Continuation of The Selling Of Small-town America   

In mid-1990, when the United States had just toppled one dictator in Panama and was about to take on another in Iraq, a seven-month-old tabloid crashed and burned in the heartland. The splashy St. Louis Sun had been a misguided mission from the start. Estimated to have lost nearly $30 million, the Sun foundered, at least in part, because of an almost comical miscalculation--that a paper could build circulation on heavy street sales in a suburban area with no mass transit. But the owner, Ralph Ingersoll II, made an even greater mistake when he spent the last half of the 1980s acquiring newspaper after newspaper in deals financed with $500 million in junk bonds marketed by his close friend, Michael Milken.

By early 1990, amid an industrywide downturn in advertising revenues, Ingersoll had sold 10 dailies to raise cash, but it was too late to avoid bankruptcy. The collapse of the Sun was followed by the total destruction of the newspaper kingdom Ingersoll had built on a foundation laid by his father, a legendary New York journalist. Ingersoll's silent partner, the investment firm of Warburg, Pincus, stepped in to salvage what it could of its $200 million equity investment. Ingersoll was allowed to keep newspapers he had acquired in Ireland and England during his buying spree but had to surrender all properties in the United States.

Though newspaper prices had plummeted in those recessionary years, many people expected Warburg, Pincus to sell the U.S. properties and take the losses rather than try to run a business it knew little about. Instead, the firm decided to stay in the game. The big losers were the original investors, who had to settle for just over half the value of their bonds.

Warburg, Pincus then built a new corporation--the Journal Register Co., or JRC--from the rubble of Ingersoll's kingdom.

Today JRC is run with an iron hand by the man Warburg, Pincus chose in 1990 to nurse its newspaper investments back to health, Robert M. Jelenic, the former president of Ingersoll Publications. The son of a Canadian nickel miner and a former controller of the Toronto Sun, Jelenic, 48, has pushed company profits to new highs in the industry, while earning a reputation for ruthlessness and fits of temper.

Under Jelenic's leadership, Journal Register went public in 1997. Three-quarters of its stock is held by Warburg, Pincus. Headquartered in Trenton, New Jersey, the company owns 24 dailies, concentrated chiefly in New England, Pennsylvania and Ohio, with a combined circulation of 652,866. Among the company's 185 nondaily publications is the huge Suburban Newspapers of Greater St. Louis, consisting of 40 papers and 73 editions. Along the way, Journal Register has accumulated a hefty debt to banks that loaned money for bondholder settlements and acquisitions. The 1998 year-end debt of $765 million, more than the book value of the company, raises eyebrows in an industry where debt ratios usually are held to around 40 percent. "They're probably the only company I know that has a higher debt ratio than I do," says Ralph Martin of CNHI, "and I'm totally leveraged."

"They owe a lot of money," says newspaper analyst and AJR columnist John Morton. In 1997, the company's cash flow totaled $133 million, which was more than sufficient to meet combined interest and principal payments of $99 million. In 1998, the company refinanced its long-term debt so that no principal payments are due until 2000. In the years after that, however, the payments escalate. And there is always the danger that the economy will go into a tailspin. "It's pressure," Morton says. "Obviously they have to keep an eye cocked on the cash flow."

That's Jelenic's job. And so far, say his Wall Street handlers, he's done it extremely well. Even though circulation declines at JRC papers are higher than the national average (see chart, page 69), and the company's share prices this year have been below the $14 initial public offering, JRC has led the industry in cash flow margins--37.1 percent in 1997 and 34.4 percent in 1998. "Unlike many newspaper executives, [Jelenic] has a very good financial eye," says Warburg Managing Director Gary Nusbaum, 32, who joins the JRC board this year. He stressed that Warburg's decision to "reinvest behind Bob Jelenic" was a mark of confidence. Jelenic has been well rewarded. In 1997, he topped Advertising Age's list of newspaper executive salaries--$11.3 million in salary and bonus, about half of which was in stock.

"Bob is very much a visionary," says Trish Dresser, JRC's former marketing vice president, who left the company in 1997 for personal reasons. "When he believes in something, he is very driven. You're not working for somebody who's wishy-washy. You always know where you stand. If you're a type-A person who's driven also, it kicks open doors for you to be the best you can be."

Managers agree that Jelenic has imposed discipline on sometimes unruly newspaper operations, but his narrow focus on the bottom line has also produced a huge cadre of employee opt-outs and exiles.

Shortly after taking over the company, Jelenic ousted New Haven Register Publisher Tom Geyer, a respected figure in the industry. Geyer had cut 20 people from the payroll, including 11 newsroom staffers, and refused to lay off more. Jelenic flew to New Haven on the company plane and Geyer met him at the airport. "We had some sort of 'or-else' conversation," Geyer recalls. "I turned to him, I said, 'Are you firing me?' He said I had to go."

After Geyer left, says Gerald Ryerson, who quit his job as chief financial officer at the Register in 1992, "it was an extremely hostile environment. If you did a forecast and the answer wasn't what top management--meaning Bob--wanted.... You know the story about 'Don't shoot the messenger'? The messenger would get shot."

In addition to minding the books, Ryerson says he had to monitor the amount of film the photographers used, check odometer readings in employees' cars against expense accounts, and lock up the supply cabinet "because people would be stealing tape to take home for Christmas presents."

Kathy Morris, controller at the Times Herald in Norristown, Pennsylvania, from 1993 to 1996, recalls the time Jelenic demanded a monthly bottom-line figure by 8:30 p.m. on a Friday night--two days early. She knew the paper's new computer system and a decrepit printer would cause delays, so she left the building before Jelenic could call. "I was afraid to talk to him because I wouldn't have what he wanted. You don't tell Bob no." She received a letter of reprimand, and a recent raise was rescinded. Now chief financial officer at a Thomson paper in South Carolina, Morris still believes the Journal Register is "smart--they know how to monitor the newspaper business." But she gives them low marks as an employer. For much of her three years at the Norristown paper, she says she filled two jobs, as comptroller and human resources administrator. "In every instance it was done to save money."

Jules Molenda, now publisher of MediaNews' Bennington Banner in Vermont, calls the 18 months he spent at the JRC-owned Times in Pawtucket, Rhode Island, in 1994 and 1995 "the single most unpleasant time in a very long career." He has been in newspaper management 30 years and worked for nine companies, he says. "I can live with cautious people looking to cut fat, but not bone and muscle. That's what JRC does."

As we talk, Molenda volunteers that Jelenic fired him--another airport transaction--because a circulation audit disallowed 40 percent of a 2,000-copy increase. Even so, his specific complaints are consistent with those I would hear from many other JRC veterans. For instance, Molenda tells me about Jelenic and "the flash." The flash is a weekly financial report JRC requires from its publishers. In Molenda's day, it was due at noon Friday. If you had a "bad flash," Molenda says, "at two o'clock you'd get the call." Several times, an angry Jelenic ordered him to fire someone--anyone--now. " 'I want somebody out of the newsroom at five o'clock. No severance. I want him out. I want his name.' "

When JRC purchased Rhode Island's Narragansett Times and several other weeklies from Capital Cities, Publisher Frederick J. Wilson, whose family had once owned the Times, stayed only five months. "They don't care about the product. They don't care about the customer. They don't care about the employees," Wilson says. "And they don't know anything about the business." He has since launched two weeklies with money from local backers that directly compete with JRC papers.

After Wilson was gone, says Times former editor Betty J. Cotter, the new publisher broke a longstanding ban against advertising on page one. Soon a shoe ad appeared in one of three top-of-the-page tease boxes. "So instead of having three tease boxes, we had two tease boxes and a shoe." Cotter stuck it out a little longer. Cap Cities had cut her staff in half to fatten the bottom line prior to the sale, she says, and JRC was slow to hire replacements. As in New Haven, she says, the operations manager was ordered to check the odometer readings in reporters' cars. "When you're paying people so little--we paid $17,000--and then you sneak around like that, it makes people feel like dirt." After she rousted her staff on a weekend to cover a major coastal oil spill, she learned their overtime vouchers exceeded the publisher's estimate to Jelenic. Cotter was forced to tell people to reduce their hours. "It was humiliating to me, it was a slap on the face to them. When I called them on a Saturday, they were on it. They dropped everything and did it, because that's what we do. JRC saved 50 bucks by doing that but they pissed people off so bad that everybody in that room eventually left." Including Cotter. She now works for Wilson.

On acquiring new properties, JRC typically whacks payrolls and merges operations into a money-saving cluster, at the same time overhauling the format to fit the corporate model. With the exception of two tabloids, the JRC dailies look quite similar, with four sections, a minimum of 22 pages and colorful if uninspired graphics. The company shrinks the width of the paper, switches evening papers to mornings, banishes national and world news to inside pages, puts local news out front, launches a Sunday edition if none exists and emphasizes sports coverage. Business sections get three pages of stock tables; sports sections get columns of agate box scores. Presses are often upgraded to improve color capacity. The chain likes color and spends $7,000 a year at each paper on a multi-hued daily weather map. "It's their mantra," says a former editor. "All local, all color. All local, all color." Even so, in some papers the color looks washed out and fuzzy.

At the Saratogian in prosperous Saratoga Springs, the new JRC format was all for the better, says former publisher Monte Trammer, who left to head up the Gannett-owned Star-Gazette in Elmira, New York. The newshole, he says, increased 35 percent. Six pressmen lost their jobs when printing shifted to Troy, New York, but two editorial positions were added. No one seemed to notice that JRC had trimmed the paper to a narrower width, Trammer says, but the increased page count drew compliments.

Under Gannett, says Saratogian Editor Barbara Lombardo, "There was a lot of talk about Web pages, who would have them. And then we never got it because it required an investment. Journal Register said it on Friday--'You'll have it on Monday.' " And they did. The paper lost the Gannett News Service but gained Knight Ridder's, which she says "has opened up a whole new world," particularly in its business coverage. On the other hand, she misses the state government news from Gannett's three-person Albany bureau and the New York copy out of Gannett's Washington bureau. The Saratogian is one of three papers I visit in January with Diane B. Pardee, then JRC's vice president for public relations. (Pardee would resign several months later to pursue an M.B.A.) My request to go without a chaperon was turned down as "not company policy." On the whole, Lombardo says of JRC ownership, "It's been okay." She adds, "I would say that even if Diane wasn't sitting here."

In central Connecticut, where Journal Register owns three papers, circulation declines suggest readers aren't happy. From 1995 to 1998, the Herald in New Britain dropped from 31,344 to 23,198; the Bristol Press from 20,036 to 15,936; and the Middletown Press from 13,019 to 10,832.

The Hartford Courant, a Times Mirror paper, has "been a direct beneficiary" of JRC ownership, says Mark E. Aldam, the Courant's vice president for sales, marketing and operations. He says the Courant has increased market share by 3 percent, or 11,000 readers, at the expense of JRC's papers in New Britain, Bristol and Middletown and is now the dominant newspaper in all but four ZIP codes where those papers circulate. Meanwhile, preprint advertising volume in the Courant is up 19 percent over the last four years. Journal Register's "mission is cash-flow generation," Aldam says. "Over time that priority will cost you market share. The reader is making a judgment based on content. They vote with their pocketbook and the advertisers follow."

At the New Haven Register, JRC's flagship paper and another that I visit with Diane Pardee, Editor Jack Kramer has no ready answer to a question about recent stories that made him proud. An investigative piece, perhaps? "We don't look for scandal," he says. He mentions stories on the city's questionable disbursement of HUD funds, an issue also covered by an alternative weekly, the New Haven Advocate. (Advocate Managing Editor Carole Bass says the first accounts of mismanagement actually were produced by a New Haven television station. The Advocate some months later published a story about a suspicious loan to a mayor's aide, and then the Register jumped on the issue. All three continued their coverage, and a HUD investigation is under way.)

Here in New Haven, the editor merely recommends stories for his front page; the publisher has the last word. Says Kramer, "We have two news meetings a day. At the conclusion of the second, I bring the news list to the publisher and we'll discuss [it]." He says, "I respect the boss."

Last July when JRC took over the Mercury in Pottstown, Pennsylvania, four managers lost their jobs immediately, including the publisher and two top editors. The managing editor was not replaced, and the number of reporters assigned to local beats has dwindled from six to three, say newsroom insiders. Crimes and crashes are now less likely to lead the paper, and the "Cheers and Jeers" column on the editorial page has a new name: "Roses and Thorns."

Subscriber Gayle Buckman, who is on the board of the Boyertown Area School District, says she is pleased to no longer encounter "a disgusting wreck on the front page with somebody's body parts sticking out." What she does miss, she says, is the interaction with reporters she knows and trusts, who understand local issues. "It took a while to learn the people and the ins and outs, the undercurrents. A lot of times it's what's not said that's important." She says she would be much less likely to confide in the stringers who cover meetings these days. They tend to "ask surface questions, and they miss stuff," Buckman says. "It comes from not knowing the players."

At the Daily Freeman in Kingston, New York, the company added a Saturday paper without increasing staff, and it also cut back on its use of correspondents. Meetings of county legislatures, once a staple of the paper's coverage, now frequently go uncovered, as do other important local government stories. At its two Rhode Island papers, JRC reduced staff, closed bureaus and dropped zoned editions that, in Pawtucket at least, increased circulation, according to former publisher Molenda.

In the Woonsocket suburb of Franklin, the Call was once so beloved that the high school fieldhouse was named after one of its reporters, says Scott Cole, a sports reporter who recently resigned. The paper has closed three bureaus, Franklin among them, despite strong competition in the area. Both Rhode Island papers have slipped badly in circulation since JRC took over. The Call plummeted from 28,774 in 1990 to 17,774 in 1998, the Times from 24,298 to 15,671.

Then last fall, the Call was shaken by several events that suggested the Journal Register had lost its grip. In 1998 the Newspaper Guild successfully organized two small departments at the paper. The day after the second victory, in September, the paper's publisher, T. Paul Mahony, abruptly cleaned out his desk and left, later telling associates that Jelenic had fired him because of the union victories. Mahony had joined Ingersoll in 1989 and had held a number of positions within JRC. He was Woonsocket's third publisher to leave in less than three years. The same day that Mahony left, Jelenic flew in.

Guild official Tim Schick says that Scott Cole, the president of the union local, was called into the managing editor's office that afternoon and told that Jelenic had a statement and a question for him. The statement was, "If you want a war you've got a war"; the question was, "If you don't like the way things are run around here, why don't you just leave?"

In a separate incident that day, the Guild sent a congratulatory floral bouquet to its new members in circulation. A manager threw the flowers in a dumpster. When an employee fished them out and returned them to the building, they ended up in the dumpster again. The Guild has alleged in charges filed with the National Labor Relations Board that both the Cole incident and the one with the flowers constitute unfair labor practices.

Cole did leave, but he says it's because his job had changed. "I went from a person who used to cover college basketball, minor league baseball, some professional sports and a lot of high school to someone who doesn't get out of the office near as much, to becoming a glorified phone clerk and layout person."

While Journal Register may have merely chipped away at some papers, the Times Herald in Norristown, a suburb of Philadelphia, got the ax. On JRC's first day at the helm, September 27, 1993--still known there as "takeover day"--the company fired 25 employees. Under family ownership the paper had weathered the lean years of the recession without layoffs, so the cuts shocked employees. "They lined us up in two lines like cattle," recalls Maureen Burk, an advertising sales representative. Each line led to a different set of strangers who would rule on their future. As the top salesperson in her department, Burk was "totally confident" she would keep her job. When she entered a conference room, she says, the new publisher smiled broadly, then told her, "We have no place for you." When she walked out, "people were crying and sobbing. One woman took her arm and swept everything off her desk." Burk, a union activist, filed charges with the NLRB and eventually won a settlement.

The layoffs triggered a one-day walkout by the Guild. Although members returned when the company agreed to recognize the union, a new contract took three years to negotiate. Under its terms a reporter with four years of experience earns $445 a week, $145 less than under the old contract. In a moonlighting survey last year, the Guild found that three of its ad takers were working part time cleaning houses. Robert Carville, chairman of the Guild unit, works at a convenience store on weekends.

After the takeover, says feature writer Valerie Newitt, her health insurance co-payments increased from $4 a week to $60 every two weeks. But when she developed cervical cancer and required chemotherapy, she realized that the bigger loss was her accrued sick leave of six months. Under JRC, she was entitled to five days. "I have a biopsy, now I'm down to four days. I go to see the oncologist, now I'm down to three days." Under the company's disability plan, she went on half-pay for the maximum 13-week period, but then she had to go back to work for financial reasons. "I was not in great shape and I was bald, but what are you going to do? I stuck a wig on my head and I was back."

Newitt had written a popular weekly restaurant review. One day the new editor demanded to know, "Who pays for the meals?" When told the company picked up the check, he canceled the feature. Readers complained. "We logged over 100 calls," Newitt says. "That's a lot for a paper this size. But they fell on deaf ears." Elsewhere in the paper, the op-ed page was dropped and the number of comics was reduced. Once 50 or 60 pages thick, the Times Herald now is half as large.

"We used to cover every meeting," says Newitt. "Before I went to work for the paper, a neighbor told me, 'If there's anything you want to know, you can find it in the Times Herald.' " Now, says Guild leader Carville, a copy editor, coverage of planning or zoning meetings is rare, and because space is tight, those municipal meetings that do get covered may get held for a day. "If we get a sensational crime story," he says, "God help the council story."

Norristown Mayor Ted LeBlanc no longer subscribes to the paper. "I have nothing good to say about it," he says. The Times Herald has "ceased to be a Norristown newspaper." Accidents and crime stories, displayed prominently on page one even if they occur in distant townships, give his city, he says, "an undeserved reputation as a place to stay away from." On the day I talked with him, LeBlanc had bought the paper, looking in vain for a story on a council meeting the night before. It ran a day later.

Only five people remain on the Times Herald editorial staff from pre-JRC days, and the staff has shrunk from 35 to 24, according to Guild figures. The librarian lost her job and no electronic database has replaced the clipping she used to do. "The people with institutional knowledge are all gone," Carville says. "Reporters have to depend on what people are telling them right there on the spot and whatever they can gather from the old folks. News becomes more shallow."

Carville, a 1994 hire who now ranks as a newsroom veteran, says the last major enterprise story he can remember was four years ago. "I think we do a decent job," he says. "We know the locals. We get out there, do the interviews. But when it gets to the issues, it becomes a much more difficult thing to do. Reporters are just trying to keep pace with the day-to-day. Even if they had time to do research, who gets a week off to assemble all the data and make sense of it and get it out in a timely fashion?"

The Times Herald used to be a place, people say, where employees worked all their lives. But under JRC it has been plagued by turnover at all levels. According to a tally by employees, after six years the paper is on its third publisher, third editor, sixth comptroller and eighth advertising director. The sixth circulation manager left in December and in March the post had yet to be filled. Meanwhile, circulation has fallen 23 percent, from 29,581 in 1993 to 22,601 in 1998.

Former circulation manager Robert Penick, who resigned in 1994 after only six months, says that he got into an argument over draws and returns with a high JRC executive at Penick's first budget meeting. The executive called him "an ignorant moron," Penick says. "I wrote it down. 'Ignorant moron.' " But what triggered his resignation was an incident that took place at another budget meeting--on a Saturday--when he got a message that his son, who lived with his ex-wife in Illinois, had been injured in an automobile accident. He told the group he had to catch a plane. "They said, 'No, you can't leave. How bad is he? Call the hospital.' I said, 'I don't believe you people. I'm leaving right now.' " Penick now manages home delivery for the Indianapolis Star and News.

Unlike their colleagues on the business side, editors at Journal Register papers rarely hear from the boss. That's the best thing about the company, says one New England editor: "They leave you alone." The only telephone call William M. Caulfield says he has received from Jelenic in his seven years as editor of the Daily Local News in West Chester, Pennsylvania, was when the paper failed to send a reporter to an important Philadelphia Flyers game. Sports coverage is shared among JRC papers, and when the Trentonian, in the city where JRC is headquartered, used a wire story, Jelenic demanded to know why.

Caulfield also received a congratulatory note in 1997 from CFO Jean B. Clifton after the paper fielded a nine-month blitz of articles and editorials exposing widespread cracks in the 911 emergency response system that resulted in substantial reforms. The series won several state awards and was a finalist for the AP Managing Editors' Public Service Award that year. West Chester has been a prosperous franchise for the company, and Caulfield says he always has a big enough newshole. "And if I don't, all I have to do is ask for it. I've never been turned down once."

The casual reader, or a new subscriber, would not necessarily detect gaps in news coverage at JRC papers. They might just find them boring. In reading two weeks' worth of papers from nine JRC communities--well over 100 papers in all--I was struck by the contrast between the splashy design of the section fronts and the absence of provocative or surprising stories. From time to time, a reporter breaks out of the mold, or a news event produces dramatic coverage. JRC certainly has collected its share of citations from the hundreds that state news organizations award every year. But day in and day out, the news stories are predictable, the features are canned, and there are few idiosyncratic local voices--columnists, reviewers, essayists--to be heard.