Feb 14


More bad news regarding The Buffalo News

Last week it was downsizing. Now, furloughs. And there's more: The slumping stock price of the paper's parent company and the prospect of being delisted from the stock exchange. Not even the vultures at Alden are interested in buying the chain anymore.
Reporting, analysis and commentary
by Jim Heaney, editor of Investigative Post

The downward spiral at The Buffalo News appears to be gaining speed.

Last week I reported the departure of four veteran reporters and editors and the pending outsourcing of work performed by the newsroom’s five-person design team. That reduces the newsroom staff to some 65 journalists, down from more than 200 back in the day.

The News has since asked the remaining staff to accept a two-week, unpaid furlough. The paper’s managers and other nonunion employees have no choice. The company must negotiate the furloughs with its unions, including the Buffalo Newspaper Guild, which represents what’s left of the newsroom staff. 

The union’s executive committee voted Monday to reject the company’s request.

“The Guild wanted to put its foot down on more cost cuts,” Jon Harris, the union president, told me Tuesday.

The Guild will allow its members to volunteer to take the unpaid leave, but I suspect that will be a short line. Very short.

The News is owned by Lee Enterprises, which owns 77 daily newspapers. The furloughs aren’t limited to Buffalo. Axios is reporting that Lee is imposing furloughs at a number of its papers. There’s a similar pushback from unions.

Said David Carson, vice president of the Guild at the St. Louis Post-Dispatch: “Alden is clearly horrible and a terrible owner, and for me, what is frustrating is it feels like Lee has done their best impression of Alden’s cost-cutting since Alden made that buyout attempt.”

The Buffalo Guild, in a communique to its members sent Friday, said, “Lee said the request for furloughs is not a reaction to any imminent financial loss but rather a preemptive cost-saving measure.”

“Because of the revenue downturn, Lee said it won’t necessarily be able to hit the guidance it provided to investors. Reading between the lines here, Lee is essentially saying the advertising downturn has created a situation where the company may not be able to hit the numbers it promised to investors.”

Lee’s sinking financial fortunes aren’t the only problem it faces.

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Nasdaq is threatening to delist Lee from the stock market over its failure to file a required Form 10-K report for the fiscal year ending Sept. 25, 2022. 

Lee told Nasdaq it “required additional time to complete management’s assessment of the effectiveness of the company’s internal control over financial reporting.”

“Management remains in the process of evaluating deficiencies identified in connection with its assessment of the effectiveness of its internal control over financial reporting.”

The company has until Feb. 27 to get into compliance.

While all this is going on, Lee’s stock price continues to struggle. Shares closed Tuesday at $18.51, “dropping quickly,” according to one ticker at mid-day.  That’s down from a high of $40.38, on Jan. 14 of last year. The current price is well below the $24 per share that Alden Global Capital offered in November 2021 in a hostile takeover bid that Lee subsequently rejected after a court fight in which it prevailed.

That prompted Alden drop its takeover bid, and sell off a portion of its holdings in Lee. You know things are bad when a vulture hedge fund like Alden loses interest.

What does all this mean?

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Well, The News isn’t about to go out of business. It will continue to shrink, in both revenue and staff. To say nothing of news coverage. But it will do what it has to do to keep the doors open.

Its print circulation is in free fall, and has been for years. It peaked back in the 1990s, when it sold more than 300,000 copies during the week and more than 400,000 on Sundays. 

Weekday circulation had fallen to 69,000 by 2021 and has since dropped to 56,000, spurred in part by aggressive price increases and a fuel surcharge that alienated a fair number of readers. (Cutting the comics didn’t help either. Or the Gusto listings. Among other things.)

The paper’s website traffic, a number Lee keeps very close to the vest, is included in Lee’s Form 10-K report for 2021. It showed BuffaloNews.com attracted an average of 89,400 unique daily visitors; average daily pageviews were 412,000. Those are big numbers, but not as impressive when compared with web traffic at other large papers in the Lee chain.

While The News’s circulation on Sunday ranked second-highest among 77 dailies, its unique web visitors ranked fifth and its page views tenth. That suggests The News has a long way to go to build a digital audience necessary for its long-term survival.

Lee’s web template doesn’t help —  it isn’t exactly user-friendly — and reducing staff limits how much content is posted on the site. There’s plenty of sports, but, like the print edition, not much by way of local news. 

Tuesday’s print edition is a case in point: It includes a total of only seven local stories written by staff, totaling some four pages. The Sports section topped six pages, and that was a light day.

Market research I read when I worked at The News showed people buy the paper first and foremost for local news, so I question whether the focus on sports is going to be a winning strategy in the long run. Yes, stories on the Bills and Sabres generate a lot of clicks, but I believe that local news remains the franchise.

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Ken Kruly, in his most recent post on his Politics and Other Stuff blog, spelled out the consequences of a diminished daily newspaper.

“The result of the staff cuts is evident,” he wrote. “For those paying attention, the only local governments getting regular coverage are Erie County government and the City of Buffalo. Local reporting about suburban and rural governments or outlying counties is pretty much non-existent.

“Educational systems are critical to this area, but for the most part the only school system you are likely to read about is Buffalo. Coverage of other districts is mostly not there, except for such things as the yearly summary of new budgets that voters vote on.”

I’m not going to fault Lee for trimming expenses where it makes sense. It operates in an industry whose business model has collapsed. The status quo will not do.

But I agree with Harris, the Guild president, too.

“We’re disappointed that Lee continues to approach us about ways to cut costs rather than to invest in The Buffalo News,” Harris told me. “Buffalo needs more journalism, not less.”

Investigative Post

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