Vincent Farnsworth 6:31 p.m., Dec. 4
U-T Heads Will Be Chopped More Severely; Economics Dictates It
Union-Tribune employees expected another mass axing in February. It didn't come. But an even larger head-chopping than expected will inevitably come. Here are some numbers that I have gleaned. U-T annual revenue is at most $250 million and probably closer to $200 million. Some say the company is slightly profitable to break-even; others say it is in the red. The company has neglected critical expenditures such as pagination and updating the antiquated printing presses. SignOnSanDiego revenue peaked at $19 million in 2006 and is probably down to $17 million. The sale was probably for $15 million to at most $45 million. (La Jolla real estate was not included.)The Mission Valley real estate is worth more than $45 million in even a so-so market, but the operating asset, the paper, has little value. The real estate has little bottom line value if the company continues to occupy the building. The company will be run by Black Press, whose bonds are in junk status. Ergo, the privately held company is hurting. It has been eyeing Copley since August, as reported repeatedly here, but probably didn't have the money for the purchase. Enter Platinum as the sugar daddy. It doesn't know newspapers and will rely on Black, even though its newspapers are quite small. So there would seem to be two business strategies: 1. Since online revenue is so small, try to keep the print edition going. This will require very sharp employment cuts. The problem is that as editorial employees are cut, the product will continue to go downhill, losing circulation and market share -- possibly a death spiral scenario. Perhaps enough employment could be cut so that the company could move to smaller quarters and cash in on the Mission Valley property; 2. Go partly- or wholly-online and only go with a print edition a couple of days a week. Printing could be outsourced and the building vacated and sold. Problem: huge gamble, with online revenue so small, and reasonable online profitability so far away. Under either of these scenarios, employment will be sliced sharply.