Times are tough. The Daily Herald is a family-owned paper that believes in sharing the pain, and this is how they’re doing it, as described in a staff memo from the paper’s CEO:


To:                  All Staff 

From:              Doug Ray

Date:               July 19, 2007 

Re:                  Operational update 

As I said in my last operational update, the precipitous drop in advertising revenue has made this one of the most difficult years in some time. 

In fact, the traditional display and classified advertising categories have fallen this year to levels not seen since our most difficult recessionary cycle. In past cyclical downturns, we have weathered the storm with temporary measures that reduced expenses, awaiting a return of business in the wake of economic recovery. 

This situation is different and requires short-term expense reduction initiatives as well as long-term structural adjustments in the way we do business, which will position the company for the future. 

Again, it is important to realize that this newspaper revenue downturn is different from those in the past.  Our industry is in the throes of a structural shift of revenue in which growth on the Internet side is not rapid enough to compensate for losses in print advertising. 

Thus, I want to outline for you the specifics of efficiency and cost savings measures needed this year. 

§    Effective immediately, each department will reduce non-payroll expense by 10 percent below the current operating levels.

§     Effective in Period Nine (August 12), salary increases will be frozen.

§    Also effective in Period Nine, salaries will be reduced by five percent. Every employee will incur the reduction in pay.  We expect the five percent to be reinstated early next year. Every employee will receive an additional week of paid vacation to be taken in the second half of 2008, to somewhat soften the impact of the salary reduction. 

All these cost cutting measures are difficult but necessary.  More importantly, this will give us time to lay the groundwork for the future, while maintaining the fiscal integrity of the company. 

As I said, in past years, economic recessions have been at the root of newspaper revenue shortfalls, and the corresponding expense cuts were deemed temporary––ride out the downturn to be fully prepared to emerge when the recession ended. 

Some categories of advertising revenue, currently depressed by interest rates, may return to the traditional newspaper as they did in the wake of past cyclical downturns.  Others will not snap back, at least within the traditional newsprint format. 

For our newspaper and for all newspaper-based media companies, this structural change in business has had similar impact––lower revenue and corresponding lower earnings. 

In order to meet this challenge, all of our competitors and most newspapers across the country have reduced staff.  We must do so now as well.  Because revenue is falling and is expected to continue with the structural changes in our business model, we no longer can avoid staff reductions.  I have directed the senior management team to develop strategies to permanently reduce payroll expense. 

Our general approach in this process is to understand that in the end our company must continue to produce quality news and information and results-oriented advertising.  It is our reason for being, and we must do it well.  But no department will be spared intense expense scrutiny as we begin the analysis of all departments for opportunities to consolidate and reorganize. 

Our hope is by year-end to reduce our permanent payroll expense so that salaries can safely be restored to current levels as soon as possible.  In the end, we will be a more focused company, intent on growing revenue and income on a lower cost basis.  This will make us stronger and better positioned to grasp the opportunities of the future.