If the job cuts announced at the Los Angeles Newspaper Group on Oct. 30 surprised anyone, the reasons behind the layoffs became clear later the same day when new data showed an 8.2 percent average decline in circulation among the group's local newspapers.

The decline was surprising because suburban and other local papers often are seen as more secure than their big, metro brethren, based upon their delivery of intensely local news and advertising. But now it's clear the woes of bigger metro dailies have spread to the suburbs.

"The whole industry is in a moment where we can either get it right and figure out what people want to read and how to make money, or we can go out of business," said Brent Hopkins, a reporter and union representative at the Los Angeles Daily News.

The Los Angeles Newspaper Group is owned by MediaNews Group Inc. of Denver, which is controlled by Chairman William Dean Singleton. The newspaper group, called LANG, is made up of eight suburban papers that ring central Los Angeles. Together, they provide the most significant competition in terms of national and local advertising and local news coverage for the Los Angeles Times.

LANG's flagship publication is the Daily News in Woodland Hills, followed by the Long Beach Press-Telegram. Those papers showed circulation reversals of 10.7 and 8.5 percent respectively in the last year. Together, LANG's eight papers lost a total of 40,352 subscribers, according to data from the Audit Bureau of Circulations. That gives them an average of 452,124 daily readers, as compared with the Times' 775,766.

When MediaNews formed LANG, starting with the 1996 acquisition of three papers in the San Gabriel Valley, the goal was to create a regional buy for advertisers as well as to "cluster" the papers geographically for operational efficiency. But the strategy never anticipated the across-the-board circulation declines that recently developed. (The group added the Press-Telegram to its roster in 1997 and the Daily News in 1998.)

The Inland Empire, one of the fastest-growing regions in the U.S., looked to hold tremendous potential for LANG, when it made its final buyouts of the Inland Valley Daily Bulletin, Redlands Daily Facts and San Bernardino Sun in 1999. But despite population growth in those communities, circulation at their papers is shrinking, with the Sun taking a 9.3 percent circulation tumble in the past year.

However, the Daily News staff has taken the group's biggest hits. The payroll reductions totaled 21 positions, including four in editorial and several as the result of combining management functions. For example, John McKeon will now serve as both chief executive of LANG and publisher of the Daily News, replacing the laid-off publisher, Tracy Rafter.

Similar job combinations will occur for finance, human resources and circulation managers.

"To the paper's credit, they tried to do it strategically as possible. They tried to do it in jobs where the work could be redistributed," said Hopkins. "It's horrible for the people who lost their jobs, but from a corporate efficiency standpoint it makes some sense."

Repeated calls to McKeon and several other executives at LANG were either not returned or the executives declined to comment for this story.

Clustering strategy

"The pressures on the news and information industries have forced us to consolidate functions so that we can maximize our resources," a story in his own paper quoted McKeon as saying. "I believe we are geared up to grow our business and improve our service to the public both in our printed and online products."

But critics charge MediaNews with shortsighted penny pinching and cheapening of the news.

"Singleton's main cry at the beginning was that he was our savior, that without him we wouldn't survive. Now it's just a grab for more papers and more profits," said Joe Segura, a reporter at the Press-Telegram in Long Beach.

As for the clustering of newspapers, Segura agrees with the theory but not with the practice of MediaNews. The system leads to top-heavy bureaucratic management, he said, and over time the largest paper in a cluster accumulates a disproportionate share of resources. Until recently, he felt that applied to the Daily News, "but now I'm questioning it," Segura admitted.

Hopkins said MediaNews has tried in the past to combine management positions within the cluster, and with the downturn in fortunes, the company has put a new emphasis on efficiency in its regional strategy, as reflected in the latest announcement. In the MediaNews annual report, Singleton acknowledged that in fiscal 2006, "revenue growth was not sufficient to overcome higher newsprint prices and employee costs."

Although MediaNews is privately held, it files some reports with the Securities and Exchange Commission because it accesses public debt markets.

It's of little comfort to MediaNews executives that the Los Angeles Times is struggling, too. Dwindling circulation and advertising revenues have forced the paper to cut more than 200 jobs in the last five years, and the paper has been put on the block by its parent, the Chicago-based Tribune Co.

The new data, however, show several suburban MediaNews papers losing greater percentages of readers than the Times, which slipped 8 percent, though some have lost less and the Whittier Daily News actually gained circulation. In a report released in May, Merrill Lynch & Co. media analyst Lauren Fine found that newspapers with circulation between 100,000 and 500,000 showed the worst declines.

These middle-tier papers "suffer from more intense competition, both from traditional media outlets in their markets and from online, and their niche is harder to define," she wrote.

The decreases continue a two-year trend of negative growth with no end in sight, according to Fine, who predicts that on average, news publishers will have ad revenue growth of slightly more than 2 percent and cost increases of more than 2 percent in the future.

"As such, we are forecasting declining EBITDA (earnings before interest, taxes, depreciation and amortization) for most of our companies for the next three to five years," she wrote in a report on Oct. 31.

Grave new world

In response to the shift in consumers' appetite for news and its delivery, papers of all sizes have embraced the Internet, and it's clear that LANG buys the concept.

MediaNews' annual report indicates that interactive media now represent 5 percent of the company's total revenue and over 13 percent of MediaNews Group's earning before interest, taxes, depreciation and amortization. Online revenue grew 39 percent in fiscal 2006 to $57.2 million.

The Daily News and Press-Telegram have online editors and have integrated their Web sites into the newsroom, rather than as separate departments. And LANG's online plans also include Nisha Gutierrez's daily morning podcast for the three San Gabriel Valley papers, as well as other blogs or podcasts at every paper in the group. Even the 4,000-circulation Redlands Daily Facts has a blog on local music.

"They put a lot of stock in Web work, they see it as the future, and I agree," said Segura, adding that given the bare bones staffing of their newsrooms, it would be easy for a local entrepreneur to put together a competing Web site without the costly production and distribution facilities of a newspaper. "They're more vulnerable than they think they are."

The Daily News' Hopkins seemed to reflect the attitude of many LANG employees. He's accepted the challenge issued by Ron Kaye, editor the Daily News, when he announced the job cuts. Besides saying the books were now balanced and the paper could move forward, Kaye made the point that no one knows the answer for the newspaper industry right now.

"Look at the drops at the Times or the (Orange County) Register everyone's hurting and scrambling to figure it out," Hopkins concluded. "The task we were given was to find that answer."

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