'Bad Publisher' Bucks Yesterday's Business Model

Hiller: L.A.Times Won't Have Margins It Used to, but He's Making Sure Brand Is Still Attractive to Advertisers

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NEW YORK ( -- Newspapers across the country have suffered repeated budget cuts like those last week at The Daily Camera in Colorado and The New York Times. But it's only at the Los Angeles Times, the country's biggest metro paper, that a publisher and three editors have so publicly rebelled -- several times resisting the paper's owner, Tribune Co., in the pages of the Times itself. They all left the paper convinced that further cuts, particularly without enough investment to seed real growth, would only fuel the same revenue decline that prompted them.

David Hiller
David Hiller Credit: Robyn Twomey

They also left as newsroom heroes, which effectively painted the publisher-CEO and Tribune company man David Hiller as the villain. An attorney who worked on immigration policy at the Reagan Justice Department, Mr. Hiller was labeled upon arrival as "not a news guy" by the blog LA Biz Observed. Dean Baquet, one former editor, put an even finer point on it when he called Mr. Hiller a "bad publisher."

During a recent visit from Ad Age, however, Mr. Hiller professed himself unbothered by such critiques, seeming more a Rumsfeldian realist who doesn't have the leeway to fund yesterday's business model. Revenue isn't coming back to old levels regardless, he said. New products won't restore the budgets enjoyed when the Times held a near monopoly on its market. And the powerful L.A.Times brand, which has endured since 1881, will persevere -- but in absolutely no certain form.

"Is it changing?" Mr. Hiller said during a wide-ranging interview in his office. "Yes, dramatically. Yes. Are some parts of the business like the core print paper going to get smaller? Yes, they are. They have been, and that's going to continue. But what you've got to do is figure out what's the new model that keeps us in business for another 126 years?"

Old glories gone
It's not just the newsroom that has to shrink, though; profits, although the Times still throws off some $200 million a year, aren't regaining their old form either. "When we hit the sustainable level," he said later, "there will not be the margins in the business that there were."

Asked why his paper has seen so many rebellions at the top, Mr. Hiller compared newspaper management with battle fatigue. "You've got to be mentally and emotionally prepared to not just accept but to lead the kind of really hard change that we've been called on to do," Mr. Hiller said. "Not everybody wants to do that, or at least wants to do that forever.

What's the future for newspapers?
Second in a series
"Unfortunately," he added, "the world is not allowing us to say, 'Well, you did something, and now you can be the same forever.'"

Except for its executives' striking defections, the struggles of the Times resemble those across the industry. Paid weekday circulation fell 5.1% to 773,884 this spring from the report just a year earlier, according to the Audit Bureau of Circulations. Ad revenue at the core print paper dropped 12.1% to $1.4 billion last year from 2006, according to TNS Media Intelligence.

As the decline of newspapers weakens one trusted channel for advertisers, though, it is forcing open a matrix of other opportunities. Even as it cuts spending elsewhere, the Times is plowing money into a host of new niche products and events -- which Mr. Hiller was eager to discuss when we arrived. Many are not "newspaper-y," as he put it. But most still prominently carry the Times imprimatur.

Competing with Craigslist
They include Metromix, a play for alt weeklies' ad revenue, and The Envelope, an awards-obsessed bid for entertainment-industry ad spending usually won by Variety and The Hollywood Reporter. Last week the Times added ICU: Los Angeles Connections, a video-enabled take on the "Missed Connections" personals from newspapers' own nemesis, Craigslist. "I can't wait to sell that," said Juliana Jaoudi, VP-sales at, "because it's totally cute, it's totally local, and I just think it's going to be hugely popular and viral."

And this week comes Hollywood Backlot, a website and weekly presence in the core paper filled with behind-the-scenes photos from movies, TV shows and music videos taken by David Strick, known for his photo column in the old Premiere magazine.

Watch this space for more, said John T. O'Loughlin, president-targeted media and senior VP-marketing. He said one product with the working title of X15 will target young families that have told the Times, "I don't have time for a traditional, full-service newspaper.''

Not every editorial innovation works, of course. One exploded on the launchpad last year, when Mr. Hiller killed a program recruiting famous figures as guest opinion editors after it sparked conflict-of-interest charges. Hollywood producer Brian Grazer had agreed to edit the first installment, but it soon became public that the editor overseeing the program was dating a public-relations executive whose agency represented Mr. Grazer's company.

The editor resigned over the program's cancellation, saying it implied that Mr. Hiller doubted his integrity. But Mr. Hiller probably had little choice; former Defense Secretary Donald Rumsfeld, a longtime personal friend of Mr. Hiller's, had already been asked to take a guest-editing turn himself.

In adverse moments, however, Mr. Hiller typically shows public resolve that has something in common with Mr. Rumsfeld's. When "Frontline" suggested that a nonprofit model could help safeguard the paper's journalism, for example, Mr. Hiller was unapologetic. "All we need, then, is a not-for-profit who wants to spend $14 billion to buy the Tribune Co., and then you'd be all set," he said then. "So if you know of one of those, have them call me."

Instead, Chicago billionaire Sam Zell took Tribune private last year in an $8.2 billion deal. That eventually required more expensive borrowing than originally planned, so making debt payments has replaced pleasing Wall Street as the company's chief onerous priority.

At the Times' venerable downtown headquarters, Mr. Hiller showed us a graphic indicating that the core paper's market penetration grows to 42% from 35% when you include its fleet of ancillary digital and niche products. That's encouraging, but can the niche products recapture the revenue that's seeping from the core product? "Will it be, quote, as we've known it?" Mr. Hiller asked. "Absolutely not." Can online-ad rates ever match the paper's print rates? "No way," he said. "Never."

Reality-based newspapering
One former Times executive said the daily still needs to invest much more aggressively, perhaps through acquisitions of established websites. "I definitely don't think, if all you're trying to do is respond to revenue decline by cutting, that you'll find your way out of this," he said.

In the May issue of Los Angeles magazine, Mr. Baquet said he fully understood the bleak outlook when he left 18 months ago. "We had already cut the hell out of the place," he said. "It got to be bad for business and journalism."

John Carroll, his predecessor, sounded more sympathetic in an April talk at the University of Kentucky. Online-ad revenue is certainly growing, he said, but we've got a long wait until it can support the kind of journalism the public expects and needs. Oh, he said, and we may never get there at all.

Although Mr. Hiller doesn't suggest that the recent good times are ever returning, he said developing the next model is imperative, and not just to Tribune. "We need people who say, 'What we're doing for the people of Southern California is too important not to be successful, not to figure this out.'"

Hiller speaks

"What the size of it is and how much user content vs. staff content -- all those things we've got to work through. But I am convinced that there is a sustainable, right-size, excellent ... business in being the Los Angeles Times."
"For too long we've been in a false and overly simple conversation with ourselves ... about resources and staffing and how you do what we do."
"Regional is ... one of the big ... opportunities that we've got. ... God's not making too many more Macy's . ...They don't mint those department stores too often."
"There were predictions that, oh, this is terrible, it's going to be awful for the brand, and the readers will hate it. Guess what: Nothing happened. ... Out of 4 million readers a week, I think I heard from four people that didn't like it."
"Even if you just look at paid circulation as the core of it, compared to anybody else's traditional media audience, it's a darn good story. ....You talk to broadcasters ... you'd never think a broadcaster had a bad day in their life."
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