Audit notes: No more daily in New Orleans, McClatchy, private equity

The NYT reports the Times-Picayune will print two or three times a week

If ever a town needed a newspaper, it’s New Orleans.

But David Carr reports that Newhouse is preparing big layoffs at the Times-Picayune, which will no longer be a daily newspaper.

Newhouse Newspapers, which owns the Times-Picayune, will apparently be working off a blueprint the company used in Ann Arbor, Mich., where it reduced the frequency of the Ann Arbor News, emphasized the Web site as a primary distributor of news and in the process instituted wholesale layoffs to cut costs…

The plans have been kept under wraps, but the newspaper will likely cease to exist as a daily newspaper, and will publish two or three times a week, according to the employees.

My first newspaper internship was as a copy editor at a Newhouse paper in Alabama, The Huntsville Times, and I remember marveling at Newhouse’s no-layoffs policy. It really had such a thing.

How times have changed.

— Despite a stock that’s off 97 percent in seven years, McClatchy is still publishing daily newspapers (for now). And it’s finally going leaky paywall, a la The New York Times.

Err… actually, it’s going to kick the tires a bit more on the paywall thing:

The approach will offer readers a new print-digital subscription that will include access to multimedia editions for a relatively small increase of home delivery rates. We’ll also offer online-only users a digital subscription that will be prompted after a set number of page views. We’ve arrived at this combination after a lot of research, involving McClatchy papers and others, which shows that a thoughtfully crafted, opt-out digital subscription is a good fit with our overall readership and circulation strategy. In the coming months, we’ll begin a final round of testing with a handful of McClatchy papers (first up will be Sacramento, Fort Worth, Modesto, Biloxi and Columbus). The experiences of these papers will determine how and under what schedule to extend to all papers.

Our experiments with pay approaches, starting with Modesto more than a year ago and moving to several other McClatchy papers, have taught us a number of things. The pay model is a complex move that has to be part of wider plan for how we distribute and value our content. We’ve learned that many light online users are unlikely to become subscribers — but that our loyal print and online customers are willing to sign up in exchange for a multi-media subscription that would include the print edition, web, smart phones and the e-edition. Above all, we found that the impact of placing a clear value on our content is among the most important messages we can send as part of this transition.

Here’s hoping McClatchy still has a stock price by the time it concludes this final round of testing.

— Josh Kosman writes for Rolling Stone on “Why Private Equity Firms Like Bain Really Are the Worst of Capitalism”:

Here’s what private equity is really about: A firm like Bain obtains cheap credit and uses it to acquire a company in a “leveraged buyout.” “Leverage” refers to the fact that that the company being purchased is forced to pay for about 70 percent of its own acquisition, by taking out loans. If this sounds like an odd arrangement, that’s because it is. Imagine a homebuyer purchasing a house and making the bank responsible for repaying its own loan, and you start to get the picture.

O.K., but what about this much more virtuous business of swooping in and restoring struggling companies to financial health? Well, that’s not a large part of what private equity firms do, either. In fact, they more typically target profitable, slow-growth market leaders. (Private equity firms presently own companies employing one of every 10 U.S. workers, or 10 million people.)

And that’s when the fun starts. Once the buyout is completed, the private equity guys start swinging the meat axe, aggressively cutting costs wherever they can - so that the company can start paying off its new debt - by laying off workers and cutting capital costs. This process often boosts operating profit without a significant hit to the business, but only in the short term; in the long run, the austerity approach makes it difficult for companies to stay competitive, not least because money that would otherwise have been invested in expansion or product development - which might increase revenue down the line - is used to pay off the company’s debt.

Kosman wrote The Buyout of America: How Private Equity Is Destroying Jobs and Killing The American Economy’, which has a killer chapter on Bain Capital. Go read it.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,