Lee Enterprises after Alden

“The model is simple,” declared The Atlantic in its cover story for the November 2021 issue. “Gut the staff, sell the real estate, jack up subscription prices, and wring out as much cash as possible.”

The author of the piece, Atlantic staff writer McKay Coppins, was writing about Alden Global Capital LLC, the widely-feared buyout firm that has emerged in recent years as one of the biggest owners of newspapers in the U.S., with nameplates including the Chicago Tribune, the Denver Post, the New York Daily News and the Sun in Baltimore.

But Coppins could just as easily have been writing about Lee Enterprises Inc., according to interviews with current and former Lee employees at the St. Louis Post-Dispatch and the Buffalo News, two of Lee’s biggest newspapers.

Since successfully seeing off a hostile takeover bid from Alden in early 2022, Lee has intensified its program of painful cuts across its news operations, leaving many of its journalists wondering whether they have a long-term future at the company as it shifts its focus from print to digital, these employees say.

“It’s funny how much damage Alden can do even when it doesn’t buy your chain,” said Post sports columnist Jeff Gordon, who serves as president of the United Media Guild union that represents almost 90 of the Post’s employees, as well as employees at the Southern Illinoisan in Carbondale, Ill. 

“We’d still rather have Lee, because we can work with Lee, but man, Alden did not do us any favors by getting involved, that’s for sure,” Gordon said.  

Post-Dispatch and Lee – No comment

Tracy Rouch, director of public relations for the Post-Dispatch, said in response to a query from Gateway Journalism Review that nobody from the Post or Lee Enterprises was available to comment for this story.

In June Lee reduced most of its 77 newspapers, mainly in smaller markets like Carbondale, to just three print editions each week. It also switched delivery of these papers from newspaper carriers to the U.S. Postal Service.

That prompted the Unions of Lee Enterprises, a coalition of labor groups representing the company’s unionized newspapers across the country, to issue a statement in late June calling the reductions “another example of short-sighted cuts and a lack of investment in local journalism – the main product that supports the company and its investors.”

The unions group, with members in cities including St. Louis, Buffalo, N.Y., Omaha, Neb., Richmond, Va. and Billings, Mt., said their members were “aware of more than 70 positions, union and nonunion, vacated and/or abolished since the beginning of the year at the dozen union papers it represents.”

Digital strategy leaves reporters in the dark

The unions also questioned Lee’s digital strategy.

“On the digital news delivery side, Lee has touted its growth in digital-only subscribers, but how many of those are readers who gave up on receiving a print edition as the company hikes prices and makes cuts to the product? That switch isn’t a net gain,” the unions said. 

Sandy Tan, a staff reporter at The Buffalo News and a coordinator of the Lee Unions coalition, said a key issue for journalists is the fact that Lee’s corporate managers have failed to lay out a compelling strategy that helps employees understand their roles in Lee’s digital future, despite repeated requests.

“We really want to be part of the solution; to the extent that we can do our part to help make this digital transformation successful, we will do that,” Tan said. “But in order to be partners in the solution, we gotta know what the plan is. And right now, we’re all in the dark, and that’s extraordinarily frustrating.”

Lee acquired The Buffalo News in 2020 along with 30 daily newspapers and more than 49 weekly publications owned by BH Media Group as part of deal with investor Warren Buffett’s Berkshire Hathaway holding company. The deal nearly doubled Lee’s audience size and made Berkshire Hathaway Lee’s sole lender, on terms widely seen as favorable to Lee.

Tan noted that Lee recently offered digital training sessions for its journalists via Zoom that she says were helpful. But small steps like this don’t address fundamental concerns about whether Lee will be able to make its transition to digital successful and profitable, she argues.

“When we look at how our website functions; when we look at the way stories are played and promoted; when we look at the lack of local digital control over which stories should be most featured, or here at The Buffalo News people being unable to easily access our website because they’re repeatedly prompted for their username and password…it’s a very user-unfriendly experience,” Tan said.

Lee’s corporate disclosures routinely emphasize its pursuit of online readers and advertisers as it carefully manages the decline of its legacy print operations.

In a recent presentation to investors, Lee said it had 606,000 digital-only subscribers as of June, with a goal of 900,000 digital-only subs by 2026. It also boasted that its digital subscription and advertising growth has been far faster over the past three years than at larger peer companies such as Gannett Co. Inc., which counts USA Today among its titles.

Print papers shrink

But that headline optimism buries some inconvenient facts: Lee’s operations still rely heavily on print publications. And they’re shrinking rapidly.

This indicates that even if its digital strategy turns out to be profitable, Lee is likely to be a much smaller company a decade from now in terms of revenue, employee headcount and journalistic output.

“Our feeling is: Why rush to kill off a print product that still accounts for a tremendous amount of Lee Enterprises revenue when you don’t yet have a strong digital product to offer?” Tan said. “That has been a source of great frustration for us.”

In its most recent earnings report in August, Lee disclosed that print still accounted for 62 percent of its operating revenue during the first nine months of its fiscal year. 

Total print revenue in the period was about $327 million, down $85 million vs. a year earlier. Digital revenue was up by about $25 million – a big increase, but not nearly enough to make up the gap.

For the nine-month period Lee posted a net loss of $3.28 million, or 56 cents per basic share.

In the company’s newsrooms, one change the unions and some individual employees find particularly irksome is Lee’s push to require its editors to adopt website templates that aim to standardize design and content across the entire chain. 

Loss of autonomy

Tod Robberson, who retired from his position as editorial page editor of the Post-Dispatch in June, said that when he arrived at the Post more than seven years ago, Lee was still letting the Post operate with a large degree of autonomy.

“We went through some tough times, granted, but Lee Enterprises allowed us to be the paper that we had been: largely independent, we got to do our own thing, minimal intervention from the corporation other than the introduction of some cost-saving measures that involved consolidating page layout and design,” Robberson said.

But when Alden made its hostile move, Lee “had to throw a ton of money” into fending off the approach, Robberson said.

“I look at everything Lee has done with the Post-Dispatch in the past two years since that takeover attempt,” he said. “What Lee ended up doing was everything that Alden would have done, and more. They gutted it even more than Alden would have done. And that, to me, is a huge disappointment.”

Lee’s approach of consolidating page layout and design at centralized “hubs” often located hundreds of miles from its newsrooms worked well at first, but constant turnover of the employees in those hubs eventually led to big mistakes, Robberson says.

He recalls one time in particular several years ago when the design team substituted a large box – blank except for the words “test only” – in place of an editorial, to see how it would look on the Post’s opinion page. Unfortunately, that big box is what subscribers to the Post’s print edition saw when they opened the paper the following morning. Robberson, fuming, had to write an apologetic editorial for the next day’s paper.

“We were constantly on edge, having to check our pages for little things they were introducing to mess them up,” he said, referring to things like captions, headlines and artwork. “It wasn’t deliberate, it was just from lack of experience. For a long time, I couldn’t trust them to do their job, so I was having to work well into the night…to check my final pages and make sure they hadn’t messed something up.”

Toward the end of his time at the Post, Robberson was splitting his time between St. Louis and Hartford, Conn., where his wife worked. Eventually the workload and the hassle of cross-country commutes became too much of a strain.

“I enjoyed what I was doing, but at a certain point I just couldn’t justify it anymore,” he said.

“The reason we’re trying so hard is because this is a profession we all love and value,” Robberson said. “It used to be fun. You’re doing this constant kind of mental calculation: The fun factor is dropping while the frustration factor is going up. And there you have it.”

The Post promoted editorial writer Kevin McDermott to succeed Robberson, but the paper did not hire anyone to fill McDermott’s old job. That means the Post’s opinion section is now staffed by just one full-time employee. (On most days the Post runs a single editorial of its own and fills out the bottom of the page with an editorial sourced from another newspaper.)

Twenty years ago, before Lee bought the Post-Dispatch, the editorial page had an editor, deputy editor, cartoonist, designer, letters editor, oped editor plus four writers.

‘’Blood from a turnip’

Another person who left the Post recently is features writer Valerie Schremp Hahn. She departed after 26 years for a better-paying writing and editing job with the St. Louis-based Catholic Health Association. 

“I think everybody’s just sort of like, trying to jo their jobs, and do a good job,” she said. But she said that Lee’s repeated cuts at the Post since taking over in 2005 have reached the point at which trying to squeeze out further costs is like trying to get blood from a turnip.

The newsroom, Hahn said, has “always sort of bounced back and done the right thing, but it’s just like…We’re humans. We’re humans that probably deserve to be paid better, and maybe not have as much pressure on us to do this work. Our names are on this stuff, for better or for worse.”

In the six months to March 2022, the Post-Dispatch’s average weekday print circulation was 48,250, down 11 percent from a year earlier, according to a ranking of the top 25 U.S. newspapers (by circulation) published in June by British trade publication Press Gazette. The figures in Press Gazette’s report were supplied by the nonprofit Alliance for Audited Media.

The Post-Dispatch was the only Lee paper on the top-25 list. Its print circulation decline was less severe than declines at the Alden newspapers that made the list.

The Alden titles were the Chicago Tribune (82,190, down 23 percent), the New York Daily News (45,730, down 18 percent) and the Denver Post (41,550, down 27 percent). Figures for the Alden papers covered the six months through March 2023.

In recent months Lee’s stock has been sluggish, with relatively low average daily volume of around 12,000 shares. Since mid-August it has traded at between $10 and $12, giving the company a market capitalization of roughly $65 million. The stock’s recent ranges are far below the $24 Alden offered in late 2020.

Michael Kupinski, director of research at Noble Capital Markets Inc. and a longtime follower of Lee’s stock, acknowledges that Lee faces the same long-term headwinds as other publishing companies. But he says Lee’s investments in digital show the company’s management team, led by President and CEO Kevin Mowbray, is on the right track.

Lee “has consistently had the highest margins in the industry, and the highest return on equity,” Kupinski said. “Lee is excelling in terms of its digital subscription growth; it’s leading the industry as it has for at least the last couple of years.” 

Kupinksi says he expects the steep declines in Lee’s operating revenue from print will eventually moderate, while revenue from digital accelerates. The puts the company on track to reach “an inflection point towards total company revenue growth,” he said.

One bright spot on the company’s balance sheet is the financing terms for its debt, which totaled $460 million in June, down from $576 million when Lee closed the deal with Berkshire Hathaway in March 2020. The debt carries a fixed interest rate of 9 percent, which insulates Lee from the effects of the Federal Reserve’s recent rate increases.

“If there’s one positive about Lee, they got a good deal on their debt, and they’ve been smart about paying it down,” said Gordon of the United Media Guild. “But the bad news is, is there a vision, one that’s sure to pay off?”

JACK GRONE is editor of McPherson, an independent journalism start-up based in St. Louis. He is a former reporter and editor for Dow Jones Newswires whose writing has appeared in The Wall Street Journal and Barron’s. Follow him on Twitter at @McPherSTL.