thousands of journalists. Journalists, like many others, are essential workers, and New Jerseyeans depend on local publications to receive targeted information pertaining to their communities. This includes getting life-saving public health information about the impact of COVID-19 in their areas. Many outlets are even making their online COVID-19 coverage free for all readers as a public service, despite the financial strains they face.”

Schleuss continued.

“Journalists who are currently still employed have reported from emergency rooms and other COVID-19 hotspots where risks of infection are significantly higher. Meanwhile, other journalists have been subject to police violence — in violation of their First Amendment rights — while covering protests in the wake of the Black Lives Matter movement.”

MY WAY OR THE HIGHWAY

Whether it’s Amazon, Starbucks or Gannett, too many of America’s publicly traded corporations take a scorched earth approach that would rather close operations down in a place than to let workers sit at the table as equals to negotiate with dignity.  Gannett’s precarious basic business model has been to pile up hundreds of millions of dollars in debt, which our corporate tax code encourages, to buy up local papers and then cut costs by shrinking newsroom staffs which invariably results in a degradation of local news coverage.

In response, 1,500 journalists in at least 50 newsrooms, including the Bergen Record and Asbury Park Press, have increasingly opted to organize under the CWA News Guild banner to push back on this predator behavior and preserve local journalism using a sustainable business model.

“Many communities have seen the resources of their local news outlets decline as economic pressure and consolidation have created news deserts across the country,” wrote Schleuss. “Since 2004, the U.S. has lost a staggering approximately 2,100 newspapers, many of them small, local papers outside of major cities. In New Jersey alone, we’ve seen 92 closures or mergers, including the Clark Patriot and Edgewater View.”

Last year, Gannett’s CEO Mike Reed raked in $7.7 million while the median salary of a Gannett employee was $48,419. According to their union, it’s not uncommon for their members to have to resort to food pantries to make ends meet. Meanwhile, Gannett spared no expense hiring union busting attorneys and in the process now has 11 open Unfair Labor Practices investigations, according to the NRLB website.

An email to Gannett’s public relation’s office with the union’s latest concerns did not elicit a response.

Earlier this year Gannett disclosed it had lost $54 million after it had made a bad bet on a partnership with European internet gambling sports book operator Tipico. Gannett CEO Mike Reed blamed a 31 percent spike in newsprint costs combined with declines in print circulation and advertising revenues. He also conceded that last summer’s hyped wager on Tipico had not panned out.

Yet, just a year earlier, it was all upside.

“Our highly engaged audience of more than 46 million sports fans crave analysis, betting insights, odds and unique features which we will provide with our Tipico alliance,” said Reed, when the deal was announced in July of last year. “Tipico adds incredible expertise from their European operations and next generation product capabilities, which offer our sports enthusiasts and local consumers a way to become even more invested in the games and sports they care about.”

A few months later the website Gambling News reported Dutch regulators fined Tipico for operating illegally in the Netherlands, a charge it denied.

DOUBLING DOWN

Early this month, Gannett’s CEO Mike Reed was tap dancing on a call with analysts explaining that Tipico, which was supposed to be such a national player with USA Today, was only licensed to operate in two states, Colorado and New Jersey. (Got to wonder who in the C-Suite did that due diligence. ) “We are already off and exploring opportunities with other sports gaming providers and expect to see increased revenue from this category moving forward,” Reed reportedly told analysts.

Of course, Reed, insulated from his bad bets by his huge compensation, always had Gannett’s playbook of layoffs and selling off its  real estate, all while executing a  $100 million stock buy back to fall back on.  According to Poynter, the non-profit journalism advocacy website, “journalists across more than 25 states also reported being laid off. Several executive editors were terminated, including Mary Dolan, who oversaw The Journal News/lohud.com (New York) and Douglas Ray, who oversaw the Gainesville (Florida) Sun, Ocala Star-Banner and Leesburg Daily Commercial. The Landmark (Massachusetts) also lost its editor and will shut down next month, reported The Grafton (Massachusetts) Villager.”

One under reported trend has been local interests buying back their community paper from Gannett. Last year, Poynter reported Gannett had sold 23 papers back to locals.

“The recent behavior of Gannett’s senior managers’ behavior recalls an old Roman adage: Those who have something to distribute do not neglect themselves,” wrote James Henry, an economist, lawyer and international tax expert after reviewing Gannett’s latest SEC filings. “Evidently these managers and their favorite bankers (Citi, US Bank) realized that 2022 would be a terrible year, with a 5-15% decline in circulation and ad revenue, a failed online gambling venture, soaring interest rates, and other costs that were hard to control.”

Henry continued. “So they decided in Feb 2022 to pledge the company’s cash and  other assets,  borrow up to $100 million (at 6-10% p.a.), and authorize these funds to be used to engage in one of the modern business practices that is truly the last refuge of the CEO who is completely out of ideas: buying back their own stock.”

“Indeed, armed with this bank term line, in April 2022 they began buying back shares — many of which they may have owned themselves, as part of the company’s generous stock compensation plan — the modern day private corporate equivalent of printing money,” Henry wrote in a detailed analysis prepared for InsiderNJ.  “We don’t have more recent data, but as of June 30 2022, Gannett had bought back 864,000 shares, or $3.1 million worth, at an average price/share of $3.84– all of this paid for with very costly borrowed money.”

A DEBT PYRAMID?

Henry believes Gannett’s declining trajectory is likely to continue “with senior management increasing relying on Civil War surgery-type tactics that are sure sign that they have lost the thread and are in lurch mode  — mass layoffs, benefit cuts, sudden shut-downs or divestitures of whole business units, U-turns in strategy, and – – to put band-aids on the amputations — even more corporate debt.”

“Not surprisingly, Wall Street has seen the impact of such self-serving corporate ‘blood-letting’ practices before, and is not impressed. Gannett’s closing stock price today was $2.26, well below the buy-back average. Investors, at least, understand that managers who literally mortgage their companies’ futures for the sake of bailing out a few of their pals are unlikely to be part of a sustainable solution.”

Amidst all of this corporate self-dealing by Gannett, its journalists have delivered like never before for their communities and the entire nation. It was its Austin-American-Statesman that got to the bottom of the botched response of the local, state and federal law enforcement agencies in the mass shooting at the Robb Elementary School in Uvalde, Texas.

In Ohio and Indiana, it was Gannett’s Columbus Dispatch and Indianapolis Star that authenticated the story about a pregnant 10-year-old rape victim you was compelled to leave her native Ohio and travel to Indiana because of a restrictive abortion law passed after the Supreme Court threw out Roe vs. Wade.

“An indignant President Biden cited the story a week later as an example of extreme abortion laws, and his political opponents pounced. They suggested it was a lie or a hoax,” reported the Washington Post. “A national newspaper’s editorial board concluded it was “too good to confirm.” Even Ohio’s attorney general called it a ‘fabrication.’”

As we have seen with our nation’s dysfunctional response to the pandemic as well as with the violent assault on our Capitol, there’s a steep price to be paid for supplanting social media for locally authenticated news delivered by professional journalists like those in the News Guild CWA.

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2 responses to “Newspaper Chain Reverts to Layoffs and Stock Buyback to Mask Lack of Vision”

  1. Gannett stopped they buyback after the first 800,000 shares to preserve liquidity, but in this article it is written in a more sensational and untrue way.

    But where the article is correct is that the management of Gannett is the main culprit for the recent bad development, since competitors did much better.

    Instead of just laying off employees, Gannett should rather refocus the business and keep the biggest 50-100 newspapers and selling the smaller local paper to local owners. Gannett could then buy local news coverage from these papers and in return sell services like advertising and national news coverage.

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