What’s Next for the Boston Globe After Union’s ‘No’ Vote?

The crystal ball thing is not a favorite of mine. But with the Boston Newspaper Guild’s narrow rejection of an 8 percent pay cut and other contract concessions at The Boston Globe, I’ll make an exception. Here are my best guesses on what’s next.
 
Expect a quick meeting between management and Guild, then imposition of the 23 percent wage cut (which was management’s “final offer”). This threat was explicit; management loses credibility now and in future negotiations unless it follows through. I don’t know Globe Publisher Steven Ainsley well, but I agree with others who do that he is a hardball kind of guy. My hunch is that he is taking the lead in the negotiations in consultation with parent New York Times Co. execs, rather than vice versa.
 
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Unless… There is a remote possibility that Guild leadership and management could sit down again and come to a new agreement quickly. Labor expert Thomas Kohler raised that possibility with my colleague Steve Myers yesterday. A quick compromise seems unlikely, given Guild President Daniel Totten’s late-breaking swing against the proposal and heated rhetoric from both sides. But every now and then in labor conflicts, high-intensity venting is the last step before settlement. 

 
The Globe is not “on track to lose $85 million,” at least not on a cash basis. In fact, the paper may be getting close to break-even. Times Co. spokeswoman Catherine Mathis conceded in a phone interview Friday that the $85 million “operating loss” that management has used for bargaining includes depreciation, amortization and special charges. She declined to say just how much better the paper is performing on a cash flow or EBITDA (earnings before interest, taxes, depreciation and amortization) basis.
 
The New York Times Co.’s first quarter financials show a company-wide depreciation and amortization charge of $35.2 million. The Globe is roughly one-sixth of the company, so figure it for roughly $6 million D&A for the quarter, or $24 million for the year. Keep in mind these are losses only on paper, not cash going out the door. The first quarter report also includes a special charge of $25.2 million for severance, mostly in the New England group (the Globe and its sister Telegram & Gazette in Worcester, Mass.). The company will pay that money out, not necessarily all in 2009, and thus will realize substantial payroll savings going forward. It seems odd, to say the least, to count that severance as a loss in the context of negotiating pay cuts and layoffs.
 
The savings from concessions by the Guild and other unions are targeted at $20 million. With that, the Globe would be close to break-even for 2009.
 
A “no” vote and continuing labor turmoil make the paper nearly impossible to sell. But a sale does not look like a realistic possibility for the Times Co. anyhow — at least in the short term. Globe labor reporter Rob Gavin and I discussed sale prospects today. We agreed that few papers have found any interested buyers this year and that the going rate in the few completed transactions seems to be a fair price for real estate and other assets, but nothing more.
 
So unless there is a mystery buyer in the wings who is willing to pay a premium, the Times Co. does not stand to lose anything significant by continuing to operate the Globe. The indicated strategy for the Globe — as for the parent company, as for the industry — is to weather the worst of the downturn, hope for a post-recession bounce in advertising and develop new revenue streams.
 
Best case, the Globe could be more attractive to a community-minded buyer a year from now. Worst case, with mounting losses it could be a candidate for closure. But waiting and seeing is not necessarily punishing even if the Guild files a complaint with the National Labor Relations Board over the 23 percent pay cut and gets a protracted hearing.
 
Mathis reiterated to me last week, as she has told other reporters, that a shutdown remains a possibility and that the company has no inclination to start over on the Guild negotiation. If the troubles escalate (a strike, say, though that has not been threatened) to the point that The New York Times newspaper is threatened, I think the shutdown scenario is plausible.

That said, given Times Chairman Arthur Sulzberger Jr.’s oft-repeated commitment to quality journalism, I think he dearly wishes to avoid being the first one this century to shutter one of America’s great metros.

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