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Ad centers lead to cuts, big savings

Gannettoid.com | news@gannettoid.com | Posted: Aug. 20, 2009 • Morning report

When Gannett launches its regional ad building centers in Des Moines and Indianapolis early in 2010, it will come after at least three years of planning for the costs-savings move.

According to internal documents obtained by Gannettoid.com, Gannett saw the consolidation as a way to benefit from "substantial labor savings" and "capitalize on current outsourcing efforts, increase outsourcing efforts and gain additional efficiencies."

The proposal obtained includes an executive summary, a business plan and a capital purchase request. The package appears to be from October 2008 as it cites a survey conducted that month, but makes a reference to Nov. 1, 2008, being a future date.

The summary of the plan estimates that 750 positions could be eliminated with the move. Since this plan was compiled, Gannett has executed major layoffs, including a round of at least 2,200 employees in December 2008 and its current round of at least 1,400 that has continued most of the summer.

The October 2008 survey of Gannett's newspaper properties was to confirm hours and ad counts as well as "titles, job descriptions, salary and years of service of all positions in prepress, ad services and ad operations."

Those are the departments expected to be most affected by this consolidation move. The numbers used were from September 2008.

Consolidation has been a hot topic throughout Gannett and the industry lately. In early August, the company held a meeting in Des Moines to discuss regional ad building centers and revealed earlier this month that The Louisville Courier-Journal would become an editorial hub for the Asheville (N.C.) Citizen-Times and The Greenville (S.C.) News (read about that here). The company has already centralized photo toning for its newspapers at regional toning centers (RTCs) in Des Moines and Indianapolis.

No Gannett official has commented on the Des Moines meeting or even confirmed that it took place. When asked, Gannett spokeswoman Robin Pence said, "We don't comment on or discuss internal meetings."

Gannett's broadcast division has also consolidated operations, with a graphics hub located at KUSA in Denver and with central master controls for multiple stations.

The conclusion part of the business plan says the ad building consolidation meets the company's goal to cut costs. "With this model, we not only reduce labor significantly but we begin to position ourselves for further consolidations ...," the conclusion read. "It puts us in a position to better manage, control and streamline changes going into the next generation of newspapers."

According to the proposal, the results
from the survey of newspapers found that:

• Over $45 million in labor is used for prepress/ad services and ad ops.
• Over $26 million in labor (approx. 750 positions) is spent building and processing ads and can be eliminated with the creation of a Regional Ad Building Center. (RABC)
• Sites will eliminate all data entry, proofreading, production and graphic artist positions. Each site will keep 2 positions that will be ad “traffic” coordinators and able to make last minute changes if needed.
• Over $12.5 million in labor savings annually plus benefits. Other financial savings also associated with this.
• ROI of 173% with capital outlay of $4.6 million to build 2 centers housing about 225 people.
• All outsourcing will be consolidated into the RABC and dedicated team will be responsible for all outsourcing.
• Outsourcing will increase from 10% to about 30% being outsourced. A 2nd outsourcing vendor will be contracted at lower pricing on easy and less complex ads, thus saving substantial dollars. Move from outsourcing to right sourcing.
• 60 Gannett sites currently have DPS Ad Tracker with 2 more signed contracts and 2 more contracts in hand.
• Sites without DPS or with no ad tracking systems will be included by installing a lite version with substantial discounts included in this proposal.

Again, these numbers are from September 2008. The company's national payroll has changed significantly with recent layoffs. The layoffs would have greatly affected these figures.

Still, this summary predicted a return on investment (ROI) of 173 percent. Sources agree Gannett typically approves projects with at least a 20-percent ROI.

The summary also provided hints about the regional ad building centers (RABCs), estimating the two facilities would have a combined 225 employees.

More savings than just payroll cuts

Consolidation of the company's ad production would mainly save in labor costs, but Gannett also expects to save on outsourced ads, graphic subscription services, software licenses and work station costs.

The labor and employee benefit savings are estimated to exceed $12.5 million per year. The company-wide survey found that in September 2008, the company was spending almost $45 million "in prepress and ad operations across Gannett properties making plates, delivering tearsheets and proofs, paginating, and building and processing ads."

More than 1,200 positions were reviewed in this survey, according to the business plan and it was found almost $44 million went toward labor costs.

"Of this $44 million it was determined that $26 million (or approx. 750 positions) used for processing, managing, and building ads, could be eliminated," the plan outlines. "In many sites there were several layers of management responsible for this staff that could also be reduced or eliminated in most cases."

The plan also said, "Any graphic design positions not reported in production or ad production were not included in this proposal, but could be eliminated for additional savings" and "IT positions that manage DPS can also be eliminated. All upgrades etc. for DPS will be at the RABC — not local."

For graphic services, the survey found that Gannett spends about $750,000 per year on the individual sites' subscriptions to services for clip art and similar resources. A consolidated center could take advantage of centralizing these services and subscriptions, according to the plan.

The proposal also said centralizing workers would improve software license organization and save money by transferring licenses and using upgrades when possible over new purchases.

The layoffs would also lead to savings by making equipment from the vacated workstations available to replace items possibly needing replaced with a newly purchased desk, computer or other item.

Ad centers could look a lot like RTCs

Gannett documents often reference the RTC model when detailing plans for the RABCs, and the business plan for the ad centers recommends having a director in charge of both the RTC and RABC.

Toni Humphreys is currently Gannett's director of RTC.

Gannett's proposal also suggests having a manager, three supervisors, a training and quality specialist, three I.T. employees and one additional administrative position at each site.

The plan said hopefully I.T. staff could be relocated from other sites to fill these openings. The administrative position would handle human resources and day-to-day financial issues.

The centers would employ about 220 graphic artists, "responsible for ads on tight deadlines, pickup with changes, changes from customers, new ad builds, customer supplied ads, on line ads and spec ads."

The savings on outsourcing ads explained Gannett's agreement to have ads built for $15 each with 2AdPro, while a new vendor, American Outsourcing Solutions (AOS) priced easy ads at $5.50 and normal ads at $13.12.

"Most sites are currently sending ads that would qualify for the $5.50 rate at AOS to 2AdPro at the $15.00 rate," the proposal said, "thus costing us additional dollars."

With an RABC, Gannett employees at the center would be able to outsource time-consuming ads to AOS.

Remember, this information is from a late 2008 business plan, obtained from a person with corporate. The actual numbers, outsourcing agreements and companies may well have changed. Current numbers and agreements are unknown.

Paxton Media Group newspapers in Georgia and North Carolina already operate a similar ad production hub. According to a report today on the Web site of the Southern Newspaper Publishers Association, 21 newspapers have ads built at a hub at The Herald Sun in Durham, N.C.

“There are several advantages," said Herald-Sun publisher Rick Bean, according to the story. "The first and most obvious is a cost savings. In the traditional newspaper model of the past, there would be an ad design staff at each newspaper. We have 15 designers handling 21 newspapers.

The story said the newspaper group began researching the idea more than a year ago.

Leonard Woolsey, the group publisher for Paxton’s three daily newspapers in Georgia, was quoted in the story as saying, "Today if you're not aggressively taking advantages of available technology, you're leaving a tremendous amount of opportunity on the table. And in today's challenging revenue environment, you can't afford to ignore such opportunities without risking the future health of your organization and its employees' welfare."

What's left behind at local sites?

Under the plans submitted in this proposal, Gannett newspapers would eliminate all data entry, proofreading, production and graphic artist positions. Each site would be left with two positions that would be ad traffic coordinators and be expected to make last minute changes as needed.

The minimum time needed for a regional center to be operational at the time was six months, according to the report. Previous information obtained by Gannettoid.com reported Gannett is planning to begin ad building at these centers in January 2010 and continue transitioning sites throughout the year.

What's next with consolidation?

Gannett has already consolidated operations for printing papers, producing the papers and the ads on the pages within some of its groups. The company has already established consolidated call centers to handle everything from subscription services to classified calls. The company is planning to automate how it collects obituaries beginning in September. Gannett's broadcast division has also been consolidating operations for years. This shows consolidation to be a major component of the Gannett of the future, where local autonomy is shrinking.

The company is always looking into plans to change the way it operates, usually with the main goal of reducing costs and eliminating inefficiencies. While Gannett is likely considering additional consolidation plans, this plan appears to expand on an already existing model.

That means the company could group more papers at printing sites, centralize master controls even more for television stations and add additional regional hubs for editorial content.

While information is slowly coming out about consolidation plans, this trend is nothing new to either Gannett or other media chains. As with most industries, plans affecting individual operations have been vetted prior to being made public.

Related reports: Aug. 3 | Aug. 10 | Aug. 17 | Aug. 27

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