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Summary:

The results are in earlier than expected: members of the Boston Newspaper Guild narrowly rejected a concession package worth $10 million dol…

imageThe results are in earlier than expected: members of the Boston Newspaper Guild narrowly rejected a concession package worth $10 million dollars, setting in motion reprisals by the New York Times Co. (NYSE: NYT) that at the worst could mean the end of the Boston Globe. At the least, the 690 staffers who belong to the Guild face a 23 percent wage cut across the board. More than 80 percent of the union took part in the 12-hour vote Monday; the results were 277 “no” to 265 “yes” according to Boston.com. The paper responded by notifying the Guild that the pay cut will be imposed next week. Asked if a 60-day closure notice would be filed, Globe spokesman Bob Powers told paidContent: “We are not planning to file that notice at this time.”

The 12-vote margin is far from a sound defeat. Instead, it’s a measure of the conflict members faced as they tried to choose between the lesser of two evils — concessions that included considerable givebacks and permanent wage cuts versus the NYTCo’s threats of a unilateral 23 percent cut and possible closure of the paper. Either way, the results are similar: heavy wage cuts and continued strife.

The company claims the paper is on pace to lose $85 million in 2009, following a $50 million loss in 2008.
As a result, it demanded $20 million in concessions from its unions; $10 million from the Guild alone. The package finally reached in early May after negotiating under the threat of closure included a wage cut, an unpaid furlough and higher health insurance costs.

But Poynter’s Rick Edmonds says that on a cash basis the paper may be close to break even. He cites a conversation with NYTCo spokeswoman Catherine Mathis, who “conceded” in a recent interview that the $85 million “operating loss” includes depreciation, amortization and special charges. No word on the number before those charges (EBITDA) or on a cash-flow basis.

With that in mind, Edmonds contends NYTCo has little to lose if it keeps operating the Globe. That may be the case, especially if the 23 percent cut is implemented, but it’s the all-things-being-equal scenario.

Globe/NYTCo Respond: Pay cut imposed next week: In a statement from the Globe, the paper said it already has notified the Guild that “as a result of the rejection of this proposal, we have reverted to our alternative Final Record Proposal which provides for a 23 percent wage reduction for all Guild members. Since the parties are at an impasse, the Globe will implement the wage reduction effective next week. We have told the Guild that we are available to meet any day this week to review implementation of the pay cut. We regret having to take this action, but have no financially viable alternative.”

Guild Executive Director Dan Totten: “With today’s vote, members of the Boston Newspaper Guild have said that the New York Times Company must do better than the offer that was presented. … The Boston Newspaper Guild is committed to resuming good-faith negotiations with the New York Times Company and Globe management to reach an agreement.” (Video)

  1. The $85 million is fake in other ways. As the NYT itself was careful to say, the paper was "on course" to lose that money, based on the winter/spring $1.5 million-a-week bleed. But traditionally, the second half of the year is stronger for all papers, advertising is a leading indicator, and the economy is anemic but strengthening.

    It didn't help the NYT case with the Guild that CEO Janet L. Robinson got $5.58 million in salary and bonus for 2008, or that Globe managers faced only a 5% pay cut. Mind you, Ms. Robinson inherited the Globe problem and the decision to build a new HQ building, and should not be held responsible for a terrible economy. But here's one person getting half of all the givebacks demanded from the 700-member guild. Also, Globe managers got the 5% cut plus a loss of bonuses, for a total loss of about 15%.

    Still, there's not exactly a feeling of shared pain among the rank and file, especially since the Globe pension fund is apparently underfunded to the tune of about $100 million. That's a poison pill. Someone buying the paper has to factor in the possibility of eventual bankruptcy. In general, the pension liabilities have a lot of priority in those cases (the Feds want money back for the pensions they guarantee).

    That means a potential buyer has to put up about $200 million (the pensions, operating losses for another 15 months, and a little sweetener for the NYT). Given the risk, THAT means an expected annual profit in a few years of $40-50 million. It is roughly in line with what newspapers can be expected to earn, given the Globe's annual revenue norms (18% operating profit and about 25% operating EBITDA cash flow for 2007). But the Globe has lagged the industry due to high operating costs, less pricing power than the norm due to the presence of another newspaper in town and some strong, small dailies in the region, among other factors.

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  2. You have to feel empathy and plain sorry for the folks in the Globe Union. They are obviously suffering from a feeling of loss of importance, as other news media become more important to Boston Globe and former Boston Globe readers (I got here through NYT Dealbook online edition), as well as the short term pay/benefits losses, and the expected long time decline of this business. Hopefully it was therapy friendly for them to be able to vote on this.

    One has to have some sympathy for the NYT which somehow can't find it in themselves to return to their "Paper of Record" position of old. They have offended Republicans with their "Get Bush" tactics; they have offended Democrats with their "Bust the Union" tactics; and they have offended the independents by no longer being "independent."

    The Gray Lady and the unions are acting like a boxer hit in the head too many times. And they have been.

    I think we should all tip our hat to the NYT and Union members for all they have done in the past. A moment of silence? A 21 Gun salute? Mainly let's wish them the best of luck in this.

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  3. invitedmedia Tuesday, June 9, 2009

    i don't believe the "$85M loss is fake".

    the "i" in ebitda is real $$$. in fact, INTEREST (which is the "i" part) on debt is one of the many nooses currently hanging around nyt's (and others') neck.

    i liken this to when we hear there is "no inflation" when you strip out "the volatile food and energy components" sure, nobody i know eats or uses electricity and gasoline.

    get real.

    while a portion of the ebitda # can be called a paper loss, neither the "i" or the "t" TAXES can be.

    whether the loss is $40 or $85M, they are still losing $.

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  4. Believe me, I did not mean to describe the loss as fake. It's just not $85 million. The entire industry has been cash-flow negative since February or March and has been running an operating loss since (probably) 4Q 2008.

    And remember, the industrywide 18-20% operating profit as late as 3Q2007 was going to pay investors, not to grow the business. The investors have been getting little or nothing for months. Many, many properties are operating in Chapter 11 (able to pay current bills, barely, but not old debts). The business is being saved because the assets are worth little in Chapter 7. Who wants to take possession of a printing press?

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  5. fair enough.

    it's very refreshing when the internet can be a place where people can disagree on an issue, resolve their difference and move on.

    thanks for the clarification.

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