The (Wilkes-Barre) Times Leader, April 16

With $3M in planned upgrades, Times Leader's new owners look forward

By RON BARTIZEK
Times Leader business editor

Breaking up is hard to do.

But sometimes it leads to better things.

The new owners of The (Wilkes-Barre) Times Leader say the change in newspaper ownership has presented challenges but even more opportunities -- even if those opportunities cost more money than anticipated.

“We continually see the chance to grow both in our community and in our industry,” said Times Leader Editor and Publisher Richard L. Connor. “We have recently committed to a capital spending program of over $3 million in the next 18 months and this represents our faith in the newspaper business and in this area.

“What it will mean to our readers and advertisers is a better, higher quality newspaper with printing quality that is unmatched here. Other results will be less obvious, but, in the end, the residents of Luzerne County will have a newspaper that gives them increased pride and more information.”

Connor purchased the Times Leader in July 2006 from former corporate parent Knight Ridder for a reported $65 million. Funding came from a Dallas, Texas, investment fund, a $45 million loan from Goldman Sachs, a private equity firm, also from Texas, and local investors.

Knight Ridder was forced to sell itself by major shareholders who were unhappy with the company’s stock performance. The McClatchy Company, headquartered in Sacramento, Calif., bought the chain’s 32 newspapers for $4.5 billion plus $2 billion in debt, then immediately began selling off 12 papers. All except the Times Leader and The Philadelphia Inquirer were purchased by other newspaper chains.

Times Leader controller Mark Amendola said more than a third of the budgeted $3.5 million for capital improvements has already been spent on various projects.

Amendola, whose previous two employers were printers but not newspapers, said that because of the heavy financial burden involved in a purchase, it’s rare for a new owner to make investments so quickly.

“Usually you come in the first year and you’re looking at costs,” he said. “That’s almost your entire focus.”

Two items were forced by the separation from Knight Ridder, which had centralized many accounting and administrative functions at its headquarters in San Jose, Calif. The Times Leader did not have its own computer accounting software and it was required to establish its own Internet Web site.

The new general ledger and accounts payable system installed late last year cost $85,000, Amendola said, not counting new computers that were likely to need replacement anyway.

“The important thing is that we have better control over processing information and payments to vendors,” he said.

Previously record keeping and payments were handled through a Knight Ridder division that served all the newspapers. That slowed down payments and made it difficult to track whether they had been processed on time.

Amendola said the new software required no change in business office personnel.

A completely revised Web site is the change most visible to the outside world. Kathy Schwartz, vice president of audience and new product development, said the process she was hired to lead went smoothly, although it required plenty of work from her three-person team.

“We didn’t really need Knight Ridder for anything because we were in control of our own destiny,” she said.

The new site debuted on March 29. The $250,000 expenditure was more than originally planned.

“There were a lot of unknowns when they were ballparking how much it would cost,” Schwartz said. The majority of expense was in the content management system that provides the flexibility to update and make changes as desired. Previously changes were funneled through out-of-state offices which weren’t staffed around the clock.

There are cheaper alternatives available, Schwartz said, but in the long run the savings would have been eroded

“With those things come headaches and we’d have to hire programmers and host it ourselves,” she said. “That’s a huge responsibility and I’m happy to outsource it.”

Not so benign neglect
Other commitments were not forced by the change in ownership, but are responses to years of neglected maintenance and failure to modernize.

“Knight Ridder never made an investment,” said Prashant Shitut, Times Leader vice president of operations.

He said Connor probably didn’t expect to spend this much. Shitut told an auditing firm during the sale process about equipment that was falling apart, but doesn’t think his concerns were fully communicated before the deal closed.

“He did not expect to be faced with this situation,” he said. Nor did Shitut anticipate the response he’s seeing now.

“We did not expect that any owner would make this level of investment.”

Ray Carlsen, executive director of the Inland Press Association and former owner of The Dallas Post, said the level of capital spending so soon after a purchase was unusual.

“I don’t think I hear of it very often,” he said. “It sounds like a strong endorsement by Connor and the investors. They must feel good about the deal.”

Examples abound in the production department. Machines that insert advertising flyers into newspapers have received about $125,000 worth of maintenance and upgrades to make the process faster and more precise. Long-overdue maintenance was performed on the $15 million press that was installed in 1997 and four huge air compressors that supply power for many of the production operations are being overhauled.

“They were absolutely falling apart, creating downtime and delays,” Shitut said.

One major equipment upgrade wasn’t critically necessary but it is already improving quality and efficiency. The Times Leader this week fully converted to “computer to plate” technology that eliminates a time and materials consuming step in the production process.

Previously, completed newspaper pages were printed as negatives – supersized versions of a photo negative. The negatives were then placed on an aluminum printing plate and a high-intensity light burned the image through the clear areas, etching type and photos on the plate.

A black and white page requires only one plate, while a color page requires four. The Times Leader uses about 200,000 plates each year

Now, once a page is completed in the editorial computer system, it is transmitted to new plate makers that use lasers to burn the image directly.

The plate makers are linked to a workflow management system that allows operators to track each plate on its way from the newsroom to the press.

“We can be plating four different jobs at the same time,” said Lorna Borghese, prepress manager.

“It all makes our turnaround faster,” Shitut said. “But most important is the quality” that is obtained because of the precision with which a laser burns the plate. Readers see the difference in sharper color photos and more consistent levels of ink on pages.

The approximately $600,000 system should save about $60,000 yearly in newsprint, because fewer waste copies will be generated at the start of press runs, Shitut said. There also will be labor savings, but he said to what extent hasn’t been determined.

Overall, the plating system should pay for itself in less than three years.

Improvements in production have had a dramatic effect on reliability and productivity. Under Knight Ridder critical equipment “uptime,” when it was being used productively, was 75 to 80 percent, Shitut said, “which is a very bad number.”

Now it is about 97 percent. Efficiency in packaging is up about 30 percent, and deadline performance – which had been in the low 80s – is near 98 percent.

The changes help the Times Leader’s bottom line and provide better and faster service to printing customers, who represent several million dollars in annual revenue.

Buildings’ interiors improved
Employees and visitors to any of the Times Leader’s buildings see the results of a $225,000 commitment to caring for them. Both Times Leader buildings in Wilkes-Barre and the Sunday Dispatch office in Pittston have received a fresh coat of paint inside and new flooring is on the to-do list.

Next on the agenda is a software upgrade in the advertising department that is expected to cost as much as $700,000, Amendola said. Classified and display advertising now are kept on separate systems, one of which is so old the vendor no longer provides service.

Aside from being faster and providing superior reporting capability, an integrated system will allow advertising representatives to call up a customer’s history of activity in a single report.

Amendola said it might be difficult to pinpoint the resulting savings or increased sales, but there will be substantial benefits.

“The payback is the ability to process orders faster; to get better information about our customers; better tracking of our sales efforts.”

A similar upgrade for the circulation department is planned in 2008.

Inland’s Carlsen thinks the spending is likely a winning bet even as doomsayers predict the demise of newspapers.

“I think most people misunderstand the depth and resiliency of the newspaper industry,” he said. “They’ve absorbed hits from many other media over the years.”

The Internet is the latest competitor, but the Times Leader, like most papers, is embracing the Web as part of an overall strategy to become a center of information.

“Rich bought a newspaper but is building a multimedia company,” Shitut said.

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