DorobekInsider: 1105 Media cuts pay 20 percent — temporarily

Thursday - 5/21/2009, 11:36am EDT

Everybody knows it has been an extraordinarily difficult time for media, and it has been particularly hard for print media. Just last week, when I was out in Tucson, AZ, the state’s oldest paper, the Citizen, closed its doors. Our industry — my industry for these years — is just struggling across the board.

That has been true for the publications that cover the government market as well. (My former colleagues over at 1105 Government Information Group, the publisher of Federal Computer Week, Government Computer News,et al, and the FOSE trade show, et al, regularly ping me for over-covering their challenges and not sharing the wealth. More on that later.)

Last week, 1105 Media cut salaries 20 percent for all employees making $45,000 or more for the summer — June, July and August. 1105 CEO Neal Vitale made the announcement last week in a memo that was not sent out across the organization but was instead read to staff by 1105 Government Information Group President Anne Armstrong. Vitale then followed up with a conference call — well, a one-way conference call.

Here are the specifics as I know them:
* A 20 percent pay cut for all employees making more than $45,000 across 1105 Media — not just the 1105 Government Information Group
* Vitale stressed that 1105 is not in risk of folding or having cash flow problems, according to people at the meeting including 1105 Government Information Group Editorial Director DavidRapp, who I spoke to last night. What Vitale told the staff is that, under the agreement with 1105’s lenders, the company must make a certain return on investment — a certain percentage. They are simply not at that percentage. To use my words, not his — 1105 is making money. It’s just not making enough money to meet the “covenants” with the lenders. (Somehow they always refer to these things as covenants, as if Moses chiseled them into stone or something like that.) Vitale specifically pointed to 1105’s Redmond group and The Data Warehousing Institute (known as TDWI), which have been particularly hard hit by a sharp decrease in most conferences. (Companies have cut business travel unless absolutely necessary, and it has left the conference market reeling.)
* In addition to the temporary pay cut, employees will also not be allowed to accrue vacation time during that period.
* Employees were, however, given 10 days off to use before the end of the year.

Needless to say, morale among the people I spoke to over the last few days is just horrible. And, of course employees vent at Vitale and Armstrong. Almost all of the people I heard from were angry that Vitale’s conference call was one way — there was no ability to ask questions. My sense is that they didn’t e-mail the message to everybody because — guess what — I or somebody like me would probably get my hands on it and post it. (IMHO, so what, but…) Furthermore, in those conference call settings, people often don’t ask questions… and what really can management say anyway. There are no promises. There are no guarantees.

To be fair, 1105 is not alone in this. This touches every part of the country; it touches every part of the media. Even the DC market has not been immune. The Washington Post is struggling.WJLA-TV here in DC recently laid off some high profile people and cut pay by 3.9 percent. In the business-to-business trade press, IDG — publisher of venerable publications such as CIO, Computerworld, InfoWorld, Network World, CSO, IT World and Industry Standard — recently cut 8 percent of its staff and instituted a 10 percent pay cut, including Computerworld/InfoWorld editorial director Don Tennant, who is almost a legend in the IT publication world. (Folio.com)

So, good friends at 1105, I hope that provides some context.

This is a media-wide issue. Entrepreneur and software engineer Marc Andreessen was on PBS’s Charlie Rose program in February and his take was that the media — and specifically newspapers — are simply between business models. The old model — this amazing industrial age process of putting out a publication and distributing it far and wide… and make no mistake, it is a remarkable model. That model simply has to change. We don’t know what that new model will be yet. We’re trying. But there are some harsh realities — more people are getting their information online, yet most of the money for publications comes from print. In many ways, news has become a commodity. The Christian Science Monitor recently posted a column by Robert G.Picard headlined Why journalists deserve low pay: The demise of the news business can be halted, but only if journalists commit to creating real value for consumers and become more involved in setting the course of their companies.