Thursday, June 23, 2011

Media General's Harbinger of Doom

Media General is the parent company of the Tampa Tribune. Media General CEO Marshal Morton sent a letter out to all employees. All Media General staff (including the Tampa Tribune) will have to take 15 unpaid furlough days.

In order to reach our cash flow goal for the year, which has again been lowered from low initial expectations, we must cut expenses in the second half of the year. One of the fastest ways to flow expense savings to the bottom line, without broad-based permanent layoffs, is a furlough program - something we had hoped would not need to do this year. I am sorry to say that Media General employees at all levels will be asked to take 15 furlough days in the second half of this year.

Earlier this year, all operations and corporate departments reduced discretionary spending. More recently, several operations implemented targeted reductions in force to address particular market challenges. Unfortunately, the expense reductions implemented to date are insufficient to meet our cash flow goal. Compounding this situation is the fact that the economic outlook for the second half of the year continues to be uncertain.

The furlough program will cause financial disruption for employees and scheduling challenges for our operations. It's little comfort that we are not alone. Our media companies have implemented layoffs and furlough programs this year. In addition to the impact of the weak economy, it's a sign that traditional media business models continue to be in transition.

Media General has been in financial trouble long before the 2008 market crash. The Tampa Tribune laid off 70 staff members in April of 2007. Late in 2006, Media General bought six NBC affiliate stations for $600 million. Media General didn't get the expected bang for its buck. Around this time the ominously named Harbinger Capital started a hostile takeover of Media General. Harbinger Capital got three of its members to sit on Media General's board. Harbinger Capital wants Media General to sell assets and make a quick profit on the stock. The takeover is so hostile that Morton can't even get Harbinger Capital to return his phone calls.

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