Maximizing Profits at The Washington Post
Bagdikian, Ben H.
Maximizing Profits at The Washington Post by Ben H. Bagdikian “You may feel responsible for freedom of the press, and I’m committed to that, too. But I have a responsibility that you don’t. I...
...But the strike has little to do with ideology...
...This is a problem we are determined to solve...
...In other words, news was cut because pop records and merry-go-rounds did poorly...
...Management does not intend to overlook any reasonable means of improving profit...
...The industrialists, moved by the prospect of higher production and profits through mechanization and the pressure of competition to reduce labor costs, countered with restrictive legislation, police action, and mass hangings...
...In the three years preceding the strike, they increased their work hours five per cent, far less than the eleven-per-cent increase in the paper’s lineage, a measure of pressroom work done...
...The growth in size, power, and remuneration of the corporate hierarchy at the Post after 1971 is one sign of the importance Mrs...
...The idiosyncratic publishers, whose integrity led them to ignore narrow economic arguments in favor of quality, and who as a result created America’s great newspapers, are disappearing...
...Management doesn’t want to be confronted with a unified adversary...
...At this writing, the strike continues...
...But the simple fact was that Post employees had split along class lines: white collars in the building, blue collars outside...
...These were not idle concerns of Beebe, Graham, and their lawyers...
...The exception was the Newspaper Guild, the union for reporters, editors, and clerical workers...
...It was a major factor in raising the level of American journalism...
...These doubts would be important the following year, when the craft unions appealed for Guild support...
...They eventually defeated the organized workers and, having failed to create a humane policy appropriate for the new mechanical age, marched forward into the Industrial Revolution...
...In reply to a question by some newsroom Guild members, Mis...
...It is interesting to note where the 47-percent increase in Post revenues did go in the years from January 1, 1971, to January 1, 1975...
...The productivity of the pressmen, in contrast, does not look so bad...
...The Washington Post is presently marching forward into a revolution of its own...
...Journalists have generally feared One Big Union because of the understandable concern that they will be outvoted by non-journalists, as they are in the Guild today, and that this may result in terms that are appropriate for clerical and production workers but not for the peculiar needs of reporters and editors...
...Reliable newsroom quality depends primarily on one thingspending money on high-caliber people whose work is immunized from business influence...
...Until recently most papers were locally owned and profitable, so individual owners had little incentive to throw out their conventional, long-lasting equipment...
...The Post clearly had prepared to operate without unions (and hinted as much during negotiations), and whoever trashed the presses clearly wished to take away this advantage...
...The Fallacy of the Dying Newspaper In the popular view, the struggle at the Post is based on the conventional wisdom about daily newspapers: they are dying and the cause of death is primarily rigid unions that are killing their employers with resistance to modern automation...
...When the Guild at the Post went on strike in 1974 it said it was “withholding excellence...
...Only alliance with the rest of the newspaper labor force could provide power against conglomerate owners...
...Without the support of other unions, the Guild had no bargaining power...
...As the strike started, someone sabotaged the Post presses, with estimates of damage ranging from $30,000 to several million...
...But newspapers are a business like any other, subject to the same pressures of technological change and competition...
...He was formerly national editor and ombudsman at The Washington Post...
...Unions have objected to new procedures that reduce jobs and pay, but the blame heaped on them is unfair...
...In the days that followed the initial shock at the wreckage, it emerged that the Post management had prepared for a strike for two years, sending 125 management people to a training center in Oklahoma to take over union jobs, and setting up alternative composing equipment in a secret project on the paper’s executive floors...
...Post stock was issued at $24 a share, and to the surprise of many, it did poqrly...
...Moreover, as a national conglomerate, the Post company was smaller and less diversified than Wall Street would have liked...
...Management has done a bad job of it...
...English manufacturers, 165 years ago, met competition by eliminating careful hand weaving and finishing of cloth in favor of coarser production by machines...
...Newsroom anger at the imposition of insulting treatment led to the disastrous Guild strike of 1974...
...The week some Nixon friends challenged Post television licenses, Post stock dropped 25 per cent...
...The ITU wanted to avoid any opportunity for management to move in the new equipment without a contract, and feared that a walkout in support of the Guild would give management that chance...
...The Budget If the pressmen could have looked at the Post’s detailed budget, they would have known that management was already reducing production costs...
...Executives can always paste up wire copy or make telephone calls or clip news releases that come over the transom...
...Times-Mirror is a truly diversified conglomerate, which, in addition to publishing newspapers and magazines, produces Bibles, paperback books, educational aids, telephone directories, navigational instruments, road maps, engineering equipment, and computer graphics...
...In that same period their portion of the Post budget increased 105 per cent, from $5,985,000 to $12,294,000...
...Despite appeals (and even some fines) from the Guild leadership, most Guild members at the Post crossed the picket lines and continued working...
...These developments are symptomatic of a basic change in most papers like the Post-the submersion of the individual newspaper in a conglomerate complex, with the resulting imperative for corporate growth and stock market performance...
...The pressmen’s only hope was to draw out all the unions at the paper, and they nearly did...
...In 1972 it dropped to 10.45 per cent, in 1973 to 10.2 per cent, and in 1974, to 9.7 per cent...
...But both sides are paying for their conservatism...
...True newspaper automation, which combines the steps of production into a single, integrated process, requires sophisticated research and development...
...The issue was greater control by management over job assignments and hiring in the pressroom...
...Their conglomerate owners are under no pressure to reinvest profits from the local paper to improve quality because they already have a stable and profitable product...
...Heywood Broun started the American Newspaper Guild in 1933...
...They are, however, an order of men not necessary to the manufacture, and if the merchants had firmness to do without them, their consequence would be lost...
...The perverse logic of conglomerate ownership is already clear in broadcast joournalism...
...They are being replaced by profit-maximizing conglomerate owners...
...The poor showing of Post stock had to do with Wall Street’s aversion to risk, rather than the Post’s politics...
...The long-awaited automation contract was signed with the ITU, permitting vast labor savings in the future...
...Facing pressure from stock market analysts to increase profits, Post publisher Katharine Graham has taken a hard line on her unions, which she believes are endangering the future economic health of the Post...
...The ultimate in executivism had been reached: a newspaper was finally paying more for “administration” than it was for journalism...
...But industrial unions, like the United Auto Workers, represent entire industries and are able to contract separate conditions for engineers, artists, writers, and assemblyline workers...
...In the last decade, shares in these corporations have increasingly been traded on the stock market...
...To Beebe’s and Graham’s credit, they ran the Pentagon Papers...
...All this technology is currently available, and there are rumors in the Post newsroom that the Post will introduce some of it on an experimental basis in several months...
...It was not just at turn-of-thecentury newspapers where bosses ordered phony stories or fired reporters whose personal politics they disliked, In Greensburg, Pennsylvania, in 1973, a reporter was fired for saying in the newsroom that he was glad Spiro Agnew resigned...
...Newsweek, whose revenues were intended to offset any local Washington losses, was not doing well that year...
...The facts seem to be that the Post’s union of press operators and the company reached midnight of October 1 without agreeing on terms of a new contract...
...That is why only 2.5 per cent of American cities with dailies have competing dailies...
...The most frustrating kind are those imposed by archaic union practices that deprive the company of the savings we ought to achieve from modern technology...
...The Logic of Wall Street The savings in production costs for papers that can afford to install these new techniques will accelerate the trend toward corporate giantism in American journalism...
...Details of the strike are now a catechism in the newspaper business, their interpretation depending on which theologian recites them...
...Graham attached to the business side of her company...
...When this happens, there will be almost no manual operations in the newspaper business, except the reporter at his typing console-perhaps still pecking away with two fingers...
...Instead, they are under pressure to siphon off local profits to the parent corporation for expansion into other product lines...
...Clearly it did not go to the newsroom, nor, in fact, to advertising, circulation, newsprint and ink, or production-& of which either dropped or remained unchanged in relation to revenues...
...The craft unions were not even asked to observe a Guild picket line, because they had privately informed Guild leadership that they would refuse...
...In any event, we fully intend to deal with it...
...In the last 20 years independent local dailies have been bought up by chains, or groups, until today two thirds of all daily circulation is controlled by absentee corporations...
...The years in which it could be managed as a family business, without straining for every possible dollar of profit, were gone forever...
...Editors soon will make up pages on the same screen...
...She seems to have welcomed the strike, believing that the newspaper craft unions, like Fitzwilliam’s textile workers, are “an order of men not necessary to the manufacture...
...As newspaper unions become closer to the core product of journalism-working with content rather than manual operation of machines-the odds increase for their evolving into a guardian for the profession...
...We are doing it both by cutting costs and by generating new sources of income...
...The unions stick to the American labor philosophy of strict bread-and-butter and leave-productquality-to-management...
...He went on to explain: “Our contract with the underwriters can be canceled if the corporation has a catastrophic event, and it’s been determined by the courts that a criminal indictment is a catastrophic event...
...Post Guild members should have learned from their abortive 1974 strike that they need craft workers...
...The paper’s revenues went from $84 million in 1971 to $122 million in 1974, an increase of 47 per cent...
...It is not true...
...Management would have preferred to give the extra work not to full-time pressmen, in the form of overtime, but to substitutes, who could be paid straight time wages and get no fringe benefits...
...More important, she appears to have “the firmness to do without them...
...Irritated and bored with serious ideas but quick and contemporaneous in his tastes, Bradlee turned the paper into the most interesting daily in the country...
...Rigid union rules no longer prevented efficient operation of the Post composing room...
...Confronted with organized protest by the unemployed craftsmen , employers hardened their resolve...
...The primitive level of reporting on American newspapers in the 19th and early 20th centuries was the result, largely, of miserable pay-attracting mostly miserable journalists...
...The New York Times, which signed the same sort of contract at about the same time, reduced its composing room manning in the first year of the contract from 816 to 692 printers and expects to reduce it even further in a few years to 330 positions...
...It was a raising of standards essential to survival of newspapers, because the audience was becoming more sophisticated and broadcasting more competitive, but it was done against the overwhelming objection of publishers everywhere...
...Many of the reporters argued that they were motivated by abhorence of sabotage...
...conglomerate had poor profit years...
...During this period, the best safeguard for quality journalism will be the integrity of management...
...There is no magic in newspaper unionism by itself...
...The aspect of the Post strike that caught most attention was the trashing of the paper’s pressroom at the start of the strike on October 1. Writers spoke of modem “Luddites,” workers faced with automation and striking back, like lunatics, smashing inevitable mechanical progress...
...The company’s television stations, controlled by Nixon’s Federal Communications Commission, were vulnerable to White House attack...
...Investors are more attracted to companies like Times-Mirror, parent firm of the Los Angeles Times, which that same year had revenues of more than a half-billion dollars...
...Reporters already “type” stories on computer consoles that proddce letters on a television-style screen...
...While the Post Guild was coming apart, maximization of Post profits continued...
...The most important union, the International Typographical Union, was in the midst of negotiating a contract that would permit the Post to install radically new automated equipment...
...Realistically, the best that can be hoped is that the new technology will remain a servant of journalism-contributing to newspaper quality and morale rather than destroying them...
...Compared to most big-city papers, especially ones with competition, the Post was a lavish money-maker, returning over ten per cent on sales...
...Workers fought back with strikes, boycotts, sabotage, and riots...
...To have this kind of influence, journalism unions must adapt to new technology and to the needs of their communities...
...Safeguarding Quality Journalism Newspapers are entering a difficult period of transformation, when the nature of jobs, the size and composition of the work force, and the capital requirements of the industry will change radically...
...The number of dailies has remained constant within one per cent since the end of World War 11...
...Production costs, complained of so bitterly, rose slower than revenues...
...Dollar amounts increased, but less than the paper’s rising revenues...
...The most spectacular increase in Post spending was for “Administrative,” that is executives...
...their power and influence has grown out of their high wages, which enable them to make deposits that puts them beyond all fear of inconvenience from misconduct...
...The cause may have been just, but the strike was a fiasco...
...It was cheaper to pay children to run machines than skilled adults to make quality products...
...So do the hundreds of papers in newspaper chains...
...Fifteen such newspaperowning companies are currently on the stock market and control a quarter of all daily circulation...
...Even under the old paternalist regime, the company had attempted to diversify by acquiring Newsweek and several broadcasting stations...
...Not until there were unions to do the bargaining did reporter and editor salaries reach levels that attracted and kept the best minds...
...The big change came in 1971, when the Post Company, of which Mrs...
...In early 1972 the new maximization philosophy was apparent in the newsroom, especially in the gratuitous, tough-guy behavior of news executives...
...The staff already was the best paid in the country, but rebellion at humiliating treatment, encouraged by Brian Flores, ambitious leader of the Guild local, moved the reporters to go on strike...
...The Nixon Administration had shown a willingness to use any weapon to hurt the Ibst and on several occasions, some open and some covert, had threatened use of the Espionage Act...
...Even the newsroom, which one would expect to receive favored treatment at a paper like the Post, was losing out in the new regime...
...Some costs resist more stubbornly than others...
...They called themselves “Luddites” after a leg e n d ar y ma chine-smasher...
...They need unity so that they can meet the economic desires of their members and still have enough collective energy left to bargain for the highest viable quality in their product...
...If the Post had met Wall Street’s financial expectations in 1971, Post stock would have done better...
...The Post’s craft workers are now finding out that they need the Guild for a successful strike...
...Smaller papers average something like 20 per cent, but big papers with large revenues still make abnormally high profits compared to other industries...
...In 1971 news operations of the Post cost $9 million, or 10.75 per cent of the newspaper’s total budget...
...Some will disappear completely...
...Wall Street operators may have disliked the Post’s editorials, but they do not let personal opinions interfere with profits...
...In 1802 the I Earl Fitzwilliam, Lord-Lieutenant of Sheffield County, wrote of the organized workers: “They are the tyrants of the country...
...The local American newspaper has become a capital generator for conglomerate growth...
...This presented management with the starkest conflict between business and editorial responsibilities...
...As the Luddites learned, smashing the machines is no answer...
...Graham with new capital for further expansion, By chance, the 1971 stock issue coincided with the decision on whether to publish the Pentagon Papers...
...The most powerful and widespread union, the ITU, is in fewer than 470 papers...
...Many big-city competitive dailies have collapsed, but the chief reason has been the economics of advertising, which produces 85 per cent of revenues for a paper like the Post...
...Perhaps it would be better if newspaper workers and managers did not have to look to mass production industries for guidance...
...Management gets caught in jurisdictional disputes, has to fight unions that are obsolete but refuse to die, and is whiplashed as a series of unions march in for separate negotiations...
...Management has taken a hard line in negotiations, and given its ability to produce a near-normal paper with 1,500 of its normal 2,673 work force on strike, seems almost certain to win its goals of cheaper production of the paper and higher profits...
...The paper that can do this is the one with the largest circulation, since large press runs give it economies of scale...
...They are more willing to develop integrated systems because they recognize the enormous long-run savings...
...The strength of reporters’ unions depends on unity with other newspaper workers-ad salespeople, clerks, and production and circulation staffs...
...The most hopeful outcome to the labor troubles of the Post and the rest of the journalism business would be the development of One Big Union at each paper, minimizing the squabbles of each craft...
...Rigid and wasteful union practices have accelerated the decline of many weak papers...
...If the reporter wants a copy of what he’s just written, he can punch another button and ask the computer for a display...
...Under the “attrition” clauses in the new ITU contracts, labor-saving machinery permits companies to reduce work forces by not replacmg employees who quit, retire, or die...
...Soon newspaper plants will bear little resemblance to those of the past...
...But this is a slender reed...
...Monopoly will be a fact of life in daily printed journalism as long as papers depend on advertising...
...It is a forecast of trouble for independent journalism in the country’s most important news companies...
...Tension over the issue increased as the pressmen’s October 1 contract expiration approached...
...Dailies with any kind of union, including weak company ones, are 402 with pressmen’s unions, 173 with editorial and commercial, 145 with stereotypers, 136 with mailers, and 83 with photoengravers...
...Market analysts noted that the newspaper was the Post company’s chief source of revenue, and that the paper itself was dependent on one city’s economy...
...An automatic process will reproduce the electronic image of the printed page, eliminating most conventional composing room work...
...It illuminates the bitter Post strike as an example of a crucial change in American newspapering: the transformation of the daily newspaper in the United States from a family enterprise to a corporation with an obligation to its stockholders to “maximize” profits...
...Now automation is being installed in modern ways, thanks to the large new sp ap er-o w ning conglomerates...
...It has to do with the balance sheet of a modern journalism conglomerate, which is what the Post has become in recent years...
...Despite a 47percent increase in revenues, the executives produced only a 29-percent increase in profits, while their own income rose 105 per cent...
...The Post and many large American papers operate under this dynamic...
...Bosses had always told reporters they were too refined to belong to a union and in a line of work that should not concern itself with grubby things like money...
...Eventually, the diminished membership and funds of the various craft unions will make them individually powerless...
...And now that the most important managements are obsessed with the short-term demands of national money-markets , a systematic internal force is needed in local papers to preserve good journalism...
...The newsroom budget in 1974 was less than $12 million, an increase of only 30 per cent...
...The paper continued to operate and make money without “excellence...
...But the Luddite reference means something deeper...
...This was the final settlement, and in the aftermath Guild members were severely divided and doubted both their own leadership and their alliance with the craft unions...
...Going ‘Public’ Such a decisive attack on unions by the most celebrated liberal paper in America has been ironic...
...Unions give themselves a bad name by some of the jurisdictional fights and by the obvious irrationality of separate negotiations that diminish bargaining power...
...Managements too have been reluctant to innovate even where there are no unions, because of the expense of conversion...
...After Philip Graham’s death in 1963, his widow took over, appointing her own editor, Ben Bradlee, until then Washington bureau chief of Newsweek...
...Getting Tough Katharine Graham told a meeting of security analysts in January 1972 that the company planned diversified acquisitions and other changes: “. . . the first order of business at The Washington Post is to maximize the profits from our existing operations...
...The impact of unions on this process is real but grossly over-stated...
...I have to worry about stock in a $193million corporation...
...The danger is shortsighted managements that embrace conglomerate business practices uncritically, and in the process destroy the fragile balance between a newspaper’s corporate and professional imperatives-an equilibrium that permits quality journalism to endure...
...Graham defended high incentive pay for top executives as “an excellent way of recognizing and rewarding good work when a person’s contributions to profitability can be readily measured...
...Smaller newspapers have had much more stable earnings than the big-city chains, Noble points out, because smaller dailies depend less on recessionsensitive classified ads, have few competitors and are located in growing areas instead of ‘stagnant cities.’ . . . Says Noble, ‘They’re good little growth companies.’ ” As the Money report makes clear, investors prefer monopolies, so the hot newspaper properties are, with rare exception, stable, highly profitable, and not vulnerable to competition...
...That statement, made to me four years ago by Frederick Beebe, late chairman of The Washington Post, during the debate on whether to publish the Pentagon Papers, helps explain the management anxiety that produced the current strike at the &st and is transforming American journalism...
...Developments at the Post suggest that even good papers, where executives are sensitive to quality, may respond not primarily to their own communities, but to the stock market analysts...
...Controlled tension” and “productivity” became ritualistic editorial incantations, based on the strange notion that insulting reporters who performed well would make them so insecure they would be moved to produce even more in order to avoid further humiliation...
...Her hiring of the hard-line Lawrence Wallace as her labor negotiator and her secret preparations for the October strike are two more...
...All the other unions except one honored the joint picket line...
...The Post would later add the Trenton (New Jersey) Times, a guaranteed money-maker, to its network, but in 1971, the Post company was a minor conglomerate, with mediocre stock market performance, and its publisher was nervous...
...Ben H. Bagdikiun writes often about the press...
...The effect of this process will be to reduce all expenditures that cannot be immediately related to increased earnings, to avoid political positions that disturb the investing community, and to extract from each local paper the profits demanded by the home office for its expansion elsewhere...
...Several leading reporters on the paper, believing that Flores was leading them in a hopeless struggle, met privately with management to discuss settling on the terms management had originally offered...
...we hope it can be solved in an amicable, constructive, spirit...
...And if we get convicted we lose all our broadcast properties because a felon may not hold a broadcast license...
...It is a constraint on journalism that has nothing to do with^ journalistic need or even with news:: paper profitability...
...The next step, due in about ten years, is the extension of this computerdriven system to the automatic etching of plates and, eventually, to printing without plates, by ink sprays of letters on moving paper...
...This was expressed by Fritz Beebe in the remark about his responsibility for a $193-million corporation...
...Both management and labor are fighting One Big Union...
...There was no professionalism to protect independent, ethical performance and no union to give security to the reporter or editor who produced news that happened to displease the boss’s private interests...
...With automation, the power of craft unions is diminishing...
...At the beginning of the 19th century, the paternalism of English textile manufacture, something like the family control of Katharine Graham, her late husband Philip, and her father, Eugene Meyer, over their newspaper, was swept away by the forces of economic competition...
...If operating income is a measure of executive “contributions to profitability,” then Post executives seem not to have deserved their productivity rewards...
...So, for simple economic reasons, the ads flow to the leading paper, which then has more money to increase editorial, production, and circulation pressure on its competitors while they are suffering falling resources to fight back...
...The chief obstacle to cost reduction was now the press room, where union control of the assignment of personnel was leading to the payment of more overtime than management believed necessary...
...To get the flavor of Wall Street decision-making about the newspaper “product line,” consider the following excerpt from a rundown of various industries in the December issue of Money: “After 1976, big-city newspapers will look less interesting than smaller chains, says Kendrick J. Noble of Paine, Webber, Jackson & Curtis...
...Given the paper’s success during the 1960s, the expected favorable reaction of investors would provide Mrs...
...Of the 1,770 dailies in the United States fewer than 25 per cent have any unions at all...
...Advertisers want to place their message into each household as cheaply as possible...
...Graham is board chairman, issued stock and became a publicly traded corporation...
...The Case for Unions Although it sounds paradoxical, newspaper publishers need strong unions to preserve the quality of their product from tampering and to rnaintain their position relative to other media...
...But corporate pressures on journalistic decisions had clearly escalated...
...Les Brown in The New York Times recently reported that the American Broadcasting Company was cutting its news documentaries by 50 per cent, not because ABC News was unprofitable-it had made unusually high profits-but because the recording and amusement park divisions of the ABC, Inc...
...Individual unions are jealous of their jurisdictions and their bureaucratic powers...
...And its primary product, the Post, improved in quality and profitability...
...Reporters have a stake in this development, not out of any academic devotion to unions, but out of a practical need to protect independent journalistic performance from arbitrary budget-cutting and capricious firing...
...When stories are satisfactory, a button is pushed and they go into the central computer brain...
Vol. 7 • January 1976 • No. 11
