• by Erik Sass  @eriksass1, July 3, 2008

The grim flurry of activity continued at Tribune Co. Wednesday with the announcement that the Los Angeles Times will cut 250 positions--or about 8% of the total workforce--including 150 editorial jobs, equaling about 17% of the newsroom staff. The editorial cuts will affect both print and online staff, which are also being consolidated into a single editorial department, according to Publisher David Hiller, who said the cuts will take place by Labor Day.

In a candid letter to employees, the newspaper's new editor, Russ Stanton, summarized the forces arrayed against newspapers in general: "You all know the paradox we find ourselves in: Thanks to the Internet, we have more readers for our great journalism than at any time in our history. But also thanks to the Internet, our advertisers have more choices, and we have less money." Stanton noted that the crisis has been deepened by the economic slowdown.

This round of cuts is just the latest in a series of contractions at the embattled newspaper. In 2001, it employed about 1,200 people in editorial positions; after the next round of cuts, it will have shrunk about 42% over the last seven years, to 700. Meanwhile, from 2003-2007, the Tribune Co. overall shed about 4,000 employees, or 17% of its workforce.

In addition to the staff cuts, the Los Angeles Times will also slim down its print edition by 15% per week, Stanton said; the reduction is in line with a policy, recently announced by Tribune's new management, that its newspapers will be no more than half editorial content, instituting a "50-50" ratio between reporting and advertising. COO Randy Michaels said the policy will allow the company to save costs on paper and newsprint, as well as reduce editorial staff significantly.

Given the ongoing declines in print advertising, the 50-50 policy may accelerate newspaper shrinkage double-time. From 2006-2007, total advertising inches in Tribune Company newspapers fell over 13%, from 39,252 to 34,069. If the 50-50 policy were already in force, this would have necessitated a 13% reduction in editorial volume, resulting in a total size reduction of 26%. Plotting the trend out--presuming that advertising inches decrease at the same pace--the newspapers would be less than one-quarter of their current size within five years.

The deep cuts in staff and newspaper volume are motivated by the need to service Tribune's enormous debt of $12.8 billion--about two-thirds of which was incurred during the transaction taking the company private earlier this year. Zell's management team will need to make about $1 billion in payments on the debt in 2008, and newspaper analysts say the possibility of default is very real, given the steep decline in revenues. Per the terms of its bond covenant, Tribune may also be declared to be in default by lenders if the ratio of debt to operating cash flow rises above 9-to-1; in recent months the ratio edged up from 8-to-1 to 8.75-to-1, reflecting a decrease in cash flow.