Paper cuts

 In 2005-07

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Paper cuts

As about 80 employees — and the new owner — of the Durham Herald-Sun learned, they can be painful.
By Tim Gray

We didn’t fire everybody,” Bob Ashley, the executive editor of The Herald-Sun, says with a nervous chuckle. “They’re out on assignment.” The newsroom of Durham’s daily newspaper is nearly empty. Fluorescent lights give a sickly green cast to the warren of paper-strewn desks. Blinds are drawn, sealing out time of day and turn of season.

Like beehives, newsrooms tend to be utilitarian spaces animated by their occupants — buzzing when filled with caffeine-stoked reporters, still after deadline. But the emptiness here seems grim. Seventeen — one in five — of this newsroom’s occupants were let go the first week of January. Over-all, a slightly larger percentage — about 80 of 351 employees — lost their jobs.

The cuts began Jan. 3, the day Paducah, Ky.-based Paxton Media Group Inc. closed its purchase of The Herald-Sun, which had been locally owned for more than a century. They proceeded with callous dispatch. Axed staff were forbidden to gather their belongings and escorted to their cars. One top executive was ordered to stop writing an e-mail to his boss. It didn’t matter — Paxton already had canned the publisher.

The sale and firings generated media coverage out of proportion to their economic impact. The region’s dominant newspaper, The News & Observer in Raleigh, and the alternative Independent Weekly in Durham larded their pages with stories, publishing more than a dozen during the next several weeks. A TV station posted a truck and reporter across the street Jan. 3 to broadcast live reports.

Why so much attention for such a small layoff? After all, the state’s manufacturers have bled tens of thousands of jobs the past decade. Vanity likely contributed, with reporters and editors assuming everybody thought the loss of journalism jobs as tragic as they did. So did self-interest: touting a competitor’s travails. Plus, it probably scared them a bit, driving home the point that a college degree and clean fingernails no longer provide job security. As the state’s textile, furniture and tobacco workers know — and their downsized white-collar brethren have learned — jobs are only as secure as the next profit-and-loss statement.

Now Ashley and his boss, new publisher Bob Childress, will be the ones looking over their shoulders. Many Herald-Sun survivors say they distrust Paxton. And the competition — especially the fourfold-bigger N&O — smells blood. The Herald-Sun, with a weekday circulation of more than 50,000, is the largest of the 29 newspapers Paxton owns, and the company paid a hefty price — an estimated $110 million to $120 million — for it. But the paper, like most U.S. newspapers, has been losing circulation much of the last decade. Paducah is watching.

Ashley and Childress, seated in the publisher’s roomy corner office, have just spent an hour explaining why The Herald-Sun couldn’t have survived without the layoffs. “The paper was losing money and was heavily overstaffed,” Childress says. “Equipment was outdated — there was software that couldn’t be used because the computers were so old they wouldn’t accept updates. The pension plan was behind in its funding.”

Childress, 64, is tall and thick-bodied, an ink-stained Buford T. Justice, the wisecracking sheriff played by Jackie Gleason in the Smokey and the Bandit movies. He crosses his arms over his belly, leans back in his chair and squints skeptically at his questioner. When off the record, he relaxes, talks frankly and cusses cheerfully. Despite his age, he doesn’t plan to retire for at least five years.

A Durham native who once delivered the afternoon Durham Sun, which merged with The Durham Morning Herald in 1991, he has been a corporate nomad for 38 years, working for a variety of newspapers, mostly in Virginia and Tennessee. The Durham where he grew up — an industrial city where tobacco was king — is gone. Back then, the Research Triangle Park was a pipe dream in a pine forest.

Ashley, who turns 57 this month, grew up in Mount Airy and graduated from Duke University in 1970. He worked at The Raleigh Times, now merged with the N&O, and The Charlotte Observer before editing a Pennsylvania paper. He joined Paxton when it bought the paper he was editing in Owensboro, Ky. When Paxton asked Childress, the Owensboro paper’s publisher, to run The Herald-Sun, he brought Ashley along.

Short and slim, Ashley exhibits the genial dweebishness common among many editors. But he’s as flinty as Childress about the layoffs. “We were able to preserve the bulk of the people on the street reporting and writing local news. Our primary concern was protecting that, even at the cost of making reductions that didn’t win us any favor with some of the more vocal aspects of the public.”

But the real question, some say, isn’t whether Paxton had to hatchet staff but how the company chose to do it. Several carloads of Paxton personnel showed up that Monday morning. “We’d gathered in the boardroom to welcome them with a big Herald-Sun hug,” recalls Toby Barfield, who was vice president of sales and marketing. Herald-Sun managers had last seen Paxton’s executives shortly before Christmas, when they had toasted the paper’s future at a laughter-filled lunch at the University Club.

Jay Frizzo, the new owner’s chief operating officer, told the managers to return to their offices — he and another Paxton executive would meet with them individually. He started with David Hughey, the publisher, who had been with the paper 30 years. Within 10 minutes, a Paxton staffer was escorting him to his car. Next came Barfield.

“I was typing an e-mail to Dave and the other officers about the great December we’d had,” he recalls. “Revenue was up 20% over December 2003. I’d written it was a great present for welcoming the Paxton people.” Frizzo entered his office and sat down. “There’s no easy way to say this,” Barfield, who had worked for the paper more than a decade, remembers him saying. “We don’t have a place for you in our organization. Your position has been eliminated, and we need you to leave the building.”

“Can I finish this e-mail I’m writing to Dave?” Barfield asked. “You don’t understand,” Frizzo replied. “We need you to leave right now. Don’t touch the computer. Don’t touch the phone.” “Can I at least gather my stuff?” “No, we’ll box it up and have it sent to you.” Barfield was led from the building. His escort — a man he had never met — ushered him in silence down the back stairs. “I figured he would stop at the back door, but he walked all the way to my car, stood there and waited until I drove away.”

Chief Financial Officer Jim Alexander and Executive Editor Bill Hawkins soon followed. Alexander pulled his car off the road a block from The Herald-Sun, which sits on a side road near a busy shopping center. He was stunned. He and other managers had known Paxton might not want to keep them; they had talked among themselves about it. “But they never gave us any indication that, 30 minutes after the closing of the deal, we’d be in the parking lot.”

Laura Hanf, a principal in the Charlotte office of human-relations consultant Findley Davies, knows why the dismissals attracted so much attention. “It’s usually not done that way unless you feel there’s a real risk of sabotage or you’re firing the person because of real issues.” Executives, she says, usually are offered a chance to resign or retire.

“We did it the way most companies do it now,” Childress contends, “and the way our lawyers told us to do it. We had to consider employee safety. If you have 40 to 50 people leaving the building in one day and if just one of them goes off the deep end, you’ve created a horrible situation for the rest.” Another reason, he says, was computer security: It would be easy to delete files.

The uproar puzzles Paxton executives. After all, those they let go got severance packages based on tenure. Some media observers speculate they were taken by surprise: Paxton is used to smaller towns where the paper — which it owns — controls most local coverage. Frizzo did not respond to requests for comment. Another company official, speaking on condition of anonymity, says Paxton executives believe they’ve been burned by what has appeared in print. That has to bring a smile to the faces of all those people who don’t run newspapers who feel they’ve been treated unfairly by the press.

Escorted out the door, Hawkins hailed Rick Bean, publisher of the High Point Enterprise, another Paxton executive brought in to help with the firings. “Rick, the sad truth is that the N&O is going to eat your lunch in Durham,” said Hawkins, now executive editor of the Charleston, S.C., Post & Courier. Childress and Ashley arrived that afternoon. By then, four newsroom staff members were gone. The rest, Ashley says, were “inquisitive and edgy. I told them we were going to move as quickly as we could on the issue of further cuts.” By the end of the week, it was over.

Soon, the N&O was showing signs that Hawkins’ prediction might come true. The next day, the paper ran a story about the layoffs on the front of its business section. Two days later, columnist Ruth Sheehan weighed in. Less than two weeks after that, the paper revisited the layoffs with an analysis of the reaction in Durham. In early February, it followed up with a story on Paxton’s continued appetite for acquisitions.

The N&O has tried with middling success to lure Durham readers since the early ’90s, when it opened a large bureau in the city. Though it has picked up about 9,000 subscribers in Durham County over the last decade, it has failed to become the city’s dominant paper. In the wake of the sale and layoffs, the N&O is again ramping up efforts. It hired former Herald-Sun staff members, including columnist Jim Wise, and poached at least one editor who wasn’t laid off. In March, it introduced a weekly newspaper called The Durham News, delivered free to about 70,000 households. N&O Publisher Orage Quarles says the timing was a coincidence — an improving economy, not changes at The Herald-Sun, spurred it. “We’ve been planning this Durham product for several years, and the reason we didn’t launch it earlier was the economy was so soft,” he says.

The Independent Weekly hounded The Herald-Sun with nearly as much vigor. In a lengthy story on the sale, it concluded that Paxton might have paid twice what the paper was worth, pegging the price at $125 million. The broker who handled the sale, Owen Van Essen of Dirks, Van Essen & Murray in Santa Fe, N.M., says it was less than $120 million.

Whether Paxton paid too much is debatable. The supply of newspapers like The Herald-Sun — independently owned, reasonably big and in a growing market — is limited, says Robert J. Broadwater, an investment banker specializing in newspapers at Veronis Suhler Stevenson, a New York brokerage. “You effectively can’t start a daily newspaper. You’ve got to buy one.” Nine media companies looked seriously at the paper, says an executive involved in the sale, and five bid on it. They weren’t naïve dabblers but experienced acquirers — including the N&O’s parent, The McClatchy Co., based in Sacramento, Calif.

Why, then, the firings? That’s what usually happens, through layoffs or attrition, when a big company with many units buys a stand-alone operation. Broadwater says the Rollins family, which had owned the paper since 1895, might have maintained a big staff to hold down current income, letting them defer taxes until they sold the paper. The family hasn’t spoken publicly, but current and former Herald-Sun managers have, with public discussion devolving into a cockfight over whether the paper was mismanaged. Childress insists it was. But beyond a key point or two, the arguments differ mainly in emphasis.

Both sides agree it had more staff than average for its size. But the former managers argue that the complexity of the Triangle market and the challenge from the N&O required a bigger staff. “Paxton has a staffing formula that doesn’t work in this market,” says Jon Ham, who headed digital publishing and now works for the John Locke Foundation in Raleigh. “They’ve got a monopoly-market approach.” The Herald-Sun competes with the N&O not only in Durham but in Chapel Hill, where it distributes its Chapel Hill Herald supplement. “The Chapel Hill Herald made us overstaffed by industry standards, but the competitive situation was unique.”

Prior management saw The Herald-Sun as a regional paper, believing that the Triangle’s affluent, educated readers wanted at least a taste of national and international news. Under Childress and Ashley, the paper will reflect the creed that, like politics, all news is local. “The New York Times and The Wall Street Journal are available in paper form and widely read here,” Ashley says. “And anybody can sit at their computer and read 15 top national newspapers. Our theory is, why are they going to turn to us for that?”

For the new regime, local means Durham, Orange, Chatham, Person and Granville counties. They’ll leave Wake County to the N&O. “The N&O is a Raleigh newspaper that does a great job,” Childress says. “We’re a Durham newspaper that does a great job. I don’t intend to go to Raleigh. What they choose to do is their business decision. But I’m not going to compete with them in the way this newspaper has seemed to in the past.”

Ashley and Childress are betting that Durham residents care more about the PTA than the pope and that Triangle cities are still as different and divided as they were when Childress was growing up. So far, the paper is doing well, according to the anonymous company official.

For their sakes, it had better. If what has happened proves anything, it’s that Paxton won’t give much warning if it wants to make a change.

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